Dec. 14 (update), 2013
Here’s a summary of the changes in Mexican tax laws affecting foreigners for 2014. This report comes from Lic. Spencer McMullen, a fine attorney in Jalisco, who specializes in legal issues affecting expats. You can contact Lic. McMullen at Chapala Law.
For CURRENT details, see our master article on taxes at: IRS Tax Issues for Americans Living and Working Abroad in Mexico – Master Article
On 11/29/2013 Lic. McMullen reports:
“Very extensive reforms have been made to Mexico´s tax laws and have been finalized in November, 2013. These become effective on January 1, 2014, which does not give people or businesses a lot of time to prepare. This short lead time may cause problems for some people. First, all the appointment times at our local SAT offices in Jalisco (SAT = Mexico’s tax department) are filled for quite a while, and second, some of the changes affect banks and businesses quite a bit. I think it’s going to be a messy transition as many will be unable to comply in time with only 2 weeks left until the government goes on vacation and returns January 2nd when the new laws take effect and even then there may be delays of weeks for people to be able to get appointments at the tax office to set themselves up or make changes.
There are new IVA sales taxes.
It’s now going be 16% nationally (whereas it’s been about 11% in the border areas), and it will include taxes on soda, chewing gum, and pet food throughout Mexico. Those weren’t included in the past. So, people with pets should stock up at Costco before the new year. Dog shelters will be especially hard hit. For people driving back from up north after Christmas, or coming back from nationalizing their vehicles at the border, they’ll want to fill up their tanks near the border, where the gas tax will still be 11% until the end of the year.
Will anything change at customs (Aduana)?
Yes, temporary importation of certain goods will also start being taxed. That could open the door in the future for a tax on the temporary importation of vehicles. Not yet, though.
The mandatory use of customs agents for any value of goods to be imported has been eliminated. The use of an agent will be optional, which is a good thing because they’ll have to be more competitive in terms of rates and quality of service.
Also, customs is going to be checking the value of imported goods more closely and communicating with the countries where merchandise is leaving, to check declared values. People may be more likely to get caught if their car nationalization pedimento say the car is worth just $10,000 pesos, while it clearly is worth much more.
What about new banking regulations?
Starting in 2007, there had been a tax on large cash deposits: 2% on the amounts of deposits exceeding $15,000 pesos, which was increased in 2010 to 3% on amounts exceeding 15,000 pesos.
Those taxes have now been eliminated.
But … banks are now required to report to SAT any deposits over $15,000 pesos, and any payment of credit card debt of $20,000 pesos made at a time. SAT may also audit you and compare your credit card expenditures to your declared income. They can then contact you to explain these transactions within a certain time frame. If you don’t respond within that time frame (say, 20 days), they could establish liens and levies. And, of course, you wouldn’t respond if the address they have for you is old.
All of this means that it is very important for people to make sure their bank has up-to-date home addresses and email addresses. This is especially true for snowbirds. It also means that snowbirds will need to check their email frequently while they’re out of Mexico.
Also, banks will require people to have an RFC (tax ID number) in order to open a bank account. They have enabled the ability to get an RFC number online, but people first need a CURP number which has to be processed through immigration (INM). (Editor’s note: If you already have Residente Temporal or Residente Permanente, you MAY have been issued a CURP number. ~ ” Lic. McMullin reports: “Many who have temporal and permanent documents do not have CURP numbers, at times immigration issued them automatically and at times not, to be sure please check at http://consultas.curp.gob.mx/CurpSP/ and if you have no record then you have no CURP number.”)
With offices closing for several weeks for the holidays, people may have problems in getting CURPs in January and may have to wait until February to open the account.
Anything new for businesses?
Yes, the current process for small business reporting (REPECO) will be eliminated. Currently, small businesses report their gross earnings every two months. For January, that will still be the case in order to report earnings for the November – December months. After that, there will be more paperwork. The process will come through the regular tax system. This means that earnings will need to be reported, and so will deductions, and facturas (invoices) – just like big businesses do today.
As before, the tax rates continue to fall between 2% and 35%. Note that there will be more paperwork, requiring a greater mastery of Spanish. My office will help people by getting them set up and familiar with the new system.
Another change is the elimination of the business IETU tax (single-rate flat tax started in 2007). Non-profits will start being required to be authorized by the SAT to receive donations, which would allow them to continue preferential tax treatment. That’s obviously going to be critical for them. They should probably start that process immediately, and try to get their major contributors to donate before January 1st.
New Electronic Factura Requirements:
The most controversial of the new business regulations is probably the requirement for electronic facturas and the elimination of paper facturas . The new rules also require giving all employees online facturas (CFDI) rather than paper facturas when they get paid, in order to be able to deduct their wages. That system may not be ready by January 1st, by either the SAT or the businesses, so that’s going to create a lot of problems.
What about tax changes for investors and real estate owners?
Mexico has caught up to many other countries and will tax capital gains on the sale of stock at a rate of 10% as well as tax dividends at the same rate of 10%.
For real estate sales there will be a maximum capital gains tax exemption pegged using the UDI index (investment units) with a new limit of 700,000 which equates to about 3,500,000 pesos so any gains over that amount from a sale will be taxed, the prior limit was 1,500,000 UDIs with that exemption waived if someone could prove they lived in the home for the preceding 5 year period.
That’s a lot of changes.
There are more… (The changes listed above) are just the ones that I think will affect expats the most. SAT is also firming up the tax code in other ways. They did some research to determine where and why they lost tax court cases in the past, and have now plugged some of the advantages taxpayers had in court. I’ll know more next week (1st week of December), so I can give you an update then when I go to another 5 hour tax update class.” http://www.chapala.com/wwwboard/webboard.html
* * * *
Feel free to copy while giving proper attribution: YucaLandia/Surviving Yucatan.
© Steven M. Fry
Read-on MacDuff . . .
Surviving Yucatan 
Thank you Lic. Spencer, very helpful.
I previously heard talk of taxing R. E. purchases at 16%. Does anyone know if this has been enacted?
Hi Donald,
This rumor about possible taxes on Real Estate appeared as speculation on some expat web-boards a few months ago. It never materialized.
Happy Trails,
steve
thanks steve
There was talk about doing away with Fidacomisos. Anyone know about this?
I understand that it has not passed the Senate. It then would need passage by the States.
Even if they do eliminate the mandatory use of fideicomisos in the restricted zone you still need to evaluate the use of one as an estate planning tool, there are times where it can be quicker and cheaper to change owners in a fideicomiso then with plain fee simple ownership but it depends on your goals and gross asset value
Muchas gracias por explicar esto de manera concisa y clara.
So…..regarding the real estate….”For real estate sales there will be a maximum capital gains tax exemption pegged using the UDI index (investment units) with a new limit of 700,000 which equates to about 3,500,000 pesos so any gains over that amount from a sale will be taxed, the prior limit was 1,500,000 UDIs with that exemption waived if someone could prove they lived in the home for the preceding 5 year period.” Does this 5 year exemption still apply……????
No the 5 year exemption does not apply anymore but there may be other ways to limit your exposure and raise your basis
Am I correct in thinking that none of this really impacts the average retiree living in Mexico, who does not have any income here in Mexico?
Hi Linda,
No more 3% tax on cash deposits to bank accounts. 16% tax on pet food, on snacks, on soda pop may affect some Canadians living here. Canadians who want to bring things into Mexico might appreciate not paying a custom’s broker?
steve
The average retiree will be affected by having to have an RFC number and also a CURP prior to open a bank account, also if they do a small remodeling job and their source of funds is to withdraw from their ATM to tap their account back home and deposit into a Mexican bank account they can innocently flag themselves for an audit and trouble down the road for example.
Spencer, does this same logic apply to foreign wire transfers that go into your Mexican bank account triggering a SAT audit after the new year? A friend was to be sending money in next year to buy a new car (50K USD). Maybe one should bring the money into Mex before the end of 2014? Please comment. (good exchange rate now too.)
Hi Sherri,
Spencer is only a guest author here on Yucalandia, and hence is not available for questions.
Spencer does watch and post on both Mexconnect.com and on Chapala.com forums – as intercasa – so you could try to contact him there.
My reading of Spencer’s information says that as long as you spend the large deposit on verifiable purchases – like a car – then you are clearly not laundering money – so an SAT audit of a large deposit would be fine as long as you show expenses on legitimate purchases – like a car…
Good luck,
steve
Very interesting. Thank You. Please send updates if possible.
I am wondering how this affects those who already have a bank account in Mexico and do not have a tax ID number ?
Hi Bob,
In the past, some banks filed RFC numbers for foreigners based on the foreigner’s applications for the account. Check your bank statement, or ask your bank ~ there may already be an RFC listed on it.
steve
By golly your right, there is an RFC number on my statement and I didn’t even know I had one !
Hooray.
Bob,
A good Mexican attorney, Lic. Spencer McMullen, offers a different perspective on the validity of bank RFCs from the past:
” No, Mexican banks fabricated an RFC number but it is not official so you should still apply for one and even people who have existing accounts are likely to be asked to get an RFC number in the future, as you can get one online you can probably wait but make sure you have a CURP number. Only SAT can issue official RFC numbers so unless you went personally to a SAT office or did it online your RFC number is one a bank generated and is not official and you will have no official proof of one like you get at the SAT office or if you generate one online on the SAT website. ”
steve
Hello Steve,
Do you know if the CURP’s expire with your migratory document? I had my FM3 for 4 years, but it expired on the day the law changed and much hoopla, I wasn’t able to get a new doc. So now I am in the process of getting a Res. Perm visa here in Canada- not going well… ,anyway, I was excited to see the with a CURP you can get your RFC number online- nope- tried, but both mine and my husbands are ‘invalid’. Do you know about this? Gracias,
Nanc
playaright,
We don’t know why the SAT website would not work to allow you to get an RFC. I believe foreigners must have a valid current visa to apply for an RFC. That may be why the SAT website did not allow you to register and get an RFC.
steve
I guess I might be little dense, but I didn’t think you answered Linda’s question. As I understand it, her question related to income received from abroad (pensions and suchlike). Do you know whether SAT has plans to tax such receipts?
Hi Andrew,
As long as you are not a Mexican citizen, then the short answer is: The taxes on income from your home country are owed in your home country.
steve
I would like to knkow specifically about U.S. social security income which is currently not taxable in the U.S. because I’m below the taxable limit.
Hi Robert,
Are you a Mexican Citizen?
If not, then you do not owe taxes on SSI benefits.
steve
Alot will depend on where the person´s tax home is as well as if they have taken a non resident status in their prior country. Worst case scenario they may have to declare their income in two jurisdictions and then use the provision in tax treaties to get credit for taxes paid in the other jurisdiction
Hello. Thanks for this article. Does this effect the importation of a Canadian vehicle at all? In two years I will be going from a Temporal to a Permenante (spelling?), and I definitely want to keep my old 93 Jeep here. Will this effect the tax that I will need to pay on it at time of importation? Also, off topic, but have you heard of an changes to the vehicle importation requirements as it affects those in my situation that will not longer be allowed to have a vehicle here from outside of the country? Going all the way back to the MX border just seems crazy!
Thanks.
Hi Dwight,
For expats living in the interior of Mexico, things stay the same on vehicle import taxes. The changes only raise the previously lower tax rates paid by people in the frontier/border/Free Zones. The 2014 changes raise those previously lower border-zone tax rates to match the rest of Mexico. (to the best of our understanding),
steve
Thank you very much.
Do you or anyone else know of a method of importing a vehicle WITHOUT having to go back to the border?
Hi Dwight,
There are various private agents who claim to offer paper-only vehicle imports, for about $2000 – $2,500 USD per vehicle (more than the charges at the US border). “Sonia Diaz” on Mexconnect.com is one example of an agent who guarantees a valid pedimento and the ability to register the car with your Mexican state’s DMV, or your money back. We offer no confirmation of whether this will continue to work or not.
~~~~~~~~~~~~~~~~~
” SMAcoolist: Mon Dec 9, 2013 7:36 am (PST) . Posted by: soniangel32
This week we received several pedimentos and facturas of cars we nationalized from as far away as Ixtapa and Manzanillo. All were done without the cars leaving their property and no driving to the border.
Please note if you want to nationalize a non-NAFTA vehicle this is the last week to do so as after this week the cost will likely rule out doing so. A non-NAFTA vehicle is one made outside of North America and the VIN starts with a letter.
Some pedimentos are slow and others are coming in 3 weeks. Hopefully, in the future they will all be faster.
Happy Holidays
Sonia
SONIANGEL32 AT hotmail.com
cell: 044-415-106- 1499 ”
~~~~~~~~~~~~~~~~~
???
steve
I just had my Jeep done by Sonia and now have Guerrero plates. Took about 6 weeks.
Hooray!
Can you please explain a UDI (investment unit) and how you calculate this as it relates to capital gains?
UDI is an index and raises slightly every month to factor in inflation, maximum amount excluded is 700,000 UDIS, today it is 5.05 so 700,000 x 5.05 means today your maximum amount to exempt from capital gains is 3,535,000
Hello Jack. What year and model was the jeep and what did it cost you?
Thanks.
As far as the comment ” (Editor’s note: If you already have Residente Temporal or Residente Permanente, you have been issued a CURP number.) ” Many who have temporal and permanent documents do not have CURP numbers, at times immigration issued them automatically and at times not, to be sure please check at http://consultas.curp.gob.mx/CurpSP/ and if you have no record then you have no CURP number
Hi Spencer,
Good update. Every RT or RP we have seen issued here in Merida have had CURPs. Our INM office has issued CURPs with every residency permit we know of since the May 2010 changes. e.g. I had a CURP issued by the Yucatan Registro Civil – for that period back in 2007(?) when we were required to have a CURP to be able to start a cell phone account. Ironically, INM ignored that previous CURP, and issued me another one in 2010.
Apparently, issuing a CURP with each residency permit has not been a nationwide policy. I edited the article above to reflect your additional insights.
steve
Thanks for the informative post.
My question is in regards to my vehicle, a US built Toyota of older vintage.
I have been an FM 3 since 2010, then transitioned to Residential Temporal in 2012.
I am under the ‘impression’ that in 2014 I will be able to transition to a permanente status.
When this occurs, do I need to nationalize my vehicle ?
Utilizing Sonia’s services are a valid option, thanks for the info.
Hi Al,
If you received your FM3 in 2010, then your Residente Temporal should expire in 2014 – and you qualify for Residente Permanente. You will need to either nationalize your vehicle or take it out of Mexico.
Since Aduana policy on permanent car imports have changed 3 times in major ways this year, NO ONE can say what Aduana policy will be in 2014. It is very possible (likely?) that Sonia Diaz’s process will not be guaranteed to still be working at the end of 2014 when you plan to become Residente Permanente. We just don’t know. Maybe yes, … maybe no.
steve
Steve
Thanks for your response.
I have one more question regarding capital gains tax on owned property in
Mexico.?
“For real estate sales there will be a maximum capital gains tax exemption pegged using the UDI index (investment units) with a new limit of 700,000 which equates to about 3,500,000 pesos so any gains over that amount from a sale will be taxed, the prior limit was 1,500,000 UDIs with that exemption waived if someone could prove they lived in the home for the preceding 5 year period.”
I was informed back in 2010 when I purchased my Casa, that my exposure to capital gains on sale of property when I reach Residente Permanente would be significantly less, due to achieving that status ? Is that correct ?
Thanks one more time.
Hi Al,
Mexican attorneys have told us that it depends on if the Notario (who handles the sale) accepts Residente Permanente status as qualifying for the Homowners Exemption. Since the Notario is personally fiscally responsible for paying any taxes if SAT/Hacienda later decides that you did not qualify.
steve
Hi there:
Someone said that purchases over $2000 pesos will require the vendor to issue a factura to the buyer with the buyer’s RFC. Is this true? As in CostCo would give me a factura?
Hi Cheryl,
Have you read our past report on this? Cash No Longer Valid for Purchases with Facturas in Mexico over $2,000 Pesos https://yucalandia.com/2013/12/15/cash-no-longer-valid-for-purchases-in-mexico-over-2000-pesos/
As our little report says: We need to use checks, credit cards, debit cards, or bank transfers for any factura purchase over $2,000 pesos. ALL of those methods of paying require that you have a valid RFC – so, yes, by default, whenever you require a factura and buy something over $2,000 pesos in 2014, SAT will be notified of the purchase that used your RFC.
SAT then tracks your facturas and crosschecks your future claimed expenses versus those 2014 facturas recorded in the SAT database.
steve
“Banks are now required to report to SAT any deposits over $15,000 pesos” Does that include check deposits from one Mexican Bank written to an account in another?
Apparently so. SAT is intent on tracking both the tax deductions we claim and tracking money laundering and black market activities?
steve
Thank you for your response. Is this reporting to SAT per deposit of 15,000 pesos per incident, per day or month? Please advise
It is per month.
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Does the Is reporting to SAT per bank deposit of $15,000 pesos apply to wire transfers as well?
We have a Mexican bank account (set up since 2006) whose only source of deposits is money from our investments wired from Canada each month.
Hi Garry,
There is no tax charged on bank-to-bank wire transfers, (because the money is in-the-system => taxes paid), but I understand that the banks report deposits/transfers larger than $15,000 pesos as an effort to track/prevent money-laundering.
steve
My accountant here in Oaxaca tells me that condo associations registered as non profit SA de CV will now have to inform SAT of income and expenses on a monthly basis and pay tax on the difference. This might pose problems for associations that collect all of their condo fees in say January as opposed to monthly. The costs to foreign owners of having to wire condo fees on a monthly basis from wherever they live make that option unworkable. Do you any have info re this possibility and how non profit associations might handle it to avoid tax?
Thank you,
Julie
Hi Julie,
Your question is beyond our expertise. The best advice we can offer is to suggest you work through it with your accountant. All businesses require some sort of cash reserves to operate, so one would think that the Mexican Govt. has included some provision for businesses to accumulate cash without paying taxes on it during the month that the credit is booked. ???
steve
Hi Julie, Norma here in Great White North…..Hope you’re well. Do send me an e-mail if you receive this…..
Hope you’re enjoying Oaxaca (moved from Puerto Escondido?)…
Thanks Steve. Will keep you posted as we work this one through.
Julie
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Hello, I have a question about MX national, lives in mexico full times, kids in school, home, everything. But own a company in US. All money earned is from the US and is transferred to Mexico 2 times a month. Based on the Residence rules could we be Non-resident for Mexican tax purposes? We do not meet the resident requirement, for taxes:
• When more than 50 percent of the individual’s total income received during the calendar year is derived from Mexican sources. ( non or our incomes is derived from mexico)
• When the individual’s main center of professional activities is located in Mexico.
(Our business has leased office space up north. not in mexico)
Hi Ulises,
Speak with a good tax attorney or good tax accountant.
steve
Did this pass?: “No deduction would be
allowed for related party
payments abroad that are
subject to an effective tax
rate that is less than 75% of
the Mexican corporate
income tax rate.”
Yes, as described above, the new taxes took effect on Jan. 1, 2014.
We get very few inquiries about corporate tax rules, so we’ll default to KPMG’s advice on related party payments:
“Limited deductions for related-party payments
Under the new legislation, payments made to a foreign company that controls or is controlled by the taxpayer will not be deductible when these payments are made with respect to interest, royalties or technical assistance, and when the foreign company that receives said payments is considered to be “transparent” and its participants do not pay tax on this income.
“Control” is defined with reference to parties that have direct or indirect influence to decide when dividends are paid.
Also, payments that are considered as “non-existent” by the payment recipient or payments not considered to be taxable income by a foreign entity also will not be deductible.
Non-deductible expenses also include payments that are made by a resident in Mexico and that, in turn, are deducted by a related-party resident or nonresident in Mexico. This restriction does not apply when the related party that deducts the payment made by the taxpayer accrues income earned by the taxpayer in the same tax year or the next tax year.
https://www.kpmg.com/us/en/issuesandinsights/articlespublications/taxnewsflash/pages/mexico-tax-reform-affecting-related-party-transactions-maquiladoras.aspx
How will this affect you? (or us?)
steve
Steve – the link to ChapalaLaw is reporting a 404 Not Found which is kind of strange – thought you should know.
Hi Barry,
Thanks! The link is typed correctly, so it looks like Spencer’s site is temporarily down.
steve
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Does anyone know if this is effecting incoming wires as of now? I have an account that does not have an RFC on it.. and its used to receive payments for work completed in the USA
I receive alimony from my ex that he takes no tax relief on. It’s paid to me in the UK. If I were to stay beyond 183 days, would I have to pay income tax on this? Or would the double tax treaty be applicable? Also, if I’m a permanent resident my heirs wouldn’t have to pay inheritance tax, is this correct? Is it 5 years as a resident to get this status?
Hi Debbie,
Good questions. I don’t know about the UK-US tax treaty or the UK-Mexico tax treaty, so I can’t comment on how tax things would work for you.
The Residente Permanente status is an INM type of visa, and it does NOT mean anything about qualifying for “permanent resident” status with the IRS. Foreigners with sufficient monthly (retirement) income or with sufficient savings can get Residente Permanente status, in as little as 30 days from INM, without ever living in Mexico – as long as you have someone who will give you a copy of their power bill for you to use as a Mexican address. Having Residente Permanente INM status does give you the permission to work in Mexico, but it really has ZERO impact on your tax status. e.g. If you sell real estate and realize a gain, then you pay taxes on that gain whether you are a Residente Permanente or Visitor or Residente Temporal. Read more about how to Immigrate to Mexico at: https://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/
What is the process to stop paying the HACIENDA tax every 2 months. It is just not worth it to me. I’ll just stop doing business. I was not making any money anyway.
Hi Darryl,
I think you need to talk with your tax accountant or tax attorney on this item, because we don’t know the specifics of your situation.
steve
I live in a condominium and pay my fees quarterly. I receive a little handwritten receipt. Is this permissible under Mexican (Jalisco) Condo law? Should I not receive a ‘factura’ as provided by the fraccionamiento in which I also reside?
I am in the process of selling an apartment in GDL which I have lived in as my principal residence for the last 7years. The gain is 1.25m pesos do I have a liability for capital gains tax?
Hi Paul,
Talk with the Notaria who would handle the sale. If you are a Mexican citizen, then you would qualify. In principle, if you have been full time official resident of Mexico (like a Residente Permanente or Inmigrado), then you could qualify for the Homeowner’s Exemption – if the Notaria is willing to authorize the exemption.
steve
Hi, I’m trying to confirm SAT changes effective Jan 1/14 that relate to Canadians (or Americans) renting property. Apparently IVA tax for renting my property in Mexico must be wired to Mexico to “cover” the amount of tax due (25 percent) on the transaction. The instructions are to deposit into an escrow account, SAT will issue the exception letter to prove to Revenue Canada that tax was paid on the income, exempting payment at home. I have a very official letter on SAT letterhead in English outlining the process. Is this really the case? My difficulty is that the rental funds are in escrow, why deposit an amount that can be deducted from rental funds and remitted to SAT before remitting net rental proceeds to me? Those were the former procedures. SAT has a link to an English document on their site, but for some reason it’ requires a login and password. Thanks for reading, hope you can clarify.
David
Here’s the SAT link I referenced above.
http://www.sat.gob.mx/English/Paginas/default.aspx
Can anyone “lend” me a sign-in and password?
???
I am about to relocate to Mexico and my relocation company is having problems with getting a new lease. Our “Intermediators” have suddenly asked that all leases list them as landlords and all money be wired to their account instead of the landlord’s, citing changes in the 2014 tax law. I have been unable to find anything that justifies this and wondered if this is standard process this year.
mariposa,
Landlords are now supposed to provide facturas, and pay either 20% or 25% (?) taxes to SAT. I don’t exactly know what an “intermediator” is or does, but it is possible that if the “intermediator” becomes the legal landlord of record, then they become responsible for any taxes. Maybe they are doing some tax dodge, where they show that they are renting to themselves – avoiding the new taxes.
???
Where are you located?
steve
hello, could someone please tell me what all these abbreviations mean….CURP, RFC, SAT
thanks so much
SAT is the Mexican Govt. organization that oversees tax collections, making it very much like the US IRS.
RFC is the ID number that SAT issues to individuals and businesses, as their account number for taxes.
CURP is the general ID number issued to Mexicans by the Mexican Govt. to track people’s records with the Mexican govt. pension system, to track people’s records with the public health systems, to track people’s (children’s) records for going to school, etc. One cannot use the govt. (public) medical, pension, or school system without a CURP. INM issues CURPs to foreigners.
steve
thank you !
My husband and I are in the process of purcashing a home in Merida, and are being asked by our notary and seller to put the Castral appraised value on the deed not the sale price. We are told thus is standard practice and everyone does it and we will have a hard time trying to find someone to buy from who won’t require thus. We were also told that we could get credit for renovation costs as we are foreigners. Is this correct and is the castral vs sale price widely practiced in Merida?
Thank you
Hi Nancy,
Catastral values are what they pay taxes on. If the seller is so convinced that the Catastral valor is the actual value of the home, then explain that you would be glad to pay them the Catastral value.
The “everyone does it” is the same logic that had MEXICANS insisting on reporting very low sales prices when selling their personal home to Gringos. The uneducated (lazy) Notarias and uneducated (lazy) real estate “experts” – “realtors” ignored that these Mexican sellers fully qualified for the homeowner’s exemption to gains taxes – so they were trying to dodge a tax that they did not even owe… (if they knew the law).
If you have a Mexican seller who qualifies as the owner who lived in the home for the last 5 years, then they can easily report the CORRECT full sales price without paying any additional taxes. Ask the Notaria if you should go to SAT/Hacienda and personally ask whether the Notaria should report the correct legal price to the government, or if they should lie and cheat the government. The Notarias are personally fiscally liable for any tax errors they make.
Our last 2 sellers personally listed the full price they received on the properties we bought – so, at least in our neighborhood, “everyone is not doing it”.
It’s all your personal choice.
steve
Hi Steve, thanks for your prompt reply and good advice about finding a Mexican seller if our current deal falls through as we are requesting the sale price from our american seller. What are the taxes for Mexican owners who have abandoned property or vacant lot, as we are looking to do a renovation. Also I made a spelling error in my 1st post, our notary told us that we could Not use our renovation costs to apply against future taxes as we are foreigners, from reading your past responses I think this is incorrect.
Nancy
Hi Nancy,
You are correct: Improvements that are documented by facturas are legally allowed deductions from the gains.
Unfortunately, the ultimate decision is up to the Notaria who handles YOUR sale (when you realize a gain on the future sale). Your current Notario has NO authority over what deductions your future Notario uses. If your Notaria would read the latest changes in the Mexican tax code, printed in their Federal Registry (Diario Offical de al Federacion DOF), both the tax laws on gains and on who qualifies have changed since the beginning of the year.
Unfortunately, Mexican Notarios and Mexican lawyers have NO obligation to bother to stay current on the Mexican laws and the latest changes – and they are often up to 4 years behind in their knowledge. Find a good one for your sales.
Education requires effort and $$, and there seems to be a shortage of both in parts of the Mexican “professional” legal community.
Happy Trails,
steve
Hi Steve, you have mentioned above about a special request for an appraisal if you don’t have facturas, does this change your iffical catastral value? Do you have to pay back taxes on the difference if you wait until you sell to do this?
Nancy
Hi Nancy,
That is exactly the point: Have the government adjust the official value of your property to reflect its current actual value (allowing you to use a higher “basis” value to deduct from the sale price, creating a smaller gain for much lower taxes, without facturas). You would not owe back taxes – just paying taxes (now) based on the fair market value.
I have no idea when you should request the official re-valuation. That is a question for an expert (tax lawyer or accountant) who knows the details of your situation.
Happy Trails,
steve
Steve, you already know the story about my notario who allowed the recorded purchase price of my property to be recorded far lower than the sales contract he had access to. He told me he relies on what he is told by the real estate company. Really?? If he is liable for discrepancies, why would he not ask for verification from them, like say, maybe a copy of the sales contract?? I surmise that is because, as they say…”It’s always been done that way.” And, by the way…all this was done in the presence of one of the vice presidents of HSBC in attendance at the closing. 😉 I have contacted both him and the notario to resolve this with no results.
All that aside, since I have been pursuing resolution of that error with him since 2007 with no results, who would I contact to have my property re-appraised (official re-evaluation) so that I can alleviate some of the difference between the very low recorded price and the actual sales price I paid? I know it will result in higher taxes paid, but I am fine with that and just hoping no back taxes would apply. Also..can you roughly translate the amount into dollars that capital gains would be exempt on…and does that only apply if I am permanente or living in Mexico full time?
As a side issue, who would I contact to do a survey…apparently there is also an error in my fideicomiso which Catastro discovered, related to the legal description. Whoever typed it, recorded two different measurements in two different places…he also told me he would resolve that…but nothing from him on that either. Do your homework, people…I also have no facturas for the major improvements done on my house over the years, even though I paid seguro social on those who did the work. Sigh…and, in case anyone is wondering…I, at no time agreed to do anything under the table in regards to the sale and told them I wanted everything done according to law…to have paid the additional amt due on the real purchase price would have been a pittance to what I will now have to pay if I were to sell with no change in value..
Do you have any recourse here in Mexico against notarios who are incompetent?
Hi Kaye,
Very good questions. Here in Merida you go to the Catastral office to get your property re-appraised. We just finished remodeling a place, and will have it re-appraised to be able to sell it with a higher basis value (owing less taxes).
Actions with incompetent Notarios? You could start by filing a complaint with PROFECO http://www.profeco.gob.mx/formas/f_3i_quejas.htm . I have no idea if it’s worth hiring a lawyer to file a legal action against the Notario. Notarios are responsible directly to the government, so their oversight agency could assist you. Yucatan has a Consejo de Notarios (Board of Notarios), and their contact information is in this pdf file (see Yucatan) http://www.notarios.com.mx/admin/fotos/docs/COLEGIOS%20DE%20NOTARIOS%20DE%20MEXICO.pdf .
Legal actions here in Mexico can take years (4 – 6 years is often typical) – with ongoing costs. I have no idea of the likelihood of success. I believe that beyond filing with PROFECO, you then need to contact a lawyer.
I’m waiting to hear from my sister-in-law architect/general contractor on the surveyor. I suspect that the original surveyor can make changes in his report, but I don’t know if a different later surveyor can make changes to the legal description of the property.
steve
steve
I have just been informed, while back up north, that the rule penalizing larger deposits has changed…
I am told that one can now deposit up to 3K in USD without penalty ?
Can you please confirm.
THX
What about tax free private club if they are 100 o/o non profit are they required to pay IVA?
Hi Kathy,
This question is best answered by your club’s accountant. They’re the ones who have to sign off on it.
steve
How do I register with SAT and obtain an RFC number? Living in the Lake Chapala area, I understand I must go to Guadalajara — what address? What documents are required, at what cost? Thank you.
Hi David,
If you have your CURP, it is easiest to get your RFC assigned online: https://siat.sat.gob.mx/PTSC/inscurp/
If you don’t have a CURP, until we hear from someone from the Guadalajara area, I can only advise you based on what Spencer McMullen has written. the SAT office there (like our Merida office) has only so many appointments open every month, and those appointment slots can fill up fast, so you have to figure-out what time of month to apply, or go in on a “walk-in” basis, sit in the chairs, and wait for an opening. If the RFC is for working, our SAT had a series of questions about the employer, the type of work, etc. I had to have a letter from my employer on company letterhead describing the job. RFCs for operating a business has different, and is beyond our ken – and can be tied to ISR rules. Advice in this area is best gotten from a good accountant or good attorney like Lic. Spencer McMullin in the Chapala area: chapalalaw.com.
I hope this cursory information helps you get started,
steve
The above link to SAT concerning RFC # assignment does not work. Might you direct me to another link? Thank you.
Hi J,
I can’t find any SAT RFC links listed above. There is a consult your CURP link, and that one works.
Can you cut and paste a copy of the broken link down here into the comments, please? (and I’ll fix it)
steve
Hi David –
I am a US citizen and I have a time share for sale in Las Vegas. Supposedly an agent in California has a buyer in Mexico, but in order to proceed I have to send SAT 15% of the selling price BEFORE we can proceed. Supposedly the money for the sale has already been put in a bank escrow account in Mexico. This all sounds like a possible scam, but I figure if I can at least verify the SAT tax law it would be a good start.
Thank you!
Hi Jennie,
Since Notarios must withhold taxes from sales proceeds, what they are telling you could be completely correct. I would contact a talented licensed professional for legitimate advice, like Lic. Spencer McMullen at Chapalalaw.com. Spencer has years of a fine reputation for giving solid legal advice and aid to us foreigners – and charges very reasonable fees for his excellent services.
(Tell him steve of Yucalandia says “hello”.)
Happy Trails,
steve
So now that I need a CURP to renew the registration on my (Mexican-plated) car and can only get a CURP with Residente Temporal or Residente Permanente status, things are going to be interesting come renewal time. I can spend a week or two at a time in Mexico, but I can’t really spend long enough to get a residency status. It’ll also be interesting for foreigners wishing to sell or buy real estate when they need a CURP and RFC but aren’t able to get them because they don’t have a residency status.
Hi, this is my question exactly! I used have an FM3, I own property in San Miguel de Allende, then had to move back to US so let my FM3 expire. Then the law changed. Now I would like to sell the property. Am I able to get the necessary CURP and RFC even though I will return to Mexico on a tourist visa? Also, I have given a Mexican friend power of attorney over my property…will this change the necessity for me to have a CURP and a RFC in order to sell? Thank you, Theresa
Hi Theresa,
Interesting situation.
Formally, in the past, one had to go in person to apply for an RFC, (which meant SAT/Hacienda required that the foreigner notify INM and also tell Hacienda their current INM permit number), but now, foreigners can use their old CURPs to get an RFC number over the internet – from the SAT website.
Do you still have your CURP from your old FM3? INM used to print the CURP in the booklet, and then later, INM printed them on the FM3/No Inmigrante cards.
Really this is a question for a good attorney, but on the practical side, if you use your previously issued CURP, now, to apply online for an RFC, then, if the SAT/Hacienda website issues you an RFC, you would then have your CURP (from your prior FM3) and an RFC. If this works, be SURE to check with the Notario who handles the deal that he accepts your prior CURP and current RFC as sufficient documentation for the sale.
???
steve
That would be great if that works…I was told by immigration at Tijuana border last time I entered Mexico that I would have a big fine since I never cancelled the fm3, just let it expire…any thoughts on that? Thank you so much for your help!…also, on another site I read that someone with no residency status in Mexico would have to go to a US Mexican consulate to get a RT (?), then in Mexico get the RFC…any comment on that?
>
Hi Theresa,
No, there’s no penalty for allowing an FM3 to expire. To get the current equivalent visa, a Residente Temporal (RT), you’d need to apply at a Mexican Consulate in the USA, and come to Mexico to finish the process. Once you have the RT, it’s easy to get an RFC.
You can read all about those requirements at our main article on immigration and visiting Mexico at: https://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/
Happy Trails,
steve
does a person need to pay a I.R.S. mexican tax when they sell a timeshare in Mexico toward the SAT?
Hi Julie,
If the timeshare is sold at a profit, I would think yes, you would pay taxes under the ISR, but I am NOT an expert. Contact the timeshare company to find out what taxes are owed, as their Notario who processes the transaction would be responsible for automatically with-holding any taxes you would owe. Under the upcoming rules, you may have to have an RFC after Sept.1, 2014.
steve
How are foreigners going to purchase condos, homes etc for vacation use, if they have to live here 6 months to do it? Is Mexico wanting to stop foreign
buying? To obtain a curp, you need to ho to immigration and say yes, I plan to stay in mexico 6 months, correct?
My friends condo sale just fell through, because of this new law, it makes no sense.
Hi Cindy,
Fortunately, there’s no truth to that “6 month” rumor.
Unlike the USA’s restrictive rules on how long foreign residents must be in the USA every year, Mexico has no such requirement.
You wrote: “My friends condo sale just fell through, because of this new law, it makes no sense.”
Since the law takes effect on Sept. 1, it doesn’t make sense that a future change ruined a current sale – before the law takes effect. Does your friend live in a state that had a similar rule already in effect for the past year?
Considering our responsibility to follow laws and pay taxes: Since the Mexican government requires taxes be paid on these sales, is it so unreasonable that the government requires that the person be registered to pay taxes?
Should undocumented aliens (who choose to not register and choose to not get the personal documents to pay taxes) be buying and selling properties – dodging the taxes the rest of us pay, due to their personal choice to not become fully documented?
Do upset Americans support undocumented Mexican aliens in the USA?
???
steve
Hi Steve and Thank You
my friend’s condo was supposed to close on Oct. 31, 2014 which is indeed
after Sept. 1. This is very simple, as when the couple were told that they would need a curp and RFC. They went to immigration and were asked if they plan on being here 6 months per year, and simply said no and they denied them because they were not going to be here longer than a month or so per yr. Right now that seems to be the only way to obtain a curp. Everyone who purchases property here needs to apply for a tax number, I understand what you are saying and certainly agree with paying taxes but nobody thinks this is going to be a problem with foreigners buying vacation places here? Some people cannot put that time in to buy something here.
I read in a previous mail to Jenny that the notatio did hold back sales tax so he would not be liable, maybe this can help. We need to obtain a curp easier than through immigration, or just use the tax number only as that is what this is about taxes, right.
Thanks
Hi Cindy,
Have your friends check out our main article on Visiting and Living in Mexico at: https://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/
In that article you can read the requirements for becoming a legal Residente Temporal (RT) – which includes INM issuing you a CURP. If the applicant does not have any Mexican family members, then they have to go back to their home country and apply for RT at a Mexican Consulate. The Mexican Consulate issues a special visa (a Canje) to return to Mexico and complete the RT process with INM. These processes have been working since Nov. 2012.
Once they have their RT status – (with NO requirements to be in Mexico for 6 months a year) – they then apply for an RFC either online or at their local SAT/Hacienda office.
Again, there are no 6 month residency requirements for being either a Residente Temporal nor for Residente Permanente. I would guess that your friends either misunderstood what the INM people told them, or that your friends don’t speak Spanish well, or that an INM person tried to speak in English and gave bad advice.
Re taxes: Just like in Canada and the USA, the Mexican income taxes owed for gains/profits from selling a property are not the same as the IVA sales tax – so “holding back sales taxes” has nothing to do with paying income taxes.
If they get their Residente Temporal permit(s), then getting the RFC and selling the property become straightforward.
steve
I am applying for a RP after the obligatory 4 years of FM 3 and RT
I have been quoted immigration charges for “analysis and consideration” of application
Of ~ 2,000 MXP and ~ 4000 MXP for “the card”…….
In your experience, is this a ‘fair’ assessment ?
I have been informed, by reading informative articles such as yours
That I have up to 55 days, post expiration date, to appear in person
In order to satisfy the RP requirements….as long as the application and fees
Are presented at time of, or before RT expiration.
Appreciate your experienced opinion
Hi Al,
The fees for Residency visas are listed in our main article on visiting Mexico and immigrating to Mexico at: https://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/
Go to the subsection: INM Residente Temporal and Residente Permanente Permit Fees https://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/#INM%20Residente%20Temporal%20and%20Residente%20Permanente%20Permit%20Fees
Note that you are allowed to go in up to 55 days late, (with a good reason/excuse), but they may charge you an additional fee/fine. To avoid fines/fees: We are supposed to start the RP process within 30 days before our current RT expires – or no later than the first business day after the RT expires.
The 55 day rule is simply in place to keep you from having to start all over again.
Good Luck,
steve
Steve, as always I depend on your font of knowledge to get me thru the complexity, (seemly more & more every year…) of MX requirements.
Thanks for sharing your wide base of knowledge with others on your site.
Al
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Thank you, Steve, for the information on how to get an RFC number. My husband and I will need that in order to sell our house here.
Do I understand that we would have to have Permanent Resident Visas in order to qualify for the capital-gains-tax exemption? Or can we just be eligible for a permanent resident visa? We have temporary resident visas and have lived in this house full-time for over eight years.
Jacki
Hi Jacki,
The decision of whether you qualify for the homeowners exemption is all up to the Notario who handles your sale.
Some/many Notarios are granting the exemption to Residente Temporales.
A few Notarios are only granting the exemption to Residente Permanentes who have Mexican citizenship applications pending. – so it’s a mixed bag out there.
Find a Notario who will commit to your plan of action, to handle your sale,
steve
Steve, I was told that the buyer selects the notario. Our potential buyer is from out-of-town and might accept our suggestion of a notario. He would be getting a mortgage from a bank using his INFONAVIT account for the down payment. In that case will the bank or INFONAVIT insist that we use their notario?
Thanks,
Jacki
Hi Jacki,
There is NO LAW and NO Government RULE requiring the buyer/seller to use the buyer’s Notary – it’s just a common custom, that is slowly changing.
If the buyer chooses to get a loan, the terms of their loan may require use of the Bank’s/lender’s notary – but that is a civil agreement that is the Buyer’s issue – one you can choose to accept or reject (by rejecting the Buyer’s offer).
The IFONAVIT loan may require use of their Notary – and in a worst case scenario, we know of 2 different home owners whose buyer’s bank Notarios withheld a full 35% taxes on the full purchase price – totally ignoring deductions for the original purchase price etc. The sellers said they had no recourse to recover the losses, once the sale was made.
For a $200,000 USD property, that could mean paying $70,000 US dollars in taxes – which is enough to cause some sellers to say “No Thank You” to that buyer. ???
steve
INFONAVIT will give him a list of approved notarios that he can use. He can not use any notario that is not approve. I just had a sister inlaw buy using INFONAVIT
Also the banks typically use a single notario. For example Scotia bank in Playa only uses one notario for the whole city
I understood that the seller coud file an annual declaration to show the correct profit and claim a refund – not true?
Hi Jim,
There are so many items in the article above that I can’t tell what you mean by “filing an annual declaration” (of what?) to “claim a refund” (of what>?)
What is the topic, which rule, what payments?
steve
Steve
Most of the previous comments related to sales of real estate with the Notario withholding way too much in taxes.
My comment was that I understand the withholding is like withholding from wages or an IRA distribution. When you file your annual tax return (declaracion en Mexico) you can show the correct gain and get a refund if overpaid.
Aren’t annual tax returns only filed by people working in Mexico? We are retired and are selling our house in order to leave Mexico. When we sell our house, we will contract with an attorney who is well versed in the tax laws affecting foreigners and who for 1% of the sales price, will work with the attorney in the notario’s office who draws up the escritura and other documents. If the notario’s office does not recognize our right to a tax exemption (due to our living in the house over five years and having permanent resident visas), we will reject the offer.
I’ve been told filing the annual was optional – but not by an expert. I need to find out.
I have a different situation…
I own a condo in Puerto Vallarta. We have a manager who has ignored requests to see receipts for her purchases, recenty we audited her. She produced lots of facturas. And we discovered that she writes herself checks out of our check book and purchases the goods and pays the IMSS taxes out of her own account. After reading this site – it makes no sense to me as it means she would have to use her own tax number on the facturas and to pay taxes. Maybe someone here could shed some light on why she does this, it seems shady to me, she won’t answer, and our HOA board doesn’t seem to care. I had thought she must use cash to buy things, but she has factura for everthing, so she has to use a check or visa…..why won’t she use our checks???
Hi Donna,
Since your property manager uses her RFC number to get the Facturas – she gets $$ tax credits (as expenses paid personally by her) for every factura she gets for your property.
Since our tax brackets can be in the 15% – 35% level, she gets a 15%-35% bonus – paid back to her through the form of lower annual taxes – for every bill she reports to Hacienda/SAT as an expense that she has paid.
The big key: Does she report the amounts you pay to her (for supplies, materials, services etc) reported to Hacienda/SAT as income received?
If she is reporting both the $$ she receives, AND the expenses, then it’s a wash…
So, there’s not enough information in what you describe to say if she’s collecting the tax credits – and not showing the payments you make to her
???
steve
Thanks so much for your help Steve,
I, of course, don’t know if she reports the income.
Also, sometimes she writes the checks (usually these checks are for anywhere from 5,000. to 15,000. each, 3 checks a month) to our “accountant”, who I do not think we need, who gets paid 3,000. a month..
I had a thought though……maybe she is washing drug money? Hopefully we wouldn’t be a party to that.
And, the facturas could be fake.
You can’t think of any reasonable reason for her in not using our business account to pay bills either? I think the bills are inflated also. But this is unnerving. The low amounts might signal that she doesn’t report the income…?
I’d get rid of her pronto, but people are funny, they “don’t want to get involved”, they need a mom, and she is it.
Donna
Hi Donna,
Good questions.
As I proposed earlier, your property manager may be paying your business group’s the bills in her name (?), (not using the business account), possibly because she can claim those facturas as her expenses on her annual Mexican tax filing => which gets her an extra 20% – 35% (mas o menos) savings on her tax bill ???
Your accountant would know this, because he should also be claiming the facturas as expenses on the business group’s tax account. ??
beyond me…
steve
ummmmm, guess we should be reporting her income? that would be her job, guess we can guess she sure isn’t doing that! Several months the total of checks comes to over 50,000. pesos.
I think I have missed some of the thread … you have a PM and not total confidence, so you should be talking with your accountant and then Hacienda direct… a local situation with all condo owners thinking they’ve paid the PM and thus Hacienda ok, which was not the case and guess who ended up liable for paying 2nd time to Hacienda – yes the owners….just saying…
We’ve always been on top of hacienda, as we knew we’d pay double, so we go to IMSS and get the receipts yearly and the PM (property manager) knows.
You haven’t missed anything Anthony, I just started posting…..was wondering if anyone knows why our PM writes herself checks instead of CFE, Global gas, etc. Then she writes them checks on her own account. She reimburses herself between 10,000. and 50,000. a month.
Steve wrote: “As I proposed earlier, your property manager may be paying your business group’s the bills in her name (?), (not using the business account), possibly because she can claim those facturas as her expenses on her annual Mexican tax filing => which gets her an extra 20% – 35% (mas o menos) savings on her tax bill ???
Your accountant would know this, because he should also be claiming the facturas as expenses on the business group’s tax account. ??”
Steve,
Our manager chose our accountant, so they are in cohoots, no one could ask him.
But, that’s a good point, we can’t claim these facturas on our tax statement as we didn’t pay them! But – does a condo “P en C” need to file taxes? We don’t sell anything, there’s no profit potential.
If the facturas are fake then she didn’t pay them at all…..
Hi Donna,
I don’t know if your condo association has to pay taxes. You’ve gone beyond our limited knowledge, taking you into areas where it’s best to talk with a professional.
All the best,
steve
I wrote a detailed response thst must have been too long. Please get in touch directly. In the interim. Unless the property manager is giving the condo a factura for all her services including the items she is claiming herself, the condo is exposed to taxes as it has no deductions. Even if the condo is getting a factura for all her expenses she has to add IVA so the manager still benefits at the condo’s expense.
Thanks Steve and Julie, so sorry to hear you wrote something that was erased ):
Guess I need to be scared. Trouble is, our condo has hired two lawyers, and both just billed us and billed us (150,000. for edictos that we never saw proof of, and if they were printed – they never got the delinquent owner to pay dues) and one told us misinformation that gave the developer all our power in the HOA. So, hiring another is something people are reluctant to do, they all seem to want to sit like ducks and see what happens. I relayed your message Julie, we’ll see if any condo owners even responds to me….one question ~ how can adding on IVA (because she is resaleing gas, etc. to us) be a benefit to the manager?
Many thanks. It just didn’t make any sense why our manager would want to funnel money through her bank account….for no reason.
I haven’t found where to contact you….I am in Cambodia right now, and internet isn’t all it is back home.
Hi again.
Adding on IVA to any service bill the manager may be giving the condo does not necessarily benefit the manager….it’s an added expense for the condo. ie..the manager charges the condo for an item plus the IVA she paid. But then if those costs are included as part of a goods and service bill from the manager the manager can then charge the condo IVA for the manager’s service of buying and selling the items to the condo. I have no idea what’s actually happening but I would certainly want all receipts to be Iñ the condo’s name and not the manager’s name in the future.
What about the checks made out to her, could we owe tax as it looks like it was salary? Or does she owe the tax, as a property manager she is supose to be contract labor?
Her salary is 5,000. a month, but I’ve noticed she started paying herself 4,500. some 8 months ago (not exact number, but each month the exact same amount). I alerted the HOA board that it looks like taxes and she isn’t an employee, but they trust her completely. The accountant is all the same, looks like tax was being withdrawn, and huge checks on the side were being written to her to reimburse her for our expenses that she suposedly paid.
Looks like people are starting to realize we do need to hire a lawyer. I really appreciate your help. I’ve always been suspicious that she didn’t like us.
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My question relates to the capital gains on sale of primary residence. With the new 2014 law:
1) what is the rule for living in the residence to be exempt from capital gains? I read 5 years to live in it but also read elsewhere that you can only claim the exemption once every 5 years, which does not mean the same thing as living in it for 5 years.
2) does a person really have to live in the residence consecutive 183 days just before the sale? What if I left the country for two weeks? I am non-resident from immigration perspective and leave the country at least every 180 days, but resident from tax perspective.
Thanks so much!
Shannon
Hi Lee,
The homeowner’s exemption is authorized or denied, depending on whether the Notario handling the sale decides to award it.
The ISR says that the sellers have to prove that the home has been their primary residence and their principal center of fiscal activities for the previous 5 consecutive years. This forces the issue on allowing an owner to claim the homeowner’s exemption just once every 5 years.
Some Notarios require checking your passport stamps to prove your use of the home as your primary residence – which would seem to rule you out due to being in the USA so much in the last 5 years.
Some Notarios require that the homeowner applying for the exemption to provide copies of CFE and water utility bills in the applicant’s name for every month (2 month period for CFE) for the previous 5 years, as proof of living there.
Some Notarios are still only awarding the exemption to foreigners, only when the foreigner has Residente Permanente status – which is within their legal purview. As a non-resident of Mexico from immigration’s rules, I understand that Notarios would likely not normally authorize the exemption.
Some buyers insist on using their Notario, so you may not be able to choose a Notario who would award you the exemption. Example: If the buyer uses a bank to facilitate the transaction, the bank’s Notario handles the deal – and bank Notarios are known for making very conservative rulings.
Talk with your Notario to find out his policies/requirements on these things – per the advice in our main article on gains taxes at: https://yucalandia.com/living-in-yucatan-mexico/capital-gains-taxes-on-mexican-properties/
Good Luck,
steve
No matter how you do it the lawyers/notarios will iwst the “law’ their way or find answers that suit them, not you. We jumped through so many hoops selling our property that at the halfway end we stopped questioning… Just paid and paid… The bank decided to veto our escritura as too old. What to do? We needed to have it digitized and believe me, it cost a lot of money, then in order to have if done quicker the notario digitizing it needed an “extra incentive”. You can’t win.
None our our ‘facturas’, impressively legal looking written by the engineer was legal, even though we spent fat amounts on renovations, it did not qualify.
Dobri Vyetcheer Raisa,
You are correct.
That is why we urge readers to find out AHEAD OF TIME what the Notario will allow or deny – and then, if needed, shop around for a GOOD Notario who will do things well.
Do not just accept the Notario that the buyer wants – as their personal pecadillos can cost you $10,000’s to $100,000’s of extra pesos.
This is why we also advise getting an official Catastral appraisal after making improvements on a property.
steve
Dobryj vechi Vam,
maybe it depends on the location, we were in Cancun area. Lots of your advise regarding documents for residente permanente paperwork was not acceptable in Cancun immigration offices… and I speak the language fluently. But…if they say it’s not right, you can’t argue.
The corruption is so ingrained there is no way one can win. Can you fight it? I doubt it, there are more sharks than the deep pool can handle and yet somehow they still find something to feed on.
. In our case we decided to chalk it up to experience better pay and get out and stay out.
Dobryj Den Raisa,
“Can you fight it?”
“… there are more sharks than the deep pool can handle and yet somehow they still find something to feed on.
So very true for Quintana Roo – as my wife describes 4 solid decades of entrenched corruption in Q. Roo – very very different from Yucatan state and Campeche state: I found Q.Roo corruption was prominent while investigating buying property back in the 1980’s on the Costa Maya – and since then consistently present in Q. Roo police traffic stops and in simple things like buying gas at Cancun/Costa Maya Pemex stations.
… We actually had one PEMEX gas pumper take-off in his best sprint for 2 blocks, as my wife walked towards the PEMEX caseta to report his cheating to the gerencia.
Best of luck,
steve
st
Maybe a better way to ask my question above is: is there any way to use some amount of capital gains exclusion amount even if I live in the property less than 5 years? Is the 5 years for 100% exclusion or it’s the period that applies across the board? thanks again.
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Hi Steve,
can advise any tax apply for transfer of shareholding in the Mexico company for the shareholder who is a foreign company holding Mexico Company share.
Best regards,
Cindy
Regarding the new electronic facturas, do we still get paper copies?
Do the courts issue paper copy receipts for judicial work, trials, etc?
Thanks for being here!
Hi Dawna,
Yes, we’ve had to supply the .pdf & .xml electronic files, plus the paper copy to both our University and Foundation employers/grantors.
We don’t know about paper copy receipts for judicial work, etc,
steve
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What a great source of information.
My question concerns personal income tax. I am a Canadian with a current permanent mexican visa but with a citizenship application pending (I expect approval before the end of this year). I am trying to figure out how income tax will work. I am still a resident of Canada and pay normal tax there. Once I am a Mexican citizen will I be required to fill out tax returns for both countries and pay tax and then wait for a refund based on tax credits? I expect that I will continue to be considered a resident of Canada by the Canadian government after I get Mexican citizenship as I have ties there that would be difficult to break. All my income would be coming from Canadian sources including pensions and investments (although I may move some of the investments here to Mexico). I live most of the year in Mexico but travel back to Canada regularly. I am in no way trying to avoid taxes but obviously want an as uncomplicated process as possible.
Just a follow up to my earlier query above. I have looked through the various parts of this site but can not find the info I need. Is there a resource – lawyer, accountant – here in Merida with whom I might be able to consult.?
Alex I am Canadian as well here’s a link that may help you http://www.cbc.ca/m/news/business/taxes/6-must-know-tax-facts-for-canadians-earning-abroad-1.1167892
Jo am selling my time share in cancun, i was just told i need a SRE Taxpayer Id… can someone please help.
Hi Jo,
THere is no such thing as a “SRE Taxpayer ID”. … SRE is the Mexican equivalent of the US State Dept.
You need an ” RFC ” which is issued by Hacienda / SAT .
The RFC is your tax ID, and you can use your CURP to get one online from the SAT website … or go into your Hacienda / SAT office.
The SAT website address for getting your RFC (from the comfort of your couch) is:
https://rfc.siat.sat.gob.mx/PTSC/RFC/menu/index.jsp?opcion=2
Happy Trails,
steve
I live in the US and I am selling my time Share for 35,000 dollars to someone who live in Mexico. Do I have to pay a tax on that sale before I can sale it?
Hi,
Gains taxes on real estate gains are withheld from the sale price (from the payout to the seller) by the Notario who processes the sale.
Notario’s can use various ways of determining the amount of the gain (or loss) and any associated taxes …
Ask ahead of time what taxes will be withheld.
steve
I am in the middle of selling my $12535.00 time share to a co. in New Mexico us, I have paid the Mexico SAT the 10% ($1253) fee but now they want another 20% capital gains tax not just on $12535.00 but on the $1253 added for a total of $2,757.70. What a rip off when originally I paid $11,900.00. I feel if any capital gains taxes due to SAT ,they should be for the $635.00 I have gained. Please help with my situation
Hi Art,
The taxes are determined by the Notario who handles the sale.
Gains taxes on sales of properties can be as high as 35% of the sale price for people who do not live in the property as their primary residence … but time-shares are an area of the ISR of which we do not know the intricacies.
I would pay a talented knowlegeable tax lawyer in the area of time share sales.
Possibly contact Spencer at Chapalalaw.com, and pay for his advice?
steve
Hi. I’m inheriting a small business in Guadalajara. What tax % will I ( or my mother ) pay on an inheritance transaction? I’m Mexican born but also have US Citizenship( in case that makes a difference). Thanks.
Hi Tim,
I don’t know. Talk with a good professional (like a tax accountant who knows both US and Mexico tax law).
Good luck,
steve
Hi Steve,, article is very helpful and thanks for that. I came to Mexico recently and I have got my FM3 card without CURP number printed on it. When I asked my employer he said that it should be applied only after getting the FM3 Card so he will do that now. But many of my other friends got their FM3 along with CURP number on Card in their first arrival to Mexico.
Secondly about salary, I have been told that I would get my salary once in a month as usual every where. But now after coming here they are telling that they will deposit my salary in 4 individual transaction(Weekly once). It looks something wrong to me. I am a Computer Engineer working in Mexico. Kindly advice me how to make sure that everything is perfect.
Hi Seshu,
A few things:
~ There have been no FM3’s since 2010. You likely have a Residente Temporal visa.
~ Some Residente Temporal visa cards have the CURP printed on them, others do not.
~ Check with INM, as they may have already assigned you a CURP when they issued you the Residente Temporal visa.
~ There is nothing wrong with receiving your salary as 4 weekly payments.
One thought: In months with 5 weeks, will you be paid for all 5 weekls?
(52 weekly payments versus 12 monthly payments => 4 additional payments per year)?
The things you describe seem OK,
steve
Question
Own a condo in Cabo San Lucas and pay IVA on my HOA . Is this legal? I have heard so many different answers!
Help!
Diane, If you mean you are being charged tax on the total amount you pay for dues? that is illegal, but some of the payments within the HOA payment go to buying things or paying employees, so there is tax inside that payment, and sometimes they separate the tax from the payment in statements. To be totally sure your management is honest…. you should be getting a SAT report monthly, this is tax law that you get a list, monthly, which is a list of all the money being spent and how much tax is being sent in to Hacienda.
Here is the law translated:
Article 25
Regulations for the Law of Value Added Tax (IVA)
Chapter 1 – General Provisions:
Article 25. The effects of the provisions established in the Law of Value Added Tax regarding tax credits apply to taxpayers that carry out activities for which they must pay tax on property subject to a condominium regime, in the proportional percentage that corresponds to each of them, of the transferred tax (IVA is payable by the final consumer of goods or services, and tax credits are transferred along the line to this final tax payer) from the operations that support the common expenses for the property in question, provided that in addition to the requirements established by the Law of Value Added Tax, they comply with the following:
1. That the expenses for repairs and maintenance, are made in the name of, and on behalf of, the general assembly of condominium owners by an administrator that has the authority to act in this capacity, granted by this assembly;
2. That the payment of fees for repairs and maintenance has been made by the condominium owners by means of being deposited in a bank account that has been established by the general assembly of condominium owners for this purpose;
3. That the supporting financial documents that back up the common expenses for repairs and maintenance are in the name of the general assembly of condominium owners, or of the administrator;
4. That the Administrator obtains the supporting financial documents corresponding to the common expenses, and the Administrator delivers to each condominium owner a monthly written declaration in the manner specified below:
A) The numbers corresponding to the supporting documents mentioned above and a description of the expense that backs up each supporting document, the total amount of these supporting documents, and the corresponding value added tax paid (IVA), and
B) The proportional percentage of the total reported expenses that correspond to each condominium owner, in accordance with the percentage of undivided property that each private unit represents in the condominium.
As well, the Administrator must deliver a copy of the supporting documents to each condominium owner.
Thank you for the information.
I would like to have a PDF of the VAT law in Spanish.
Would it be possible for you to send me a link to the PDF or the PDF itself?
Great information
Thanks again.
I copied that above out of Gary Musgrave’s book Jalisco Condo Law. This is an amazing book and everyone who owns a condo should have it. He has two books on the law, one explains all the laws (Jalisco Condo Manual), the other (Jalisco Condo Law) lists the condo laws and translates them. It’s on Amazon and for sale in Mexico at book stores. Gary is Canadian and he owns a condo in Jalisco. The law in Cabo is most likely the same, but I don’t know. He has a blog and you could go to it and ask him. http://jaliscocondos.org/blog/
oh, that law I copied for you above is Mexican Civil Law, not state specific.
Hello. Do I have to pay IVA tax when purchasing goods for export purposes?
Hi Andrey,
Since we do not know the particulars of you, your situation, or what you plan to export … we can’t answer.
steve
I want buy a watering system for $ 10,000. How do I return I.V.A.
Thank you.
Just ask any jewelry store…. yes you do.
I want buy a watering system for $ 10,000. How do I return I.V.A. If I live in Russia.
Thank you.
You don’t need to pay IVA separately, they will charge you when you buy it.
I am an American who owns a condo in Nayarit. If I decide to occasionally rent my unit to tourists, do I have to pay Mexico income tax, or can I simply declare it as income on my USA taxes?
Also, am I required to have a TP or RP in order to rent the unit?
Thanks in advance,
Hamil
Hi,
According to our Mexican accountant, you should
~ have an RFC to collect rents
~ report the rental income to Hacienda/SAT
~ pay Mexican taxes on the income.
RP’s would simply report their business activities to INM in a letter.
For RT’s, I suspect that as a lucrative activity, you would need formal permission from INM – and a change of visa status, BUT We don’t know how INM handles passive income like this where you are not personally working. You would need to ask your INM office about their rules on when you participate in lucrative activities, but are not “working” … as the visa is called a Residente Temporal con permiso de trabajo … ???
steve
I am selling a time share in Mexico to a Mexican entity for which the Mexican gov’t is requiring a Foreign Registation fee from me in order to receive the proceeds from the sale . Is this now legitimate or a scam. The escrow account says that I will be reimbursed from the buyer for this additional fee. IS THIS LEGITIMATE ? or should I run……. ?
The ISR is fairly dense, but one constant is that IF HACIENDA DECIDES THAT THE NOTARIO MADE AN ERROR, the Notario handling the sale is then personally responsible for any tax obligations owed on the sale.
IF the asset is sold at a price higher than the purchase price (or is higher than the basis), then the seller owes taxes on the gains. Alternately, if the owner is not living in the property, then gains taxes can be owed on the entire sale price.
So, if the seller of the time-share does not have a legitimate RFC issued by Hacienda, then the Govt (as represented by the Notario) is required to withold likely taxes.
Beyond those basic requirements for selling assets in Mexico, we don’t have enough specific details to advise you further.
Happy Trails,
steve
So many questions unanswered about timeshare sales and so many scams! I was told I needed an RFC, got that. THen told I owed capital gains taxes, now being told I need to pay a stay tax. This is all out of pocket, before receiving proceeds. IS this Legit? I know this is not the US, but why isn’t it deducted from the sale? Run?
Talk with a good specialist tax attorney…
There’s no way we can track 32 Mexican state’s individual tax policies,
steve
something isn’t working, as when I hit reply down below I go to the thread, but this is not posted there, it’s old posts on the site, so a reply would not be relevant.
What’s your question?
steve
I am sure that my question has been answered here before.
But I have forgotten the specifics…
Please pardon my rudeness for asking again…
How does possessing a Residente Permanente solely residing in the Casa affect the Hacienda Tax on the sale ?
Hi Al,
Your intuition is correct, if you sold that property, you could potentially qualify for exempting any taxes on the gains.
See this for details:
https://yucalandia.com/living-in-yucatan-mexico/capital-gains-taxes-on-mexican-properties/
and
https://yucalandia.com/living-in-yucatan-mexico/real-estate-property-appraisals-in-mexico-catastral-taxes-capital-gains-notarios/
steve
Define “potentially” Yuclandia….! My realtor says no capital gains, but my lawyer says it will be calculated probably at a 2% rate. We have Permanente Residente and our home has been our primary residence for 8 years…..
Hi Darm,
Ignore your ‘realtor’ ** …
Only the Notario who handles the sale can definitively say how the taxes on the gains will be determined – as the Notarios have broad individual discretion in how they handle them.
The entire amount can be taxed at fixed rate, or they can adjust the basis depending on what allowed expenses the owner paid, or the seller (owner) may qualify for all gains to be exempted.
**Realtors in Mexico are required to have zero training,
Realtors in Mexico have zero requirements for certification,
Realtors in Mexico have zero requirements for being registered or licensed,
Realtors in Mexico have zero established professional standards.
**Realtors can occasionally be correct, especially if they have special arrangements with a Notario … (‘wink wink, nudge nudge … a wink is as good as a nod behind a blind man’s back’ )
A good attorney (abogado) who has years specializing in taxes can offer advice, but the individual Notarios have full authority to ignore whatever even the best abogado advises.
For this reason, some sellers go ‘Notario shopping’ before selling the property, to ensure that they get the tax treatment they believe is legal & fair from a Notario who correctly applies the law.
Best of luck,
steve
thanks Steve….what a precarious system.
@darmstrong601
actually not precarious, but different.
many Americans have “edgy” situations, and are sometimes assumed to be “maybe” gaming the system, as in “not really a primary residence, actually a rental or vacation retreat”.
Steve: 100% spot on, thanks.
You’re welcome …
Agreed that there’s way too much dodgy stuff going on,
which is one reason some Notarios have required a full 5 years of every single hard-copy of CFE bills and water bills before approving gringos for the exemption.
(How many of us have kept every single month’s copies of every single utility bill for 5 years?)
*grin*
steve
“Define “potentially” Yuclandia.”
If you read the 2 articles I referenced, they describe various requirements for qualifying for reductions in gains taxes and for qualifying for being exempt from gains taxes.
“Potentially”, because we simply do not know all the details of the prior purchase,
~ whether the Acquisition Tax was paid,
~ how long the owner has lived there,
~ whether the owner qualifies as having lived there as their principal residence,
~ what qualifying expenses have been paid,
and
~ on … and on … and on.
That’s why it’s best to talk with the Notario who will handle the sale, BEFORE choosing the Notario for the sale.
Happy Trails,
steve
Again…..thanks Steve. All along our lawyer has been telling us we don’t need a notary….conflicting info is always frustrating.
Hi Darm,
To the best of our understandings: Federal tax law (the ISR) requires that a Notario be used for property sales, to ensure that proper Federal taxes are collected by the Notario. (Abogados do not collect taxes like Notarios)
and yes, there’s a lot of crappy information passed around by lawyers, accountants and even some Notarios, who don’t bother to follow the updates & changes in the ISR => lots of bad advice floating around out there.
Note that Mexican Notarios are nothing like a “Notary”. So referring to a Notario or Notaria (the firm/office) as a Notary really creates wrong perceptions.
Happy Trails!
steve
I know of no way to Purchase or Sell without a Notary, they do the land registering.
If you are renting/leasing that is another thing.
So I am Canadian, have my Permanente Residente, and the casa has been my primary residence for 8 years, so not sure why there would be capital gains. I have documented every penny we have spent on the place in 8 years, and have all the receipts, so not sure how the calculations are made, but hoping it will be fair. Whatever that means in Mexico.
I just sold my condo in PV, I used Marc Serrano at Applegate…. thank goodness. I owed no capital gains or any other taxes/fees. Sounds like a lot of readers are getting ripped off.
Hi PV,
Gains taxes on property sales are determined by the Notario who registers the sale.
If you lived in your condo, the Notario could have decided to give you a ‘homeowner’s exemption’.
The Notario personally takes on the risks of all future taxes owed (if Hacienda/SAT decides taxes are owed), so maybe the Notario took pity on you (and took the risk)?
These other people have time-shares, which are different from condos…
Timeshare ‘ownership’ as a contract-holder where the timeshare participant does not actually ‘own’ the property … may likely… be different from being a condominium owner who owns the building/apartment but does not own the land under it.
… a messy area of Mexican law…
steve
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My colleagues wanted IRS 1040 Tax Table earlier this week and found an online platform that hosts lots of fillable forms . If people are requiring IRS 1040 Tax Table too , here’s
https://goo.gl/Jd2tbtQuestion: I own and am selling a timeshare in Mexico. Sale about $36,000. Gains about $7500. Do I need a Mexican tax payer ID to sell and I’m being told that it costs about $3200. to get one.
The RFC is free.
You get one from SAT / Hacienda .
The Notario who handles the sale is supposed to require an RFC for the seller, to pay taxes owed on the gains.
steve
Question: With money that is earned by a girl friend and deposited in her bank account. IF its not declared to the SAT in their monthly declaration is there any responsibility on their partner. We are not married, but been to gather for years and live in same house.
Hi Ulises,
Are you reporting her as your concubina with the government?
Has she reported you as her concubino with the government?
If you have not formally registered yourselves as being in a “Union Libre” … or if you are in a Mexican State that has not legally appproved~recognized concubino~union libre relationships, then in either case, you would not seen to be liable for your partner’s taxes.
Still, we are neither lawyers nor tax experts – so consult a competent tax authority.
steve
Thank you very much… We lived together for 8+ years. But never reported anything. We were just boyfriend and girl friend. But we did have a baby together…? And i provide everything for my kid always. IN Cancun they have concubino, But i do not know if it has to be reported or registered?
As always, speak with a knowlegeable Mexican tax authority, but our best understanding is that if you have not registered~claimed official concubino status, then the Mex. Gob. sees you as legally independent from your live-in partner.
??
The people i been renting my home to in tj mexico just lesrned that they havent paid property tax in 5years can they takw my house away
yes. get the taxes paid now.
Hi,
Here in Merida, Yucatan … no.
We have many properties being squabbled-over by the kids (after the parents die), where the property taxes don’t get paid, that our Catatastral office does not seem to take any seriously punitive actions against even long-term delinquent payments. … Here, they collect the back taxes when someone buys the property – taking the back taxes out of either the final sale proceeds … or they go after the “new” owner.
TJ ???
I have no idea how it works there.
Talk with a good Notario,
steve