U.S. EXPAT TAX GUIDE – MEXICO
Who is required to file an FBAR if living in Mexico?
US persons, including citizens, green card holders, and residents with foreign financial accounts, must file the FBAR (Foreign Bank Account Report) if the total balance of their foreign accounts exceeds US$10,000 at any point during the calendar year.Â
This applies even if you only have signature authority over the account or own it jointly with someone else.
Table of contents
How does FBAR differ from FATCA reporting?
FBAR and FATCA (Foreign Account Tax Compliance Act) reporting are often confused but serve different purposes.Â
The FBAR is a form filed with FinCEN to report foreign bank accounts, while FATCA is included in your US tax return (Form 8938) and requires reporting specified foreign financial assets over certain thresholds.
Key Differences:
- FBAR Threshold: Over US$10,000 in foreign accounts
- FATCA Threshold: Starts at US$50,000, higher for expats
- FBAR Filing: FinCEN Form 114
- FATCA Filing: Form 8938 (part of your IRS tax return)
Are taxes due on FBAR?
No, the FBAR itself doesn’t involve paying taxes—it’s purely informational. However, income from the reported accounts, such as interest or dividends, must be included in your US tax return and could be subject to taxation.
What types of accounts should be reported on the FBAR?
Foreign financial accounts that require reporting include:
- Individual and joint bank accounts
- Accounts over which you have signature authority
- Online payment accounts like PayPal (if they meet the threshold)
What happens if I transfer money between foreign accounts?
When money is transferred between foreign accounts, both accounts’ highest balances during the year must be reported. For instance, if you move US$7,500 from one foreign account to another, the total balance across both accounts is US$15,000, meaning you must file an FBAR.
Example: If you have US$7,500 in one account and transfer it to another, making both accounts show US$7,500 at their highest point, the combined total (US$15,000) exceeds the FBAR threshold, triggering the filing requirement.
Which banks in Mexico are popular for expats?
Expats commonly use these major Mexican banks:
- BBVA Bancomer: Offers personal and business accounts with strong digital services.
- Banorte: A well-known local bank that focuses on supporting the Mexican economy.
- Citibanamex: A subsidiary of Citigroup with a long-standing presence in Mexico.
- Santander México: A global bank offering personal and corporate banking.
- HSBC México: Known for its wide range of services, including wealth management.
- Scotiabank México: A Canadian-owned bank known for personalized services.
Are foreign investment accounts reportable on FBAR?
Yes, foreign investment accounts like brokerage accounts, mutual funds, and pensions must be reported on the FBAR if the total balance exceeds US$10,000. This includes:
- Foreign Mutual Funds: Collective investment accounts must be reported.
- Brokerage Accounts: Any trading accounts held abroad.
- Retirement/Pension Accounts: Foreign equivalents of IRAs and 401(k)s also need to be included if the combined value of all foreign accounts surpasses US$10,000.
What is the deadline for filing FBAR?
The FBAR is typically due by April 15 each year, but there is an automatic extension until October 15. There’s no need to apply for this extension—it’s granted automatically.
What penalties could apply for failing to file FBAR?
Failing to file the FBAR can result in steep penalties. The fine for a non-willful violation can be as high as US$10,000 per year, while willful violations carry even harsher penalties, including potential criminal charges and fines up to 50% of the account balance.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.