Property managers are normally individuals or entities who manage third party properties. Whether they are listing someone else’s property on Airbnb, or a multi-person group of properties, the property owners authorize these property managers to manage their listings.
The property manager is usually the one who registers an Airbnb account, lists the properties of those third parties that authorize them to do so, receives payments for the accommodations, and distributes the income each owner is entitled to. Occasionally, they set up their Airbnb account so that their commission for management services is paid directly to them, and the rest of the income is paid directly to the owner.
Each person’s situation is unique and must be assessed by a specialist to consider the scope of both Mexican Tax laws and the laws of your country of residence, so you should consult with an advisor if you have an obligation to pay taxes in Mexico.
Consider that since the entire income could be attributed to you as a property manager (e.g., prohost), in which case you must issue an invoice to the guest for the accommodation service total.
Here are two scenarios that you, as a manager, can consider dealing with this situation.
- List the properties under the name of the owner
- Ask for an invoice from the owner (if the listing is under the property owner’s name)
Below, each scenario with its tax implications is explained:
Scenario 1. List the properties under the name of the Owner
This may be the simplest option from an operational point of view for your business: the owner creates an Airbnb account and lists his/her property. As a result, the owner directly receives the payments for accommodations and any tax withholdings are directly attributed to them. You, as an administrator, will negotiate directly with the owner how you will receive payment for your services.
If the foreign owner is required to pay taxes in Mexico, then their Registro Federal de Contribuyentes (RFC, Mexican Tax ID) must be registered in their Airbnb account.
This option implies the creation of individual Airbnb accounts for each one of the owners, including adding the RFC (if applicable) and each owner’s bank account. This way, the payments will be directly received by the owners and withheld taxes should be attributed to them.
This is the most transparent scenario for managers and owners as well as for the tax authority.
Scenario 2. Ask the owner for an invoice (or receipt)
In this case, the Airbnb listing is presented under the property manager’s account and not the property owner’s, so this option is a bit more time-consuming from an operational point of view, as you will have to ask the property owners to issue an invoice to you for the amount of the payment they are entitled to receive, so that as a manager you do not end up paying taxes for the total amount of the transaction, but instead, only for the income that you effectively receive.
To show that your income corresponds only to your commission, you should deduct the payments made to the owners. For this, you should ask the owners to issue an invoice to you, which can be monthly or per transaction, for the amounts paid to the owners.
For example, if in a $1,000 transaction you charge a 20% commission, your real income is only $200, while $ 800 is the owner’s income. However, the tax authority may consider that your overall income is $1,000, since that is the amount attributed to you in your Airbnb account.
To show that your income is only $200, you would deduct the $800 that was paid to the owner. For this, the owner should issue an invoice to you for $800, plus any other tax liabilities required by your country of origin’s tax law.
The following shows the data that the tax authority receives on the left side. On the right side the cash flow is shown. Please note that this assumes the tax withholdings rate is 20%.
| Data seen by the tax authorities | Cash flow | |||
| Prohost | Owner | Prohost | Owner | |
| Income | 1,000 | – | 200 | 800 |
| Tax withholding (20%) | 200 | 200 | ||
| = Total Income | 800 | – | 0 | |
If you, as the property manager, do not obtain an invoice issued by the owner then, you would have a tax liability on the total transaction ($ 1,000), and the owner would have taxes on the part that he is due ($800), as exemplified below:
Tax
| Prohost | Owner | |
| Income | 1,000 | 800 |
| Written-off expenses | – | – |
| Total Income | 1,000 | 800 |
| Tax rate (for illustration purposes, 25%) | 25% | 25% |
| = Income Tax | 250 | 200 |
| – Tax withheld | 200 | – |
| = Tax payable | 50 | 200 |
If you get an invoice issued by the owner you can demonstrate you paid the owner their share of the transaction ($800), therefore your taxes should be calculated by the real amount of your income, and the owner will calculate tax on their income share, as exemplified below:
| Prohost | Owner | |
| Income | 1,000 | 800 |
| Deducted expenses | (800) | – |
| Total Income | 200 | 800 |
| Tax rate (for illustration purposes, 25%) | 25% | 25% |
| = Income Tax | 50 | 200 |
| – Tax withheld* | 200 | – |
| = Tax (refund) / payable | (150) | 200 |
(*) Where applicable.
Note: This illustration is for demonstration purposes, not to be taken as legal or tax advice. It is strongly recommended to consult with your local tax advisor to assess your personal situation and confirm your entitlement to this credit.
Compensating the owner for taxes withheld in excess in Scenario 2 (i.e. when the property is listed under the property manager)
As you can see, even when withheld tax is attributed entirely to you as a manager, it affects payout cashflow, resulting in the owner receiving a lower payment (reduced by the tax withheld). As this withholding is attributed to the manager, the owner cannot claim it or apply it against his/her own taxes.
As the withholding is attributed entirely to the manager, only he/she may claim it, not the property owner. Therefore, the owner will have a reduced net income and no way to apply or credit the withheld tax.
For this reason, the manager could consider compensating the owner for their corresponding share of tax withheld. This compensation would be made by the manager, directly to the owner, after Airbnb has done the applicable withholdings.
To illustrate, please see below how the payment towards the owner is reduced by $160 (their share of the withholding). This amount should be compensated directly by the manager to the property owner.
| Data known by the tax authorities | Cash flow | |||
| Prohost | Owner | Prohost | Owner | |
| Income | 1,000 | – | 200 | 800 |
| – Tax withholding (20%) | (200) | (40) | – 160 | |
| = Total Income | 800 | – | 160 | 640 |
It should be noted that the manager can deduct the compensation from their income if the owner issues a receipt.
What could happen if scenario 1 or 2 are not considered?
It is possible that your income will decrease if you do not list the properties in the owner’s name (Scenario 1) or if the owner does not give you an invoice or receipt (Scenario 2).
If it is not possible for you to obtain an invoice or receipt from the owner, then you should consider that you could pay more tax and, consequently, your net income could be reduced.
If we take the example of the previous scenario, if instead of paying $40 of taxes, you will pay $200, because you do not have the invoice or receipt issued by the owner, your net income could be reduced by $160, as indicated below:
| Manager’s After-Tax Income, writing-off the owner’s share | |
| Gross income | 1,000.00 |
| – Owner’s share | 800.00 |
| – Tax on Manager’s net income | 40.00 |
| = Manager’s After-Tax Income | 160.00 |
| Manager’s After-Tax Income, without writing-off the owner’s share | |
| Gross income | 1,000.00 |
| – Owner’s share | 800.00 |
| – Tax on Manager’s net income | 200.00 |
| = Manager’s After-Tax Income | – – |
| Difference | – |
| Manager’s After-Tax Income, writing-off the owner’s share | 160.00 |
| Manager’s After-Tax Income, without writing-off the owner’s share | – |
| = Amount that could not be obtained | 160.00 |
If the owner does not issue you an invoice or receipt, you will pay taxes on the $1,000 of the transaction because it is deemed as your income. In the example used, those $1,000 generate a tax of $200, which is $160 more than the $ 40 tax that would result if the owner did issue you an invoice or receipt.