Have you ever wondered if the issue of taxes in real estate transactions is the same or if it is more expensive for foreigners?
- When a Mexican buys.
If a Mexican buys a property, at a general level, the process that must be followed is the following:
You must obtain certificates of freedom from encumbrances, certificates of no debt in tax matters and a certificate of use of the land of your property.
Go to a notary and present documents such as the property title, property bill, water bill, marriage certificate (when applicable) and appraisal (when applicable).
With this, the notary executes the deed and both the seller and the buyer pay their taxes. If what is being sold is a house, the seller can exempt or pay the Income Tax (ISR) and, who buys, will pay his taxes for acquisition, rights, fees and notarial expenses.
- When a foreigner buys (outside the prohibited zone).
This implies making a transaction in a distance of 100 kilometers to the interior of the country and 50 kilometers from the coasts, that is, if you buy a house or apartment in Colonia del Valle in CDMX, said person must only agree with the Mexican government, Through the Ministry of Foreign Relations, that it is considered as a national in relation to that acquisition. This process responds to what is known as the Calvo clause.
“This is a procedure that does not even have a special cost with which notaries help foreign purchasers. And the deed does not cost them more because they are foreigners, they pay the same as a Mexican at the time of purchase”, explains José Antonio Manzanero, president of the National College of Mexican Notaries.
- When a foreigner acquires (within the prohibited or restricted area).
Here, the foreign investment law allows foreigners to use the trust figure to take advantage of a property that is within the restricted or prohibited strip, such as Acapulco or Cancun.
“For these purposes, the foreigner cannot acquire direct ownership as a buyer and the legal instrument that remains for him is -through a trust-, use and take advantage of the asset. A credit institution is required to manage this business”.
If a Mexican lives in the United States and wants to sell a house that he has in Mexico. “If the man is a tax resident in another country, when he sells an asset that he has here, he will have to pay taxes under another scheme in which they are higher,” says the specialist. In this case, it must be understood that more than nationality, what is relevant is the tax residence of a person.
Trust costs vary from institution to institution. In the first instance, a single initial payment or setup fee is made, which is in a range of between $2,500 and $ 3,500 USD, including the payment of the permit to the Ministry of Foreign Relations. Notary fees will be added to this amount.
Property Acquisition Tax (ISAI) or Domain Transfer Tax: Applies to the purchase of any type of real estate property. Payment must be made after registering the house to register you as the owner of the property.
Its rate may vary, depending on the state, between 2 to 4.5%, it is calculated on the highest value of the purchase transaction.
Property: Only in the case of acquiring a previously inhabited home, make sure that the payment has been made as required by the Tax Administration for the sale of the property.
Deed: Within the expense of the paperwork, the payment to the notary must be considered, who will be in charge of carrying out the procedure.
By Orlando J. Gutiérrez