Who taxes my Mexican rental income first, Mexico or Canada?
Mexico, because the building is there. Tax on rent is imposed where the property stands, and that is the charge that comes first in time. Canada then taxes the same rent as part of your worldwide income as a resident and gives relief for what Mexico has taken, capped at the Canadian tax on that rent. The practical consequence is an order of work rather than a choice. Relief is measured by your final Mexican liability, so if the Canadian return is prepared while the Mexican position is still provisional, the claim is built on a figure that is about to change.
Is my Mexican property held in a bank trust taxed in Canada?
Yes, but the more important question comes first: what the arrangement is. Property held through a bank trust arrangement has to be characterised for Canadian purposes before anything can be reported. Depending on the terms, Canada may treat you as holding the property directly, or may see a trust with its own consequences and its own reporting. The two routes put the income in different places on the return and bring different disclosure with them. Nobody can tell you which applies from the property alone; the trust instrument decides it, so it is read before a return is drafted.
Can I claim Mexican withholding tax on my Canadian return?
Credit is available, but only up to the Canadian tax on that same income, and only for tax you were properly liable to pay. That second limit is what catches people. Where more has been withheld at source than the treaty entitles Mexico to take, the excess is not relieved by a Canadian credit at all; it has to be recovered from Mexico. So the rate applied when the payment is made matters more than the claim made afterwards, and the cheaper fix is almost always to establish entitlement with the payer before the money moves rather than to chase it later.
My Mexican plant invoices my Canadian company — which side prices it first?
Neither, and that is the difficulty. Transfer pricing runs in both directions at once: each country tests the same intercompany charge against its own rules, and an adjustment in one does not automatically produce a matching adjustment in the other. There is no first mover to wait for. What protects the group is one set of documentation that supports the same price on both sides, prepared when the arrangement is put in place. Where production or a service arrangement sits in Mexico and the customer-facing company is in Canada, the charge between them is the single most examined number in the group.
Do I pay Mexican or Canadian tax when I sell my Mexican property?
Mexico taxes the gain first, because the land is there. Canada taxes the same disposition as part of your resident income and relieves the Mexican tax by credit. The two computations are not the same computation: what counts as cost, which expenses of sale are allowable, and the currency the gain is measured in all differ, and the Canadian gain includes exchange movement between purchase and sale because it is measured in Canadian dollars throughout. So relief rarely absorbs the whole Canadian charge, and the residue is cash due on the Canadian timetable.
Does Mexico or Canada tax my Mexican company's profits first?
Mexico, on the company, where it operates. Then a withholding charge is taken at the border when profit is paid out. Canada comes last, taxing you on what reaches you, with credit for what the treaty permits Mexico to have taken. Depending on how the company is controlled and what it earns, Canada may also attribute certain income to you before anything is distributed, which breaks the tidy sequence. That is why the ownership structure is examined before the first return: the order of charges is fixed, but which charges apply depends on facts settled years earlier.
What is a double tax treaty and what does it actually do?
It is an agreement between two countries that divides up the right to tax. Article by article it decides which country taxes employment income, dividends, interest, royalties, pensions, property and business profits — and where both may tax, it caps what the source country can withhold and tells the other to give credit. It also breaks residence ties and opens a government-to-government channel for disputes. What it never does is apply itself: a treaty position is claimed. See our treaty work.
What is a permanent establishment, and how easily do we create one?
A taxable presence in another country under the treaty — typically a fixed place of business such as an office, branch, factory or workshop, or a dependent agent habitually concluding contracts on your behalf. Some treaties add a services test measured in days. Purely preparatory or auxiliary activity is excluded, but that carve-out is narrower than it sounds: one senior employee working from home in the other country, with authority, has been enough. See business profits and permanent establishment.
