Taxation

Double taxation between Mexico and Spain: how the treaty works

By Humberto Franco Díaz de León, Mexican lawyer (professional licence 6538816), founder of Franco & Asociados. Published on 26 October 2026.

Living in Spain while still receiving income from Mexico does not, by itself, mean paying the full tax twice, but it does not mean you can leave the income out of your return either. The treaty between the two countries allocates which State may tax each kind of income and, for a person resident in Spain, provides a deduction for the income tax paid in Mexico, within a limit.

First step: where you are resident for treaty purposes

Under Article 4(1), a resident of a State is a person who, under the law of that State, is liable to tax there by reason of domicile, residence, place of management or any other criterion of a similar nature. An individual can meet that test in Spain and in Mexico at the same time. For that case, Article 4(2) sets an order of tie-breaker tests:

  1. The State where you have a permanent home available to you; if you have one in both, the State with which your personal and economic relations are closer (centre of vital interests).
  2. If the centre of vital interests cannot be determined, or you have a permanent home in neither State, the State where you have your habitual abode.
  3. If you have a habitual abode in both States or in neither, the State of which you are a national.
  4. If you are a national of neither State, the competent authorities settle the question by mutual agreement.

Nationality comes third and does not decide the matter on its own. If you hold the nationality of both countries and the earlier tests do not settle the question, paragraph 2 contains no closing rule for that case; Article 26(3) provides, in general terms, that the competent authorities will endeavour to resolve by mutual agreement any doubts arising from the application of the treaty.

A frequent case: rent from property in Mexico

Article 6(1) allows income derived by a resident of one State from immovable property situated in the other State to be taxed in that other State. Paragraph 3 makes clear that it covers direct use, letting or share-cropping, and any other form of use of the property. A person resident in Spain who lets a property in Mexico may therefore be taxed in Mexico on that income.

That does not take it out of the Spanish tax position. The Personal Income Tax Act taxes the taxpayer's income, understood as all of their earnings, capital gains and losses and imputed income, wherever they arose (Article 2), and taxpayers include individuals whose habitual residence is in Spanish territory (Article 8(1)(a)). That is where the method for relieving double taxation comes in.

How double taxation is relieved in Spain

Article 24(1) of the treaty provides that double taxation will be relieved under Spanish domestic law or under its own rules: where a resident of Spain derives income that, under the treaty, may be taxed in Mexico, Spain will allow a deduction from that resident's income tax of an amount equal to the income tax paid in Mexico, in accordance with Spanish domestic law. The deduction may not exceed the part of the Spanish tax, computed before the deduction, that corresponds to that income.

The Personal Income Tax Act has its own rule in Article 80: where the taxpayer's income includes earnings or capital gains obtained and taxed abroad, the deduction is the lower of two amounts, the effective amount paid abroad as a tax of an identical or similar nature and the result of applying the effective average tax rate to the part of the taxable base taxed abroad. Both rules share the logic of a cap tied to the Spanish tax that corresponds to that income.

That is why it is not prudent to describe the result as an exemption or to forecast a saving: it depends on the specific income, the tax actually paid in Mexico and the applicable limit. In the opposite direction, Article 24(2) allows residents of Mexico to credit against Mexican tax the Spanish tax paid on income arising in Spain, up to the tax payable in Mexico on that income, in accordance with Mexican law.

What the 2017 Protocol changed

The treaty was signed on 24 July 1992 and published in the Spanish Official Gazette (BOE) on 27 October 1994. A Protocol of 17 December 2015, published in the BOE on 7 July 2017, amended it and entered into force on 27 September 2017: it replaced the preamble to add the aim of avoiding non-taxation or reduced taxation through evasion or avoidance, gave new wording to the article on relief from double taxation (now Article 24, previously 23) and renewed the article on exchange of information, now Article 27. The consolidated BOE text already includes these changes.

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Common mistakes

  1. Thinking that paying in Mexico removes the obligation in Spain. Tax paid or withheld in Mexico does not replace the return of a person resident in Spain.
  2. Claiming the deduction without checking the limit. A calculation that does not separate the income from the attributable Spanish tax may be wrong.
  3. Treating nationality as the automatic answer on residence. It comes after permanent home, centre of vital interests and habitual abode.

What this guide does not cover

It develops the example of rent. It does not analyse dividends, interest, pensions or other income, which have their own rules, nor the returns the Mexican tax authorities may require, which depend on the type of income and each situation. It also gives no percentages or simulations: without the facts of the case they would be invented.

Sources

General information as at the date of publication. It does not replace advice on a specific case.

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