Costs and Taxes when Selling a Mexican Property

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When you sell a property in Mexico, you will be subject to the fees of any professional services you contract, plus the following taxes and fees:

Mexican Tax on Property Gains (Capital Gains Tax): Mexico recently reformed its property tax laws to make it clearer for property owners who are selling their assets when and how much they need to pay in Capital Gains Tax. Exemptions can be applied before taxes are calculated, but these are dependent upon your residency status, how long you have owned the property, and whether the home was your primary residence for at least two years. A good realty agent, Notary Public, or lawyer will be able to advise you.

Foreign Tax on Property Gains: Depending on your nationality, your 'home' government may require you to pay taxes on any gains you realize from your Mexican property. Whether you have to pay, and how much depends on your country's tax policies, your residency status, and whether your home country has a tax-agreement in place with Mexico (if it does, then usually any taxes you pay to the Mexican government can be deducted from any additional taxes owed to your home government). You should contact your accountant or other tax professional as every situation is unique and tax law is complex.

Agent Fees: If you employ an agent, expect charges of around 4-8% of the value of the sale as a fee, but you may want to negotiate on this beforehand. You will also need to pay IVA (Mexican Sales Tax) on agent commissions. For example, if you pay 8% commission on a $100,000 sale ($8,000), you will need to pay IVA on $8,000. As IVA is relatively high in Mexico, you should take this into consideration as part of your budgeting.

Costs and Taxes when Buying Mexican Property

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Acquisition Tax: This tax is paid on the sale value of the property and is equivalent to about 2% depending on the state in which you buy. This tax is paid whether the property is sold, transferred, donated, placed into trust, split off or merged.

VAT (Sales Tax): No Value Added Tax (Sales Tax) is payable on residential property. Commercial Property transactions are liable to VAT at the current rate in addition to the Acquisitions Tax.

Appraisal Tax: The Tax Authority may choose to perform a commercial appraisal of the property after you purchase it. If the appraisal value is greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts. This sum is due within 15 days of the date of the appraisal report.

Registry Fee: In order to have the Public Records updated, a 1.3% fee (based on the value of the transaction) is paid by the buyer.

Public Notary Fees: You will be required to pay fees for services provided by the Notary Public. These are about 1.5% of the transaction value, plus the cost of the official appraisal (as described in Valuation section, for tax purposes).

Bank Trust: If you purchase property within the 50/100km restricted zones, you will need a bank to set up and manage a trust for you. Shop around, as prices vary from bank to bank. Set-up fees can cost around US$1000, with annual service charges between US$1000-$2000. The annual service fee will cover legal obligations (e.g. the filing of necessary documents annually) by the bank on your behalf.

Lawyer / Attorney Fees: If you hire a lawyer / attorney, you will also need to pay him/her with fees for services they undertake on your behalf. These should be negotiated in advance.

Land / Building Surveys: If you need to undertake any land or building surveys, these will have to be paid for separately. Cost will depend on type, extent and complexity of surveys undertaken.

Foreign Office Permit: Your permit from the Mexican foreign office will cost around US$150.

Service Fees: If you are buying a house in a gated community, or an apartment, be sure to check on the annual service fees, and have these put in writing. Service fees can range from US$100 a year to US$1000+ a year, depending on location, number of houses or apartments in the enclosure and amenities offered.

Title Insurance: When you buy property in Mexico, you would do well to consider purchasing Title Insurance. Rates are based on the sale value of the property and are charged at around US$5-US$5.50 per US$1,000 of the value. More Information about Title Insurance.