Mexico

Private-sector workers in Mexico have a mandatory individual account at a retirement fund administrator (Afore) they choose. CONSAR, the regulator, says each worker owns the account and that the employer, the government and the employee must all pay in,¹ and describes the system since 1997 as a private scheme of individual capitalization.² The account has three large subaccounts: retirement, severance in old age (cesantía) and old age; housing; and voluntary saving.³ Housing has its own block below.

For 2026 the employer pays 2% of the base wage for retirement,⁴ plus 3.150% to 7.513% for severance in old age and old age, depending on pay, rising each January to 3.150% to 11.875% in 2030.⁵ The worker pays 1.125%.⁶ The base wage has a ceiling of 25 times a daily unit, now read as the UMA.^7,8 The federal government adds a daily amount, the cuota social,⁹ for workers earning up to four UMA.¹⁰

Workers can add voluntary money at any time, and so can employers, with no limit.^11,12,13 It comes out at any time under CONSAR's procedure, on the fund's stated terms: one fund's prospectus on CONSAR's site says six months after the first deposit or the last withdrawal.^14,15 Supplementary retirement contributions stay locked until the mandatory money can be drawn.¹⁶

The Afore invests through SIEFOREs, investment companies it runs.^17,18 CONSAR describes ten funds set by birth years, in which a worker stays until retirement.¹⁹ The pension is a life annuity from an insurer or scheduled withdrawals from the Afore,^20,21 available from age 60 if out of work, or at 65.^22,23 The weeks of contributions it takes started at 750 in 2021 and rise by 25 a year to 1,000 in 2031,²⁴ and someone short of them can take the balance in one payment.²⁵ Partial withdrawals exist for marriage and unemployment.²⁶ When the worker turns 70 the retirement balance moves to the public Pension Fund for Well-being unless the worker still has a job, and the right to it does not lapse.^27,28,29 A housing balance not claimed by then moves too.³⁰ Those rules name only these two balances, not voluntary money.

Not settled: the worker owns the account in form, but no IRS guidance says it is not a trust. Cautious: a foreign trust.

Not settled. No IRS guidance, Treasury text or court decision says whether an Afore account is a trust; the IRS's one mention we found is about FBAR.³¹ Federal law, not Mexico's label, decides.³²

The argument that it is not a trust: Mexican law makes the worker the owner. The account forms part of the worker's property and the money in it is the worker's,^33,34,35 and CONSAR's rules require a contract under which the Afore buys SIEFORE shares in the worker's name and on the worker's account, holds them as depositary, and acts under a commercial agency the worker grants.^36,37,38 The statement must show the shares the worker owns.³⁹ A SIEFORE is a stock company,^40,41 and only workers and the Afore can hold its variable capital.⁴² A U.S. trust needs trustees who take title,⁴³ IRS advice lists a trustee with legal title among a trust's elements,⁴⁴ and a title-holder who only acts at the owner's direction is not a trustee.⁴⁵

The argument that it may be one: form is evidence, not decisive,⁴⁶ though the same court treats organizing documents as determinative in assessing an arrangement's features, which helps the argument above.⁴⁷ The purpose matches a trust, with someone else managing property for members who cannot share in that job.⁴⁸ The Afore does more than hold title,⁴⁹ must act exclusively in the workers' interest,⁵⁰ and provides custody, management and investment.⁵¹ The worker picks only the Afore and the fund and, apart from the partial withdrawals above, cannot reach mandatory money before retirement.^38,26 Mandatory money cannot be pledged and creditors cannot attach it,⁵² and the foreign pension fund the IRS privately ruled a trust also had interests that could not be assigned and assets out of creditors' reach,^53,54 though its benefits followed a formula and did not depend on its investments. Members choosing among listed investments did not stop another fund being one,⁵⁵ though that fund was organized as a trust with a trustee.⁵⁶ The law's own words qualify the ownership: "with the modalities" it sets.³⁴

With the question open and the penalty for a missing Form 3520-A large,⁵⁷ this guide takes the cautious course of reading an Afore account as a trust, and a foreign one, since Mexican law governs it and it is run in Mexico.^58,59 It reads the account as one whole, including voluntary money you can withdraw, because one contract and one Afore hold it;^36,60 no IRS guidance says whether a subaccount can be read apart. If it is not a trust, none of the steps below apply.

On the cautious reading, an employees' trust: employer money is U.S. income when paid in; your voluntary money is your own.

On the cautious course we read it as a §402(b) employees' trust: the employer must pay in,⁴ and a trust created outside the United States cannot be exempt under U.S. §501(a).⁶¹ §402(d) treats a foreign trust as exempt only if it would otherwise qualify,⁶² and on our reading nothing suggests this plan meets §401(a). No IRS ruling addresses Afores. The IRS has ruled privately on a foreign fund with mandatory employer contributions and personal accounts,⁶³ but that fund was organized as a trust with a trustee, which an Afore account is not in form.⁵⁶

On that reading, employer contributions are U.S. income as they vest,^64,65 and they vest at once, because the money is the worker's on deposit.³⁴ The foreign earned income exclusion cannot cover them.⁶⁶ You are not treated as owner of the part they fund.⁶⁷ If the account is not a trust, on our reading the employer's money is ordinary pay or property for services, and the exclusion could apply to it.⁶⁸

The worker's 1.125% is withheld by law with no election, so on the Chief Counsel's reading of a mandatory fund it counts as the employer's.⁶⁹ Even counted as yours, it never exceeds the employer's share.^4,6 Voluntary and supplementary money you pay in is your own,⁷⁰ including long-term saving under Article 185 of the income tax law held in the account.⁷¹ An employer's voluntary money is the employer's.¹² The federal cuota social comes from neither you nor your employer, so §402(b)(1) doesn't cover it,⁶⁴ and whose it is is not settled: no IRS guidance addresses it.¹⁰ The cautious course counts it with your own money.

So there is one test: your own voluntary money plus any cuota social, as a running total, against the employer's. Leave the employer's housing 5% off the employer's side, which is the cautious direction.⁷² Once your side exceeds the employer's, you are treated as owner of the part that money funds, if the grantor trust rules are otherwise met.⁷³ The cuota matters only at low pay: on early-2026 figures at one minimum wage it is about MXN 12.16 a day, against MXN 16.22 from the employer and MXN 3.54 withheld from you that counts as the employer's,^74,75 so on those figures about MXN 7.61 a day of voluntary money would pass it. For other years, your statement shows the employer's, the State's and your own contributions.⁷⁶

The mandatory system covers employees generally, so on our reading the rule for highly compensated employees, which turns on failing the U.S. coverage tests, should not apply.^77,78

No contribution to a §402(b) trust is a Part I event.⁷⁹ Payouts from the employer's part are taxed under §72 when paid or made available to you, with the employer money already taxed as your basis,^80,81,82 and they stay off Part III if you report them as compensation income,^83,84 unlike payouts from a part you own.⁸⁵ Whether a balance you may draw at 60 or 65 is made available before you draw it is not settled.^86,87

Rev. Proc. 2020-17: possible only for mandatory money, on our reading of reporting. Proposed regulations: possible.

Rev. Proc. 2020-17 exempts an eligible individual (one who has filed U.S. returns and reported the account's income as U.S. law requires)⁸⁸ from Forms 3520 and 3520-A for a retirement trust that meets its conditions.⁸⁹ It is possible for mandatory money, and unlikely for voluntary money. For this step alone we look at the subaccounts separately, as the U.S.-Mexico FATCA agreement does for bank reporting,⁹⁰ although the trust question above reads the account as one whole; no IRS guidance says that is right, and the law allows voluntary money on every account.

Mandatory money fits most of the conditions. It is tax-favored: employer and government contributions and their yields are not income to the worker in Mexico when paid in or earned, and a SIEFORE is not an income taxpayer.^91,92,93 Contributions come from work and are a percentage of pay up to the ceiling.^94,95,4,7 Payouts are tied to age 60 or 65, disability or death; a withdrawal on unemployment is a hardship, which the revenue procedure allows, and the marriage sum is small, though it is not named.^96,97,26 The employer condition doesn't fit a national system set by statute; if it counts, coverage is general.^98,77

Reporting rests on our reading. The revenue procedure asks that annual information be provided or otherwise available to the tax authorities.⁹⁹ We found no yearly return by an Afore on mandatory money. But an Afore is a financial entity, and those must give the tax authorities account information on request, directly or through CONSAR.^100,101 We read that as otherwise available; no IRS guidance says that access on request is enough.

Voluntary money doesn't fit the same way. Anyone with an account can add it, even while out of work, with no limit,^102,13 and it can be withdrawn early.¹⁴ The Afore does keep data on it for the SAT.¹⁰³ The proposed regulations, which you may rely on now if you apply them in full and consistently with related persons,¹⁰⁴ let a value test of US$600,000 (adjusted for inflation from 2026), which on our reading adds together all your trusts in Mexico, stand in for a contribution limit,¹⁰⁵ and make allowance for "limited contributions made by unemployed individuals",¹⁰⁶ so on our reading they are possible for an account with modest voluntary money. The payout condition stays, and early withdrawal of voluntary money is the doubt.¹⁰⁷

No deferral. Whether Article 19(1)(b) reaches Afore payouts is not settled; the cautious course treats them as taxable.

No deferral. No article of the U.S.-Mexico treaty or its protocols defers U.S. tax on an account's income or relieves contributions. Article 19(1)(a) taxes a pension only in the country where you live,¹⁰⁸ but the saving clause lets the United States tax its citizens and residents as if the treaty had not come into effect,¹⁰⁹ and of Article 19 it spares only paragraphs 1(b) and 3.¹¹⁰ So a U.S. citizen living in Mexico, taxed by both countries, gets relief through the foreign tax credit, also spared.¹¹¹ Someone living in the United States is different. Mexico's law taxes a nonresident's pension above a yearly floor,¹¹² but on this reading Article 19(1)(a) leaves the pension taxable only in the United States, so reclaim any such tax from Mexico rather than crediting it, since tax beyond what the treaty allows is not creditable.¹¹³

Article 19(1)(b) makes social security benefits and other public pensions paid by a Contracting State to a resident of the other State or a U.S. citizen taxable only in the paying State,¹¹⁴ and Treasury says a Mexican social security benefit is exempt from U.S. tax even for a U.S. citizen.¹¹⁵ Whether that reaches Afore payouts is not settled, and no IRS guidance addresses it. The argument that it does: the pension is the one the Social Security Law provides, and that law treats the contributions as public spending on social security.¹¹⁶ The argument that it doesn't: the words are "paid by a Contracting State", while an Afore or an insurer pays,^20,21 CONSAR calls the system private,² and the treaty was signed in 1992, before the 1997 system existed. When the United States and Chile covered Chile's private-account system in their 2010 treaty, they named it and used wider words.^117,118 The cautious course is to treat Afore payouts as taxable under Article 19(1)(a) and the saving clause.

On our reading Article 19(1)(b) does reach the guaranteed pension the federal government pays from its own money,¹¹⁹ the old pay-as-you-go IMSS pension¹²⁰ and the non-contributory pension,¹²¹ both in the practical notes below. A pension for past government service falls under Article 20(2) instead, as the ISSSTE block below says. Whether Article 19(1)(b) reaches the Pension Fund for Well-being's top-up is not settled. A treaty position on pensions is waived from Form 8833.¹²²

A green card holder who is a resident of Mexico under the treaty's tie-breaker is not subject to the saving clause, though a U.S. citizen stays subject to it.¹²³ Such a person can figure their U.S. tax as a nonresident, filing Form 1040-NR with Form 8833,¹²⁴ but is still treated as a U.S. resident for other purposes,¹²⁵ so the cautious course is to keep filing Forms 3520 and 3520-A unless you rely on the proposed regulations, which treat you as not a U.S. person for that time.^126,104 For a long-term resident, starting to be treated as resident abroad under a treaty, without waiving its benefits, ends lawful permanent residence for tax purposes once the IRS is notified, and that is an expatriation.^127,128 Treasury officials told GAO few treaties address moves between plans,¹²⁹ and this one has no rule on whether a move is taxed. Where a treaty is silent, IRS officials said, there is generally no form of transfer that gets deferral.¹³⁰

With only mandatory money, nothing yet; Part II and 3520-A once voluntary money plus any cuota social exceeds your employer's.

Read on the cautious course as a §402(b) trust. No Part I for any contribution.⁷⁹ No Part II or Form 3520-A for the employer-funded part; once your own voluntary money plus any cuota social exceeds your employer's, Part II and Form 3520-A each year for the part that money funds.^67,73,131 No Part III for payouts from the employer-funded part that you report as compensation income;⁸³ payouts from a part you own go on Part III, lines 24 and 27.⁸⁵ No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules, and the income of a part you own is taxed to you each year.^80,132,133 Someone with only mandatory money, including a worker who left Mexico before becoming a U.S. person, has nothing to file until a payout not reported as compensation, or a move as the practical notes describe it.^67,83

A death benefit paid straight to a U.S. beneficiary is a payout from a foreign trust on this reading, and since it is not settled whether a beneficiary can report it as compensation income, the cautious course is to report it on Part III.^134,83 A retirement or housing balance moved at 70 to the Pension Fund for Well-being stays yours to claim,^29,30 and whether that move or a later payment through the Institute is a distribution is not settled: no IRS guidance addresses it, and by then you could generally have drawn the money, so it is not a locked move. The cautious course is Part III at the move and at payment, unless you report it as compensation income. Voluntary money isn't named in those moves, so a part you own keeps its reporting.

If the account is a trust but not a §402(b) trust, each contribution of your own is a Part I transfer and you are treated as owner of the part it funds, so Part I, Part II, Form 3520-A and Part III all apply.^{135,136,131,134} Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹³⁷ If it is not a trust, none of these apply. An eligible individual whose account qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them.^89,104 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^138,139,140 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹⁴¹ The funds an account holds may be subject to the PFIC rules; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

Federal workers under the 2007 ISSSTE law have an individual account operated by PENSIONISSSTE, a public body, or by an Afore they choose.^144,145 CONSAR calls PENSIONISSSTE a public sector party managing individual accounts as any other Afore does.¹⁴⁶ It invests through SIEFOREs.¹⁴⁷ Those who chose the old regime instead are in the practical notes below.

Here the worker's mandatory share is the larger one: 6.125% of basic salary,¹⁴⁸ against 5.175% from the federal agency or entity, 2% for retirement and 3.175% for severance in old age and old age.¹⁴⁹ The federal government adds a cuota social.^150,151 A worker can also choose to have up to 2% of pay put into solidarity saving, and the employer then adds $3.25 pesos for each peso.^152,153 Benefits start at 60 if out of work, or at 65.^154,155 When the worker turns 75 the retirement balance moves to the Pension Fund for Well-being unless the worker still has a job, and the right to it does not lapse.¹⁵⁶

Not settled, as for an IMSS account. A worker can move the account between PENSIONISSSTE and an Afore unchanged.

Not settled, on the same two arguments as an IMSS account, and no IRS guidance addresses it. The property language is the same: the money in the account is the worker's.¹⁵⁷ Mexican form points away from a trust, and purpose, supervision and the lock on the money point toward one.^48,32

That PENSIONISSSTE is a public body doesn't change this: a worker can move the account between PENSIONISSSTE and a private Afore without changing what it is,¹⁵⁸ and PENSIONISSSTE is regulated under the Afore rules.¹⁵⁹ With the question open and the penalty for a missing Form 3520-A large,⁵⁷ this guide takes the cautious course of reading it as a foreign trust.^58,59 It reads the account as one whole, as for an IMSS account, including voluntary money you can withdraw, because one administrator holds it.^144,60 If it is not a trust, none of the steps below apply.

On the cautious reading, an employees' trust. The mandatory 6.125% counts as the employer's on the Chief Counsel's reading.

On the cautious course we read it as a §402(b) employees' trust, with the federal agency as employer.^149,61 Employer contributions are U.S. income as they vest, and they vest at once;^64,157 the foreign earned income exclusion cannot cover them.⁶⁶ You are not treated as owner of the part they fund.⁶⁷

The 6.125% is withheld by law with no election, so on the Chief Counsel's reading of a mandatory fund it counts as the employer's.^69,148 That memo is advice about a fund held in trust, not precedent. If it counted as yours, it would exceed the employer's 5.175% from your first payday, unless you elect solidarity saving of about 0.43% of pay or more, when the employer's match keeps its side ahead.^73,153 Solidarity saving is your election, so your part is your own,⁷⁰ but it can't overtake a match of 3.25 to 1.¹⁵² So the test is the one in the IMSS block above: your own elective money plus any cuota social, against the employer's, with the 6.125% on the employer's side.¹⁵¹

No contribution is a Part I event.⁷⁹ Payouts are taxed as in the IMSS block above.^80,81

As for an IMSS account: possible only for mandatory money, on our reading of reporting. Proposed regulations: possible.

As for an IMSS account. Rev. Proc. 2020-17 is possible for mandatory money and unlikely for voluntary money, for the same reasons.⁸⁹ Contributions and yields are not income to the worker in Mexico when paid in or earned.^91,92 Payouts are tied to age 60 or 65.^96,154,155 Reporting rests on our reading, with one more doubt: Mexican law applies the Afore rules to PENSIONISSSTE but doesn't call it a financial entity.^99,159,101 The proposed regulations are possible, with the value test, which on our reading adds together all your trusts in Mexico.^104,105

No deferral. Whether Article 20(2) reaches these payouts isn't settled; it gives no relief to a U.S. citizen or green card holder.

As for an IMSS account, no deferral, and the saving clause leaves ordinary pensions taxable.^109,108 A pension for past government service, paid directly by the State or out of funds it created, falls under Article 20(2) instead of Article 19(1)(b).^160,161 Whether that reaches a payout from an individual account at an Afore or PENSIONISSSTE is not settled, and no IRS guidance addresses it, so the cautious course for someone living in the United States is to treat it as taxable there. Where it applies, the pension is taxable only in Mexico for someone who is neither a U.S. citizen nor a green card holder, while the saving clause keeps U.S. citizens and green card holders taxed.¹⁶² Relief for them comes through the foreign tax credit,¹¹¹ except that a U.S. citizen living in the United States is taxable only there,¹⁶³ and reclaims any Mexican tax instead.¹¹³

With only mandatory money, nothing yet; Part II and 3520-A once your elective money plus any cuota social exceeds your employer's.

Read on the cautious course as a §402(b) trust. No Part I for any contribution.⁷⁹ No Part II or Form 3520-A for the employer-funded part or the mandatory 6.125%; once your elective money plus any cuota social exceeds your employer's, Part II and Form 3520-A each year for the part that money funds.^67,73,131 No Part III for payouts from the employer-funded part that you report as compensation income;⁸³ payouts from a part you own go on Part III, lines 24 and 27.⁸⁵ No Form 4970: payouts from a §402(b) trust are taxed under §72, and the income of a part you own is taxed to you each year.^80,132,133 Someone with only mandatory money, including a worker who left Mexico before becoming a U.S. person, has nothing to file until a payout not reported as compensation, or a move as the practical notes describe it.^67,83

A death benefit paid straight to a U.S. beneficiary is a payout from a foreign trust on this reading, and since it is not settled whether a beneficiary can report it as compensation income, the cautious course is to report it on Part III.^134,83 A retirement balance moved at 75 to the Pension Fund for Well-being stays yours to claim,¹⁵⁶ and whether that move or a later payment through the Institute is a distribution is not settled: no IRS guidance addresses it, and by then you could generally have drawn the money, so it is not a locked move. The cautious course is Part III at the move and at payment, unless you report it as compensation income.

If the account is a trust but not a §402(b) trust, each contribution of your own is a Part I transfer and you are treated as owner of the part it funds, so Part I, Part II, Form 3520-A and Part III all apply.^{135,136,131,134} Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹³⁷ If it is not a trust, none of these apply. An eligible individual whose account qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them.^89,104 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^138,139,140 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹⁴¹ The funds an account holds may be subject to the PFIC rules; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

An employer pays 5% of the base wage into a housing subaccount; INFONAVIT collects and manages it for IMSS workers and FOVISSSTE for ISSSTE workers, and the Afore only reports the balance.^72,164 The INFONAVIT law says the contributions are the workers' "patrimonio", their assets, and together make up a national housing fund.¹⁶⁵ The fund lends to workers, and during a loan the employer's contributions reduce what the worker owes.¹⁶⁶ What is left at retirement passes to the Afore for a pension or is paid out.¹⁶⁷ It earns interest from INFONAVIT's operating surplus.¹⁶⁸ A worker may also move voluntary money in for a loan.¹⁶⁹

Not settled: the workers' assets by statute, but pooled and lent by a public agency. Cautious: read with the account.

Not settled, and no IRS guidance addresses it. Federal law, not Mexico's label, decides.³² The INFONAVIT law calls the money the workers' "patrimonio", their assets, and the ISSSTE law calls it their "propiedad", their property,^165,170 but it is pooled, sent to the Institute's account at the Bank of Mexico,¹⁷¹ and lent or invested by a public agency with its own assets.¹⁷²

The argument that it is not a trust: a public agency runs a housing finance program, whose purpose is lending rather than protecting and conserving property.⁴⁸ The argument that it may be one: a body holds pooled money the law treats as the workers' assets, they can't direct it, and it is paid out at retirement. The foreign pension fund the IRS privately ruled a trust also held money for members who could not assign their interests, though its benefits followed a formula.^53,54 This guide reads it cautiously, with the rest of the account. If it is not a trust, none of the steps below apply.

On the cautious reading, the employer's 5% is U.S. income when paid in; you are not treated as its owner.

On that reading, the employer's 5% is an employer's contribution to an employees' trust under §402(b), U.S. income as it vests,⁶⁴ and you are not treated as owner of it.⁶⁷ Where it pays down your own mortgage, we read it as pay whether or not the account is a trust.¹⁶⁶ Mexico doesn't tax it when paid in.¹⁷³ Voluntary money you move in is your own, and counts in the comparison in the IMSS block above.^70,73

Open, and little turns on it: little is filed here on the cautious reading.

Open. The subaccount has a housing purpose on its face, not retirement alone, though the revenue procedure allows for primary residence purchases.^89,97 No IRS guidance addresses it, and on the cautious reading there is little here to file.

No deferral, as for the rest of the account.

No deferral, as for the rest of the account.^109,108 Whether Article 19(1)(b) reaches money paid out with a pension is not settled, as in the IMSS block above.¹¹⁴

Nothing on Form 3520 for the employer's 5%, except a payout you don't report as compensation.

Read on the cautious course with the rest of the account. No Part I.⁷⁹ No Part II or Form 3520-A on the employer's 5%: only the employer pays that.^67,72 Part III only for a payout you don't report as compensation income.^83,134 No Form 4970.^80,132 If it is not a trust, none of these apply.

Voluntary money you moved in for a loan is your own,¹⁶⁹ and counts as in the IMSS block above.⁷³ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

This is a voluntary plan an employer sets up on top of social security.¹⁷⁴ For the employer's tax deduction, the fund must be held in an irrevocable fideicomiso with a bank or be managed by an insurer, a brokerage firm, a fund operator or an Afore,¹⁷⁵ and its assets and yields may be used only for the fund's purposes.¹⁷⁶ This block covers the fideicomiso; the next covers the other routes.

The deductible plans pay life annuities on top of IMSS.¹⁷⁷ The employer pays; a plan may let workers contribute too,¹⁷⁸ and must let them choose to join.¹⁷⁹ Employer and worker contributions together are limited to 12.5% of annual salary.¹⁸⁰ A plan registered with CONSAR must cover all workers generally.¹⁸¹

A foreign trust, on our reading: a bank takes title for the plan's purposes and owes a statutory duty.

A foreign trust, on our reading. In a fideicomiso the settlor transfers ownership or title of assets to a fiduciary,¹⁸² only authorized institutions can act as one,¹⁸³ and it must act as a good head of family, keep the assets apart, and open special accounts for each contract.^184,185,186 Trustees holding property to protect or conserve it for beneficiaries is what makes an arrangement a trust for U.S. purposes,⁴³ and IRS advice, which is not precedent, lists the same elements.⁴⁴ Rev. Rul. 2013-14 doesn't reach it, since the bank does more than hold title.⁴⁹ Governed by Mexican law and run in Mexico, it meets neither test for a domestic trust.^58,59 No IRS guidance addresses Mexican plans, though the IRS has ruled privately that a foreign pension fund is a trust.⁵³

Check the contract. A fideicomiso can be set up without naming a beneficiary,¹⁸⁷ so see whether it names the workers. The employer can reach the money at a tax cost, and can use excess reserves for its retirement contributions.^188,189 We don't read that as making the employer an owner, because the law dedicates the assets to the pensions.¹⁷⁶

A §402(b) employees' trust on our reading. Employer money is U.S. income when vested; elective money is your own.

We read it as a §402(b) employees' trust: an employer's contributions to a trust for its workers, and a trust created outside the United States cannot be exempt under U.S. §501(a).^64,61 §402(d) treats a foreign trust as exempt only if it would otherwise qualify.⁶² That test is live here: this is a voluntary plan with general coverage, and one that met all of §401(a) would escape §402(b). On our reading nothing suggests one of these plans does, so ask the plan if you think yours might. No IRS ruling addresses Mexican plans. The IRS has ruled privately on a foreign fund organized as a trust, with mandatory employer contributions and personal accounts;^63,56 a fideicomiso plan also has a trustee, but this plan is voluntary and may not have personal accounts.

Employer contributions are U.S. income to you as they vest,^64,65 and the foreign earned income exclusion cannot cover them.⁶⁶ We found no vesting rule in Mexican law for these plans, so the plan decides. A defined benefit plan's contribution for one worker may not be known; the regulations then use an amount worked out by a formula or by recognized actuarial principles.¹⁹⁰ Ask the plan for its figures. You are not treated as owner of the part the employer funds.⁶⁷

Elective contributions of your own are your own,⁷⁰ and you become owner of a part only when yours exceed the employer's and the grantor trust rules are otherwise met.⁷³ If you are a highly compensated employee and one reason the plan is not exempt is that it fails the U.S. coverage tests, you include your vested accrued benefit, less what has already been taxed to you, in income each year instead.⁷⁸

No contribution to a §402(b) trust is a Part I event.⁷⁹ Payouts from the employer's part are taxed under §72 when paid or made available to you,^80,81 and they stay off Part III if you report them as compensation income,^83,84 unlike payouts from a part you own.⁸⁵ A worker who leaves early has the employer's money moved to supplementary contributions or a personal retirement plan if it can't go to the next employer's plan.¹⁹¹ No IRS guidance says how such a transfer is reported on Form 3520.

Rev. Proc. 2020-17: possible, Mexico's best candidate; the 12.5% cap and general coverage do the work.

Rev. Proc. 2020-17 is possible, and this is Mexico's best candidate. It exempts an eligible individual⁸⁸ from Forms 3520 and 3520-A for a retirement trust that meets its conditions.⁸⁹ A plan written to the deduction rules points toward all of them.

It is tax-favored: the employer deducts, interest paid to the fund has no withholding, and pensions are exempt up to a limit.^{91,192,193,194} The bank files yearly with the SAT for each income-generating trust: settlors, beneficiaries, contributions and income.^99,195 The SAT's rule lets a bank leave that information out for listed types of trust, filing a separate report we did not read. A private employer's pension fideicomiso is not on the list, but one set up by a federal, state or municipal body is, so for that plan this filing may not show reporting.¹⁹⁶ Contributions come from pay.^94,180 Advances on the pension and handing the reserves to the worker are barred, and your own part comes out only on leaving the employer.^96,197,178 A worker who receives money before the retirement conditions pays income tax on it.¹⁹⁸

The two conditions that do the work are the limit and coverage. Employer and worker contributions together can't exceed 12.5% of annual salary.¹⁸⁰ On our reading that meets the percentage-of-earned-income limit for a plan written to it,⁹⁵ because the rule is a condition of the plan rather than a relief limit, but it conditions the deduction, a plan can give up the deduction, and no IRS guidance addresses it. Coverage is plan by plan: the deduction needs benefits granted generally to all workers.^98,199 An executive-only plan doesn't meet this.

The proposed regulations, which you may rely on now if you apply them in full and consistently with related persons,¹⁰⁴ also accept a limit set as a percentage of earned income,²⁰⁰ so the same reading of the 12.5% carries over, and they are possible too. A value test of US$600,000 (adjusted for inflation from 2026) can stand in for a limit, but it tests the aggregate value of the trust, so on our reading a pooled plan may fail it however small your share.¹⁰⁵

No deferral: the treaty has no such article, and Article 19(1)(a) is under the saving clause.

No deferral: no article of the treaty defers U.S. tax on a plan's income or relieves contributions. Article 19(1)(a) taxes a pension only in the country where you live,¹⁰⁸ but the saving clause keeps U.S. citizens and residents taxed.^109,110 A U.S. citizen living in Mexico gets relief through the foreign tax credit;¹¹¹ someone living in the United States reclaims any Mexican tax instead, as the IMSS block above says.¹¹³ A plan's pension isn't paid by a Contracting State, so Article 19(1)(b) doesn't reach it.¹¹⁴ The exception for a green card holder is in the IMSS block above.¹²³

No Part I; Part II and 3520-A once your own money passes the employer's; Part III for payouts not reported as compensation.

Read as a §402(b) trust: no Part I for any contribution.⁷⁹ No Part II or Form 3520-A for the employer-funded part; once your own contributions exceed your employer's, Part II and Form 3520-A each year for the part they fund.^67,73,131 No Part III for payouts from the employer-funded part that you report as compensation income;⁸³ on the cautious course, one you don't report that way goes on Part III. Payouts from a part you own go on Part III, lines 24 and 27.⁸⁵ No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules.^80,132

If the plan would otherwise meet §401(a), Part I still doesn't apply.^79,61 If for another reason the plan is not treated as a §402(b) trust, each contribution you make is a Part I transfer and you are treated as owner of the part it funds, so Part I, Part II, Form 3520-A and Part III all apply.^{135,136,131,134} Part I also applies at your death as a U.S. citizen or resident, if any part of the plan is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹³⁷ Either way, an eligible individual whose plan qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them.^89,104 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^138,139,140 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹⁴¹ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

These are the other routes the income tax law allows for a deductible fund: management by an insurer, a brokerage firm or a fund operator, in place of a fideicomiso.¹⁷⁵ That rule conditions the employer's deduction, and we found nothing requiring a plan to be funded at all. An Afore can manage such a fund too:²⁰¹ where ownership of each contribution passes to the worker,²⁰² read it with the Afore accounts above.

Not a trust, on our reading: an insurer's contract, assets the employer keeps, or no fund at all.

Not a trust, on our reading; no IRS guidance addresses these routes. A trust needs trustees who take title to protect or conserve property for beneficiaries,⁴³ and these don't fit. An insurer owes a contract, under a policy from a commercial company, which the Code treats as a corporation.²⁰³ With a broker or fund manager the law says "managed by", with no transfer of title in its text, so on our reading the assets stay the employer's until paid, though the law limits what they can be used for and we read no such contract.^175,188,176 An unfunded plan has nothing to hold.

The strongest authority the other way is the IRS's private ruling that a foreign pension entity supervised with insurers is a trust.^53,54 That body held the assets itself to pay its members, which a commercial insurer's policy or an employer's own account doesn't do. If the documents don't make clear how the plan is held, the cautious course is the fideicomiso block above.

Applies only to a trust; employer premiums or money set aside from creditors can still be U.S. income.

§402(b) reaches only an employer's contributions to an employees' trust,⁶⁴ so on our reading it doesn't apply. An employer's premiums for an annuity contract are your income under the rules for property transferred for services.²⁰⁴ Assets set aside from the employer's creditors can also count as property, while an unfunded and unsecured promise to pay does not.⁶⁸

Not needed.

§6048 reaches only foreign trusts.¹³⁵

The same pension rules as the fideicomiso block; no reporting relief is needed.

No reporting relief is needed. Payouts fall under Article 19(1)(a), under the saving clause.^108,109 Article 19(2) covers an annuity only if it is bought for full consideration other than services rendered, so it doesn't fit a pension an employer funds.²⁰⁵

Nothing on Form 3520 or 3520-A.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts.^135,131,134 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

A savings fund is a pay benefit. For the employer's deduction, worker and employer pay equal amounts, the employer's up to 13% of the wage and no more than 1.3 times the minimum wage for a year, read as 1.3 annual UMA: MXN 55,633.03 from February 1, 2026,^206,8,207 and the worker can draw it only once a year or at the end of employment.²⁰⁸ CONSAR's English lists savings funds among social welfare funds.²⁰⁹ The income tax law also exempts what workers receive from workers' savings associations (cajas de ahorro) and from savings funds,²¹⁰ and labor law allows pay deductions for such an association with the worker's free consent,²¹¹ but we found no statute defining a caja.

A foreign trust only if a bank holds it in a fideicomiso, on our reading. Check how yours is held.

Nothing we found requires a fideicomiso, and no IRS guidance addresses these. If a bank holds the fund in one, it is a foreign trust on our reading, as in the fideicomiso block above.^182,43 A fund the employer holds is not a trust, and an unsecured promise isn't property.⁶⁸ An association its members run reads as no trust, on our reading: they share in running it, so they aren't beneficiaries who cannot share in that job.⁴⁸ How a given fund or association is held is a fact to check.

In a fideicomiso, the employer's match is U.S. income when vested; to be deductible it must equal yours.

In a fideicomiso, on our reading, §402(b) applies: the employer's match is U.S. income as it vests.⁶⁴ To be deductible it must equal yours,²⁰⁶ so your total doesn't exceed it unless the plan is built differently.⁷³

None: a fund you can draw on each year isn't for retirement.

None. Rev. Proc. 2020-17 covers retirement trusts and medical, disability or educational trusts,^89,212 and money you can draw once a year doesn't meet the payout condition.^96,208

No relief: not a pension.

No relief. It is not a pension, and the saving clause keeps U.S. citizens and residents taxed.¹⁰⁹

Nothing on Form 3520 unless it is in a fideicomiso.

These answers apply only to a fund held in a fideicomiso. No Part I for any contribution.⁷⁹ Part II and Form 3520-A only if a plan lets your total exceed the employer's.^73,131 Part III only for a payout you report other than as compensation income.^83,134 No Form 4970.^80,132 If it is not in a fideicomiso, none of these apply. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

A worker with no IMSS or ISSSTE coverage, called an independent or non-affiliated worker, may open an Afore account to save for a pension.^213,214 Only you pay in. Money set aside for a pension comes out on requirements CONSAR sets, and the contract can't deny you free use of it at 60.^215,216 Voluntary money comes out on the terms in the fund's prospectus, not less than two months.²¹⁷

Not settled, as for other Afore accounts; with no employer, the case for no trust is stronger. Cautious: a foreign trust.

Not settled, and no IRS guidance addresses it. Federal law, not Mexico's label, decides.³² The same two arguments apply as for an employer-paid Afore account, with the balance tilted further toward no trust. The law calls these accounts the worker's,³⁵ the Afore buys shares in your name under the same contract,³⁶ no employer is involved, and the money is yours to pay in and, on the terms above, to take out. A title-holder who only acts at the owner's direction is not a trustee.⁴⁵

The argument that it may be one: the Afore does more than hold title,⁴⁹ it holds and invests for you under a statutory regime and must act exclusively in your interest,⁵⁰ and the purpose matches a trust.⁴⁸ With the question open and the penalty for a missing Form 3520-A large,⁵⁷ this guide takes the cautious course of treating it as a foreign trust.^58,59 It reads the account as one whole, including voluntary money you can withdraw, because one contract and one Afore hold it.^36,60

Does not apply: no employer pays in.

§402(b) reaches only an employer's contributions to an employees' trust,⁶⁴ so it does not apply to an account only you pay into.

Rev. Proc. 2020-17: unlikely, with no earnings test or limit. Proposed regulations: possible for the pension money.

Rev. Proc. 2020-17 is unlikely: contributions needn't come from earnings, and the law sets no limit.^94,95,13 The employer condition doesn't apply to a plan no employer maintains.⁹⁸

The proposed regulations need contributions only "generally" from earned income, with allowance for "limited contributions made by unemployed individuals", and let a value test of US$600,000 (adjusted for inflation from 2026), which on our reading adds together all your trusts in Mexico, stand in for a limit,^106,105,104 so on our reading they are possible for the pension money. Voluntary money that can come out early is doubtful under the payout condition.¹⁰⁷

No deferral, and whether Article 19(1)(b) reaches this at all is doubtful.

No article defers U.S. tax on the account or relieves contributions.¹⁰⁸ The saving clause keeps U.S. citizens and residents taxed on payouts.^109,110 A U.S. citizen living in Mexico gets relief through the foreign tax credit;¹¹¹ someone living in the United States reclaims any Mexican tax instead, as the IMSS block above says.¹¹³ Article 19(1)(b) is doubtful here: this is voluntary saving, and an Afore pays it.¹¹⁴

On the cautious course, full reporting, as for a foreign trust you own.

On the cautious course, you report it as a foreign trust you own: you are treated as owner of the part your contributions fund, including contributions made before you became a U.S. person, because its income is held for you,^218,136 so Part II and Form 3520-A are due each year,¹³¹ and payouts go on Part III.¹³⁴ Each contribution you make as a U.S. person is a Part I transfer,¹³⁵ and one made within 5 years before your U.S. residency started is treated as made on your residency starting date and goes on Part I for that year.²¹⁹ Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹³⁷ If the Afore does not file Form 3520-A, you attach a substitute to your Form 3520.²²⁰ No Form 4970, because the income is taxed to you each year.¹³³ If it is not a trust, none of these apply. An eligible individual whose account qualifies under the proposed regulations files none of them.¹⁰⁴ On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^140,221 No IRS guidance names executors. The funds an account holds may be subject to the PFIC rules; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

A personal retirement plan (PPR) is an account or investment channel set up only to receive and administer money for use at 65 or on disability or incapacity.²²² It is administered in an individual account by an insurer, a bank, a brokerage firm, an Afore, or a fund distributor or operator,²²³ which counts as authorized once it is on the SAT's list.²²⁴ The opening contract must say it is a PPR.²²⁵

You pay in, and the contributions are deductible up to 10% of your income, with a ceiling of five annual minimum wages, read as five annual UMA: MXN 213,973.20 for 2026.^226,8,207 Money can come out early, but it then counts as income, with tax withheld.^227,228 This block covers a PPR with a broker, fund manager or Afore, and a bank PPR that holds fund shares or securities. A PPR written as an insurance policy, or a bank PPR whose contract shows a deposit, is in the next block.

Not settled, unless the contract names a fiduciary: we could not read a PPR contract. Cautious: a foreign trust. Check yours.

Not settled, and no IRS guidance addresses PPRs. The law calls them accounts or investment channels and doesn't say who holds title.²²² Federal law, not Mexico's label, decides.³² A bank PPR that holds fund shares or securities belongs here: the law says only that a bank administers it,²²³ and we could not read a bank's PPR contract. The law doesn't list a fideicomiso among a PPR's routes, but if a contract names a fiduciary and a fideicomiso, it is a foreign trust on our reading, as in the employer block above.^182,43

The argument that it is not a trust: a general brokerage contract from a firm on the SAT's list has the broker act on the client's account over securities the client owns.^229,230,231 A title-holder who only acts at the owner's direction is not a trustee.⁴⁵ One distributor's help pages, a third-party description, say you can withdraw whenever you like, with 20% withheld.²³² We could not read a contract written for a PPR.

The argument that it may be one: the law sets these accounts up for the sole purpose of retirement,²²² and a firm that manages or invests does more than hold title.⁴⁹ With the question open and the penalty for a missing Form 3520-A large,⁵⁷ this guide takes the cautious course of treating it as a foreign trust.^58,59

Check your contract. If it shows the securities or fund shares are yours and the firm acts only on your instructions, the case for no trust is at its strongest, though no IRS guidance confirms it.⁴⁵ If it names a fiduciary and a fideicomiso, it is a foreign trust on our reading.¹⁸² If it shows a bank deposit, the next block applies.²²³

Does not apply where only you pay in.

§402(b) reaches only an employer's contributions to an employees' trust,⁶⁴ so it does not apply where only you pay in. If an employer adds to a group plan,²²³ read the employer's part as in the fideicomiso block above.⁷³

Rev. Proc. 2020-17: unlikely. Proposed regulations: possible, though early withdrawal is taxed rather than penalized.

Rev. Proc. 2020-17 is unlikely. A PPR is tax-favored: contributions are deductible, and interest paid to it has no withholding.^91,226,193 Reporting is met: the firm reports on the electronic tax invoice's retirement plan complement and gives you a yearly statement.^99,233,234 But nothing limits contributions to earnings, and on our reading the cap is on the deduction, not on what you pay in, though the law's words are that "such contributions" may not exceed it.^94,95,226 Early withdrawal is taxed rather than barred, and the amount withheld is a prepayment of income tax, so on our reading it is doubtful as a penalty.^96,228 The employer condition doesn't apply unless it is a group plan.⁹⁸

The proposed regulations are possible. They need contributions only "generally" from earned income, with allowance for "limited contributions made by unemployed individuals", and let a value test of US$600,000 (adjusted for inflation from 2026), which on our reading adds together all your trusts in Mexico, stand in for a limit,^106,105,104 but they keep the same payout condition, with the same doubt.¹⁰⁷

No deferral: the treaty has no such article, and Article 19(1)(a) is under the saving clause.

No deferral: no article defers U.S. tax on the account or relieves contributions.¹⁰⁸ The saving clause keeps U.S. citizens and residents taxed on payouts.^109,110 A U.S. citizen living in Mexico gets relief through the foreign tax credit;¹¹¹ someone living in the United States reclaims any Mexican tax instead, as the IMSS block above says.¹¹³

On the cautious course, full reporting, as for a foreign trust you own.

On the cautious course, you report it as a foreign trust you own: you are treated as owner of the part your contributions fund, including contributions made before you became a U.S. person, because its income is held for you,^218,136 so Part II and Form 3520-A are due each year,¹³¹ and payouts go on Part III.¹³⁴ Each contribution you make as a U.S. person is a Part I transfer,¹³⁵ and one made within 5 years before your U.S. residency started is treated as made on your residency starting date and goes on Part I for that year.²¹⁹ Part I also applies at your death as a U.S. citizen or resident, if any part of the plan is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹³⁷ If the firm does not file Form 3520-A, you attach a substitute to your Form 3520.²²⁰ No Form 4970, because the income is taxed to you each year.¹³³ If it is not a trust, none of these apply. An eligible individual whose plan qualifies under the proposed regulations files none of them.¹⁰⁴ On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^140,221 No IRS guidance names executors. The funds or securities it holds may be subject to the PFIC rules; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

A PPR can be written as an insurance policy.²³⁵ A bank can also administer one,²²³ but the law doesn't say how the bank holds the money and we could not read a bank's PPR contract. This block covers a bank PPR only if its contract shows a deposit; one holding fund shares or securities is in the block above.

Separately, Article 185 of the income tax law lets you make deposits in special savings accounts, pay premiums on pension insurance, or buy fund shares,²³⁶ up to MXN 152,000 a year,²³⁷ with the deduction taken in the year and tax due on withdrawal. Fund shares bought this way stay in the fund's custody for five years.²³⁸ Article 185 money held in an Afore's long-term saving subaccount follows the Afore block it sits in, since that account is read as one whole.⁷¹

Not a trust, on our reading: a policy, a deposit, or shares in a stock company. No IRS guidance addresses them.

Not a trust, on our reading, and no IRS guidance addresses them. A trust needs trustees who take title to protect or conserve property for beneficiaries.⁴³ A policy is a contract with an insurer, which the Code treats as a corporation,^235,203 a bank owes a deposit where the contract shows one, and an investment fund is a stock company.^239,41

The strongest authority the other way is the IRS's private ruling that a foreign pension entity supervised with insurers is a trust.^53,54 That entity was a pension body holding assets for covered employees who could not assign their interests; a policy or deposit you take out yourself has no such holder. A contract that names a fiduciary and a fideicomiso, or a bank PPR holding fund shares or securities, belongs in the block above,¹⁸² and so, on the cautious course, does a bank PPR whose contract doesn't make clear how the money is held.

Does not apply: no employer pays in, and a contract or deposit is not a trust.

§402(b) reaches only an employer's contributions to an employees' trust,⁶⁴ and no employer pays into these.

Not needed.

Since §6048 reaches only foreign trusts.¹³⁵

No reporting relief is needed; the saving clause keeps U.S. citizens and residents taxed on income and payouts.

No reporting relief is needed. The saving clause lets the United States tax its citizens and residents as if the treaty had not come into effect,¹⁰⁹ so U.S. tax follows the contract or account as U.S. law treats it.

Nothing on Form 3520 or 3520-A; for a bank PPR, only if its contract shows a deposit.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts.^135,131,134 The funds an account holds may be subject to the PFIC rules; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^142,143

A foreigner can't own land within 100 kilometers of a border or 50 of a beach,²⁴⁰ so a bank takes title under a permit from the Ministry of Foreign Affairs, and the foreigner gets the use of it.²⁴¹ The term is up to 50 years and can be extended.²⁴² A foreign-owned Mexican company can hold non-residential land there directly; that is a company, not this block.²⁴³

Not a trust if the facts, only occasional rental included, match Rev. Rul. 2013-14; if not, cautious: the next block.

The IRS has ruled that such a Mexican land trust is not a trust on its facts, because the bank's only duties were to hold and transfer title at the owner's direction.⁴⁵ Its holding does not apply if the bank holds any other asset or is permitted or required to do more than hold title; the classification rules then decide.⁴⁹

So read your contract against the ruling's facts. It concerned Mexican residential real property in a restricted zone,²⁴⁴ with no other property under the agreement.²⁴⁵ The owner could sell without the bank's permission,²⁴⁶ and the bank had to grant a security interest to a lender if asked.²⁴⁷ The owner paid Mexican taxes directly,²⁴⁸ and had the exclusive right to possess the property.²⁴⁹ The property was only occasionally leased, and the owner received the rent directly.²⁵⁰ The bank had no duty to defend or maintain it,²⁵¹ and there was no other agreement among the parties that would make the relationship a partnership or other entity.²⁵² Regular rental, a contract with rent going through the bank, which Mexican law allows,²⁵³ or co-owners in a rental pool fall outside these facts.

Two points the ruling doesn't settle. Every Mexican fiduciary owes the statutory duty to act as a good head of family,¹⁸⁴ but the bank in the ruling was under the same law and the IRS still held no trust, so on our reading that duty alone doesn't take a contract outside it. And Mexican law lets a contract name beneficiaries in succession, within a limit on replacing one at death,^254,255 which can pass the interest on death. The ruling doesn't address that. On our reading a transfer at death on instructions you gave and can change is still a transfer at your direction, but no IRS guidance says so.

Outside the ruling a contract isn't automatically a trust: the classification rules decide, and on the cautious course you follow the next block.⁴³

You own the land directly if the facts match; otherwise a U.S. person who funds it is owner if the grantor trust rules are met.

If your contract matches and any rental is only occasional, there is no trust: you are treated as owning the property directly.⁴⁵ If not, on the cautious course a U.S. person who funds it is treated as owner of the part they fund for any year in which it has a U.S. beneficiary,¹³⁶ or because its income is held for them.²¹⁸ Someone who funds it while not a U.S. resident and becomes one within 5 years is treated as transferring on the day their U.S. residency starts.²¹⁹

No relief.

The saving clause lets the United States tax its citizens and residents as if the treaty had not come into effect,¹⁰⁹ and none of the provisions it spares concerns foreign trust reporting.¹¹⁰

Nothing if your contract and any occasional rental match the ruling; otherwise as for other fideicomisos.

If your contract matches Rev. Rul. 2013-14 and any rental is only occasional: no Part I, Part II, Form 3520-A, Part III, or Form 4970, since there is no trust, and you report any rent and gains as your own.⁴⁵

If the bank does more than hold title, or the land is rented regularly: on the cautious course, a U.S. person who funds it files Part I for that year,¹³⁵ a U.S. owner files Part II and makes sure Form 3520-A is filed, or files a substitute, each year,^131,220 and a U.S. person who receives a distribution files Part III.¹³⁴ So does use of the land by a U.S. owner or beneficiary, or a related U.S. person, without paying its fair market value: it is a reportable distribution whether or not it is taxable, as the next block's paragraph on loans and use of trust property says.²⁵⁶ A transfer to a foreign trust is treated as a sale, and you recognize any gain on what you transfer;²⁵⁷ a transfer is not, to the extent anyone is treated as owning the part it funds.²⁵⁸ Part I also applies on the death of a U.S. citizen or resident who was treated as owner of any part of the fideicomiso, or whose gross estate includes part of it, and to property that passes to the fideicomiso by reason of a U.S. person's death; the executor reports it, whether or not the executor is a U.S. person.¹³⁷ The gain rule does not apply to property that passes to the fideicomiso by reason of a U.S. person's death, if its basis in that property is set under section 1014(a).²⁵⁹ A distribution from a non-grantor trust that carries out income kept in earlier years is taxed with an interest charge on Form 4970.²⁶⁰ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.²⁶¹

A fideicomiso is the general Mexican trust. The settlor transfers ownership or title of assets to a fiduciary,¹⁸² which only authorized institutions can be,^183,262 for stated purposes, and a beneficiary can require the fiduciary to carry them out.²⁶³ The settlor can keep the right to revoke it,²⁶⁴ and a contract can set up a technical committee whose instructions free the bank of liability.²⁶⁵ It is used for family and will arrangements, investment, administration and development.

A foreign trust, on our reading, unless it is run for a business, secures a debt, or its bank only holds title.

A foreign trust, on our reading, unless one of the three cases below applies, and no IRS guidance addresses Mexican fideicomisos beyond the land ruling. A bank takes title and owes a statutory duty of care over the assets,^182,184 which is what makes an arrangement a trust for U.S. purposes,⁴³ and U.S. law looks first at purpose.^266,267 IRS advice on Liechtenstein Stiftungs, which is not precedent, treats them as trusts unless created primarily for commercial purposes.²⁶⁸ Governed by Mexican law and run in Mexico, it meets neither test for a domestic trust.^58,59

Three cases may differ. One run for a business may be a business entity for U.S. purposes,²⁶⁹ and Mexico taxes those through to the beneficiaries.²⁷⁰ Whether a fideicomiso that secures a debt is a trust is not settled:²⁷¹ no IRS guidance addresses it, and the cautious course is to report it. One whose bank only holds and transfers title at your direction follows the ruling's reasoning rather than these answers.⁴⁵

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

Who is treated as owner decides who files Part II and Form 3520-A. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which the trust has a U.S. beneficiary.¹³⁶ Someone who funds the trust while not a U.S. resident and becomes one within 5 years is treated, for this rule and for Part I, as transferring that part of the trust on the day their U.S. residency starts.²¹⁹ A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone or with the consent of a related or subordinate party subservient to them, or if only they or their spouse can receive distributions during their life.²⁷² Otherwise, unless another grantor trust rule makes a U.S. person owner,²¹⁸ no one is owner, and the trust is taxed as a separate, non-grantor trust.²⁷³

A trust has a U.S. beneficiary for the transferor rule if anyone has discretion to pay or benefit any person, unless its terms identify the class who may benefit and none of them is a U.S. person that year,²⁷⁴ even if nothing is paid to a U.S. person that year;²⁷⁵ a power to amend the trust to benefit a U.S. person counts, and so does a letter of wishes or other understanding that points to benefiting one, even one that says it is only a suggestion.²⁷⁶ Where a U.S. person funds the trust, the IRS may treat it as having a U.S. beneficiary unless that person shows it has none.²⁷⁷ A beneficiary who first became a U.S. person more than 5 years after the transfer is not counted,²⁷⁸ and a transferor whose trust gains a U.S. beneficiary is taxed that year on the income the trust kept for that part to the end of the year before, as an accumulation distribution with the interest charge.^279,280 A settlor who is not a U.S. person keeps the revocable-trust exception for a year only if they can take the property back alone, or with the consent of a related or subordinate party subservient to them, for at least 183 days of it; a power that needs anyone else's consent, such as an independent trustee's or protector's, does not count.^281,282 Once the exception fails for a year it is lost for good.²⁸³ Separately, a portion already treated as owned under §676, or under §677 other than its life insurance rule, on September 19, 1995 keeps that owner for the property it held that day, for as long as it stays so treated.²⁸⁴ A U.S. settlor of a trust with no U.S. beneficiary can still be owner under another rule, for example by keeping a power to take the property back,²⁸⁵ and a U.S. beneficiary who alone can take the property is owner of it.^286,272