U.S. TAX GUIDE IN MEXICO
Mexico—who needs to file the FBAR?
The Foreign Bank Account Report (FBAR) is required to be filed by US persons, green card holders, or tax residents who have foreign financial accounts.
If the highest balance or the total aggregate highest balance of multiple accounts exceeds US$10,000 in a calendar year, you must file an FBAR.
This report includes details like the bank’s name, account number, address, and highest balance.
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How does the FBAR differ from FATCA?
Although the Foreign Account Tax Compliance Act (FATCA) is often confused with the FBAR, they serve different purposes.
FATCA requires US taxpayers to report specified foreign financial assets if they exceed certain thresholds, which can be higher than the FBAR threshold. FATCA requires foreign banks to tell the US government about accounts held by US taxpayers.
While the FBAR is filed with the Financial Crimes Enforcement Network (FinCEN), FATCA reporting is part of your annual tax return filed with the IRS.
Key Differences
- FBAR Threshold: US$10,000 aggregate balance
- FATCA Threshold: Varies based on filing status and residency (starts at US$50,000)
- FBAR Filing: Separate form with FinCEN
- FATCA Filing: Included in IRS Form 8938
Is there any tax due on the FBAR?
No, there are no taxes due on the FBAR itself; it is purely for reporting purposes. However, any interest income generated in the foreign account must be reported and taxed on your US tax return.
What types of accounts need to be reported on the FBAR?
You need to report all types of foreign financial accounts, including:
- Individual bank accounts
- Joint bank accounts with a spouse or others
- Accounts over which you have signature authority
- Online banking accounts, such as PayPal, if they meet the reporting threshold
What happens when I transfer money into another account?
If you have two bank accounts and move money between them, both accounts must be reported if the aggregate highest balance of both accounts exceeds US$10,000.
For example, if you have US$7,500 in one account and move it to another, the highest balance of each account is US$7,500. Added together, this exceeds US$10,000, triggering the FBAR filing requirement.
Example Scenario
Let’s look at someone in Mexico with two bank accounts: one empty and one with US$7,500. This means that no FBAR is needed.
However, if the US$7,500 is moved to the empty account, both accounts’ highest balances are US$7,500 each, totaling US$15,000. This now requires an FBAR filing.
What are the largest banks in Mexico?
Mexico has a robust banking sector with several large and influential banks. These banks offer a wide range of financial services, including personal and business banking, investment services, and international transactions. Here are some of the largest banks in Mexico:
BBVA Bancomer is one of the largest and most prominent banks in Mexico. It offers a variety of services, including personal banking, loans, mortgages, and investment products. BBVA Bancomer is known for its extensive branch network and strong digital banking services.
Banorte, officially known as Grupo Financiero Banorte, is one of Mexico’s leading financial institutions. It provides a comprehensive range of banking services, including savings accounts, credit cards, loans, and insurance products. Banorte is also notable for its focus on supporting Mexican businesses and the local economy.
Citibanamex, a subsidiary of Citigroup, is one of the oldest and most established banks in Mexico. It offers a wide array of financial products and services, including personal and corporate banking, investment services, and wealth management. Citibanamex has a significant presence in Mexico with numerous branches and ATMs.
Santander México, part of the global Santander Group, is a major player in the Mexican banking sector. It provides a full range of financial services, including personal banking, mortgages, credit cards, and investment solutions. Santander México is known for its strong customer service and innovative banking products.
HSBC México is a subsidiary of the global banking giant HSBC. It offers a wide range of banking and financial services, including retail banking, commercial banking, and wealth management. HSBC México is recognized for its international reach and comprehensive suite of services for both individuals and businesses.
Scotiabank México, a subsidiary of the Canadian bank Scotiabank, offers a variety of financial services, including personal banking, business banking, and investment products. Scotiabank México is known for its customer-focused approach and strong financial products.
Are foreign investment accounts also reportable on the FBAR?
Yes, foreign investment accounts are reportable on the Foreign Bank Account Report (FBAR) if the aggregate value of all foreign financial accounts exceeds US$10,000 at any time during the calendar year. Here are some types of accounts that need to be reported:
- Foreign Mutual Funds: Foreign mutual funds must be reported on the FBAR. These are collective investment vehicles that pool funds from multiple investors to purchase a diversified portfolio of securities.
- Mutual Fund vs. Shares of Stock: Both mutual funds and individual shares of stock held in foreign accounts must be reported on the FBAR. While mutual funds represent a pool of investments managed by a professional, shares of stock represent ownership in individual companies.
- Trading Account: This includes brokerage accounts held outside the United States that facilitate the trading of stocks, bonds, options, and other financial instruments.
- Retirement/Pension Accounts: This includes accounts such as foreign 401(k) equivalents, individual retirement accounts, and other pension schemes. If the aggregate value of these accounts, combined with other foreign financial accounts, exceeds US$10,000, they must be reported.
When do I need to file the FBAR?
The FBAR is due by April 15 each year. However, there is an automatic extension to file by October 15.
This extension is granted automatically and does not require a separate application.
