Mexico gained its independence from Spain in the early 19th century. Since then, the ruling party has been the Institutional Revolutionary Party (PRI) until the most recent election in the year 2000, when Vincent Fox, a member of the National Action Party (PAN) won in a free election.
In 1994 the Mexican Peso devalued significantly, causing major financial woes to the country. Since then, it has made a steady, impressive comeback that has created an environment allowing expatriates to live a comfortable lifestyle for significantly less than they would be able to in the United States or Canada.
The Mexican government has seen through dramatic changes in Mexico's taxation system and continues to adjust the system in order to be competitive with other nations. The majority of the direct taxes come from the federal government in the form of income taxes. They are broken down into resident and non-resident status taxation.
Resident taxation is based on worldwide income, regardless of the person's nationality, and is based on a sliding scale that climbs to 35 percent.
Non-residents - both individuals and corporations - are taxed on their Mexican income only, and that is done at a flat rate depending on what type of income it is.
In addition to income taxes, Value Added Tax is calculated at 10 percent, but this is not charged on certain medicines and food.
Visa, Residency & Immigration Laws
If you are only planning a short visit to one of the border towns in Mexico, you won't require any type of visa or other documentation. There is a "free-zone" (twenty miles within the U.S. border) and as long as you don't cross that and leave the country within 72 hours, you will not have to take any special precautions.
To obtain citizenship you must go the Secretaria de Relaciones Exteriores and apply for naturalization. You must prove five years of legal residency, which can be FM2 or FM3, and may also have to take exams in Spanish and Mexican history. You also have to provide colour photos and anything else that the licenciado asks for. This application is examined in great detail at the office where the application is made. It is then sent to Mexico City for a year or more for a decision. You must continue with the annual renewal of the FM2 or FM3 while this is being done. Once approval is received from Mexico City you pay another fee, wait another few months and (hopefully) receive your naturalization card. With it you become a full citizen.
Foreigners are allowed to purchase property in Mexico, but the process is quite different from that in the United States or Canada. First, there is no title insurance. The entire process is handled by a Notary Public (notario publico). Notary Publics operate differently than in the US - they are completely authorized to handle property sales, and are, in fact, the best way to handle a transaction. Some attorneys will try to become involved, but they generally serve no purpose and tend to charge high fees and hold up the process.
Once you have found a property that you are interested in, simply take everything to the notary public and allow him to check the property to make sure that everything is in order. Sign all contracts in front of him (after he's reviewed them) and exchange all monies in his presence. A notary public is to be trusted because he is held responsible by the government for any errors that he makes.
Retiring in Mexico
There are many reasons for retiring to Mexico. Some people claim that the climate is what they enjoy most, others cite the friendly people and cultural diversity, while yet others say it all comes down to money (it is certainly true that your pension will go a lot farther in Mexico and you won't have to worry about losing your benefits if you are an American - the US government will forward your social security checks).
Mexico offers retirees a one-time benefit of importing all of their household goods, car, boat and even an airplane with no import taxes. This, combined with the rich experiences and reduced cost of living, makes Mexico the retirement destination of choice for approximately 600,000 Americans.