August 1, 2014 Update:
The original version of this article was written in 2010 to describe the huge changes in Mexican tax law (aka ISR). There have been yet more substantive changes to the ISR (Mexican tax code/law) since then that are worth noting. The good attorney Lic. Spencer McMullen has publicly posted his understandings of the taxes owed on selling a property in Mexico. As always, we offer the clear disclaimer that we are not tax authorities, nor legal authorities, nor accounting authorities, so the information we offer is quoted from other sources we have found to be reliable. As always, the insights offered here on Yucalandia are based upon actual experiences of the experts and their specific local legal workings. Since the laws and rules change, and there are also local variations in how the rules are applied: Final decisions on real estate sale tax matters are up to YOUR individual Notario. Find a good Notario and consult with them. Having said all this, here are Lic. McMullen’s current July 2014 insights:
Sellers can currently exempt gains up to the amount of “700,000 UDIs” which is roughly $3,500,000 pesos, as long as the seller is a citizen or has a residente temporal or residente permanente. The building and property must also be your primary home (see the legal definitons and requirements below on how to qualify a property as being your primary home – principle center of fiscal activities). Further, you can only use the exemption once every 5 years, and your land area must not exceed more than 3 times your building footprint, (“among other things”).
That leaves a question: Are you also required to pay the 16% IVA on the agent’s commission? …. Lic. McMullen replies:
“Yes you pay the IVA 16% sales tax on services, not just goods. This is something foreigners don´t understand, as they are used to paying sales tax on the sale of goods only and not professional services. You pay the sales tax of 16% and they (later) pay income tax on their earnings. This is like purchasing a car in the USA, you pay sales tax and the dealer still pays income tax on their profit. “
Original Article: Mexico’s tax code on property taxes just changed dramatically in February 2010, nullifying most internet advice given before February. This article addresses some of the current tax requirements and rules, and also addresses the some of the possible tax differences between FMT/FMM & FM3 or FM2…
There is a lot of outdated on the internet about how to save on a future Capital Gains taxes when you sell your property. This advice may have worked before Feb. 2010, but the rules have changed: … dramatically raising the bar . . .
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Full details and translations can be found in the Main Article (see Header):
Capital Gains Taxes on Mexican Properties
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Feel free to copy while giving proper attribution: YucaLandia/Surviving Yucatan.
© Steven M. Fry
Read-on MacDuff . . .