Laredo Cross-Border Tax

One Economy, Two Countries

Laredo and Nuevo Laredo function as one metropolitan area split by the Rio Grande, and many businesses and families operate in both. BOMCAS prepares the U.S. side: federal and Texas returns and U.S. information returns, working with Mexican accountants who handle Mexican filings. We also serve Canadians and Canadian companies involved in the trade corridor.

Treaty basics and Canada–U.S. matters are on the Texas cross-border tax page. This page focuses on Laredo and Nuevo Laredo.

Mexican-Owned Carriers and Warehouses

Many Laredo trucking companies, brokerages and warehouses are owned by Mexican families or groups. A U.S. corporation that is at least 25 percent foreign owned files Form 5472 to report transactions with its foreign owners and related companies, and a foreign-owned single-member LLC files a pro forma Form 1120 with Form 5472. Missing or substantially incomplete filings carry a $25,000 penalty per year. Payments of dividends, interest or rent to Mexican owners may require U.S. withholding, at rates the U.S.–Mexico treaty can reduce.

U.S. Owners of Mexican Companies

Laredo families who own transport, customs or manufacturing businesses in Mexico file Form 5471 for Mexican corporations, or other forms for Mexican entities treated as partnerships. Some income of a controlled foreign corporation may be taxed in the U.S. each year even if it is not distributed. We work with the Mexican accountant to translate the Mexican financial statements into the U.S. reporting.

Families in Both Cities

A family may live in Laredo, own a house in Nuevo Laredo and have bank accounts on both sides. U.S. residents report worldwide income, foreign accounts on FBAR above $10,000 in total, and on Form 8938 at higher thresholds. Gifts or inheritances from relatives in Mexico above $100,000 in a year are reported on Form 3520. Relatives who live in Mexico and own Laredo property owe U.S. tax on rental income.

Selling Laredo Property

When a Mexican resident sells a house or commercial property in Laredo, the buyer generally must withhold 15 percent of the price under FIRPTA, with reduced withholding for some homes bought as residences. The seller files a U.S. return to report the actual gain and recover excess withholding. A withholding certificate obtained before closing can reduce the amount held back.

Residency and Work Status

Mexican nationals working in Laredo may become U.S. residents for tax under the substantial presence test. Days commuting daily from Mexico to work in the U.S. are generally not counted, which helps many border commuters remain nonresidents. Green card holders are residents regardless of where they live.

Canadian Carriers and Residents

Canadian carriers and shippers moving goods between Canada and Mexico through Laredo may need U.S. filings if they have a U.S. presence. Canadians living in Laredo report RRSP, TFSA and other Canadian accounts under U.S. rules, and our Canada–U.S. practice handles both sides of the treaty.

Mexican Drivers and B-1 Status

Mexican drivers who enter the U.S. on B-1 visas to deliver or pick up international loads generally work for Mexican carriers and are paid in Mexico. Under the U.S.–Mexico treaty, pay a Mexican resident earns for short periods of work in the U.S. is generally taxed only in Mexico when the employer is Mexican and the cost is not borne by a U.S. location, though the details depend on the facts. A Mexican carrier that sets up a U.S. terminal or employs U.S.-based staff may create U.S. filing obligations of its own.

Common Filings

Forms 5471, 5472 and pro forma 1120.
FBAR, Form 8938 and Form 3520.
Form 1040-NR and ITINs.
FIRPTA withholding certificates.
Treaty statements on Form 8833.