AOW, pension and tax in Mexico: three articles, three directions

The treaty with Mexico dates from 1993, has been in force since 1994 and was updated in 2008 with a protocol. It is a treaty that doesn't send your income one way but splits it in three, and that is exactly why almost no Dutch-language page gets it right. This article reads it article by article.

Article 18 paragraph 1: occupational pension and annuity to Mexico

Pensions and other similar remuneration in respect of past employment, as well as annuities, are taxable only in the state where the recipient lives. No Dutch withholding at source, no threshold amount as in the newer treaties with Cyprus or Portugal.

The Netherlands does withhold wage tax, though, until you have applied for and obtained the exemption, with a Mexican certificate of residence. Without that application you first pay here and claim it back afterwards — that works, but it costs a year and a return.

Paragraph 2 is the small print: a lump sum or other one-off payment the Netherlands may tax after all if the employment was exercised here. Whoever wants a small pension commuted therefore does so before or after departure with a different outcome.

Article 18 paragraph 3: the AOW, shared with a cap

Here Mexico departs from most treaties. Pensions and other payments under a social security system — your AOW — may be taxed in the source state, but the tax may not exceed 17.5 percent of the gross amount. So the Netherlands keeps taxing, up to that cap; Mexico may tax too as the state of residence and credits what the Netherlands already took.

For whoever no longer pays national insurance contributions — and you don't after deregistration — the Dutch withholding on AOW alone usually stays under the cap. But that is a sum and not an assumption, certainly for whoever also sees a government pension taxed in the Netherlands alongside the AOW.

Article 19: the government pension stays Dutch

ABP and every other pension from past employment with the government fall under article 19 paragraph 2, and that designates the paying state. The only exception is whoever is resident and national of Mexico: then Mexico taxes. A Dutch passport therefore keeps the government pension Dutch, however long you live there.

Whoever has a mixed pension therefore has three sums done, not one: the occupational pension to Mexico, the AOW shared with a cap, the government pension Dutch.

What Mexico does with it

Mexico taxes residents on their worldwide income — article 1 of the Ley del Impuesto sobre la Renta says it literally: all income, wherever the source lies. The scale is progressive and rises to 35 percent. You file a return every year in April for the year before, with a tax number you apply for in person at the SAT, and with your Dutch annual statement as evidence for the credit of article 22: Mexico deducts the Dutch tax on your AOW, up to the amount Mexico itself taxes on it.

And then the exemption that's on every English-language site: article 93 exempts pensions up to fifteen UMA a day, in 2026 a good 53,493 pesos a month. The statute ties that exemption to the accounts of the Mexican system — provenientes de la subcuenta del seguro de retiro — and whether it also applies to a Dutch pension is unsettled. Contadores read it differently. Don't count on it until a contador confirms it in writing for your situation, and work out the Mexican tax without exemption as the worst case.

The residence test: the house in the Netherlands

Article 9 of the Código Fiscal de la Federación makes you tax resident as soon as you take up a home in Mexico. If you also keep a home in the Netherlands, the law looks at your centre of interests: more than half of your income from a Mexican source, or your professional activity in Mexico.

A pensioner with only Dutch income and a house in the Netherlands is then under Mexican law not a resident — and without residence in one of the two states the treaty doesn't apply. The Netherlands then simply keeps taxing everything, and Mexico nothing. For one person that is a disadvantage and for another exactly the intention; in any case it is a decision you take with the house, not with the visa. Put the bank conditions and the residence question side by side, in one conversation.

The AOW blow for singles

Apart from the treaty, and harder than the treaty: Mexico isn't among the 36 countries with which the Netherlands has a social security treaty. The minister listed them in 2024 in answer to parliamentary questions, from Argentina to South Korea — Mexico isn't among them, nor is Costa Rica.

Outside a treaty country the AOW is exported at no more than the married rate. For couples little changes — they already have that rate — but a single person falls back from 70 to 50 percent of the net minimum wage, and the AOW supplement lapses.

Twenty percentage points of AOW is for many budgets the difference between ample and tight, and almost no site on Mexico mentions it. Work out your monthly income with the export amount, not with your current AOW statement — and as a single person weigh extra heavily whether the sum still adds up.

The Netherlands tried in 2015 to conclude an enforcement treaty with the countries with the most AOW recipients. None of them wanted to negotiate, and according to the minister that has remained so to date.

Whoever leaves before AOW age: the accrual stops on the day of departure, and the voluntary continuation with the SVB has a registration period of one year.

What the Netherlands doesn't let go of either

The year of departure goes with an M return, usually without invitation. An annuity, pension entitlement or substantial interest travels with a protective assessment — and outside the EU the deferral is no automatism: you apply for it, and the tax authority can demand security. Dividend from a Dutch company the Netherlands may withhold up to 15 percent (article 10), wages are taxed where you work (article 15), self-employed work in your state of residence unless you have a fixed base elsewhere (article 14), and property where it lies (article 6).

And the child benefit: article 7b of the Child Benefit Act gives no entitlement for a child outside the Netherlands, unless it lives in an EU country, the EEA, Switzerland or a treaty country. Mexico is none of those. The child benefit stops with the quarter in which you leave.

The honest summary

Whoever has only an occupational pension and keeps no house in the Netherlands pays in Mexico and not in the Netherlands — on a progressive scale, with an exemption you may not assume. Whoever has AOW shares it with a cap, and as a single person with twenty percentage points less. Whoever has a government pension keeps it Dutch. It isn't a bad sum, but it is a sum of three parts — and the brochure mentions one.