Buying Real Estate in Mexico
The Agency Punta de Mita simplifies the buying process for our clients. Below is a list of important information on property ownership, as well as the services we provide on your behalf.
Foreign Ownership In Mexico
Foreigners purchase real estate in Mexico through a Mexican land trust called a Fideicomiso. The Fideicomiso was created because the Mexican Constitution prohibits non-Mexicans from purchasing or owning real estate within 60 miles of the U.S. border or within 30 miles of the Mexican coast.The Fideicomiso allows non-Mexican ownership through a trust agreement, much like an estate trust in the U.S., which gives the purchaser all of the rights of ownership. The Department of Foreign Affairs issues a permit to the Mexican bank, allowing the bank to act as Purchaser of the property. Essentially, the bank acts as the “Trustee” to hold the trust, which is not an asset of the bank. The Purchaser acts as the “Beneficiary.” The term of the trust is 50 years and can be renewed for additional periods of 50 years indefinitely. This allows for long-term control of the asset and for the property to be willed to an Inheritor.
The Agency Punta de Mita can obtain a trust within an average of 60 to 90 days, and in some cases, in a matter of a few weeks. We partner withxxxxxx to secure the trust.
The Purchaser’s Rights
The Purchaser has the same rights as a property owner in the U.S. or Canada. In the trust document, the Purchaser must name the Beneficiary or foreign Owner of the property. The purchaser can be an individual, multiple partners, a foreign corporation, an estate trust, a living will, or another entity. The Trustee will take direction from whomever is named the Beneficiary. The Mexican bank, or Trustee, takes instructions only from the Beneficiary, or Purchaser. The Purchaser has the right to use, occupy, alter, lease, sell, or pass the property to an Inheritor.
The Payment Process
Funds are paid by The Purchaser once the clear title is in hand. A third-party escrow service retains the money in an escrow account until the trust is complete and property rights have been transferred to The Purchaser.
The Agency Punta de Mita provides Title Insurance on all properties and oversees the entire process on our client’s behalf. Whether you purchase real estate in the U.S. or Mexico, Title Insurance is recommended for every property purchased.
Taxes in Mexico
Two taxes are paid when purchasing property in Mexico. The Acquisition Tax is paid upon purchase and is approximately 2% of the total registered purchase price. This tax is fully deductible if you choose to sell your property.
Property Tax is very low in Mexico. It is not based on the purchase price, but rather the property tax value assigned to the area in which the property is located and the size of the property.
The Seller is responsible for capital gains tax which is based on the price at the time of purchase. The Notary adds to the Seller’s original purchase price the cost of any construction or remodel (original facturas/receipts required) as well as the closing costs. Annual inflationary credit and construction depreciation factors are calculated. The Notary then determines the capital gains tax by subtracting the cost basis, as well as the sale’s commission, to obtain the ‘gain’, which is taxed at 35%.
Visa Requirements for Mexico
In order to purchase property, the Purchaser is obligated to have legal immigration status in Mexico. Every person entering Mexico must obtain a tourist visa. This visa is good for 180 days and does not include permission to work. If people wish to stay or live indefinitely in Mexico for periods longer than six months, whether or not they have acquired property, they must apply for a visa at the Mexican consulate in their home country. This is typically a simple process when work is not involved. Both permanent and temporary resident visas are available, with the latter being the easiest to obtain.