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Taxes The Mexican tax system has been subject to comprehensive tax reform legislation enacted pricipally in 1986 and 1988. Allthough this tax law is subject to change we have supplied this information to better help our customers understand the basic tax laws with the emphasis on your real estate purchases and sales. Taxes are always to be considered in your real estate transactions and this is even more true when as a foreigner it is possible that two countries may claim tax jurisdication over you and your property. Various taxes and procedures with regards to your transactions are calculated somewhat different here in Mexico , with the key points being ; can you claimed as a tax resident? when is a property subject to tax? and too know exactly what taxes you can be subject too. As always Dorado Properties feels it is very important to always consult with a local tax consultant or Notario for up to date information. Understanding the tax laws of Mexico is a extremely important part of real estate ownership here in Mexico . What you do today will greatly effect your tax liabilites of tommorrow. Purchasing Taxes: The aquisition tax in Mexico is a relatively low rate of 2% of the purchasing price. It could be said that the most important thing that we can stress is to always properly record your purchase price at full value and pay this tax. Never is it a good suggestion to try and save a little by recording a lower purchasing price, this can often be heard as a suggestion but never should it be considered. If a lower sales price is registered, basically the seller will avoid some of their 35% capital gains tax and in the future when it comes timefor you to sell, you will be forced to pay a higher amount of capital gains tax that isnt necessary. Pay the 2% tax and avoid the 35% tax. Facts about purchasing. 1. Never record a lower purchase price 2. This purchase price will NOT affect your property taxes. 3. Always check your Fideicomiso( bank trust) to make sure the purchase price is correct. ( write down exchange rate for future reference) 4. Pay your 2% tax as soon as possible to begin receiving your inflationary credit. Inflationary Credits: As soon as you have paid your 2% aquisitions tax you are now eligible to receive a inflationary credit for every year you own your property. This credit will be added to your base purchase price when you sell your home, and can be very substanial in some cases. Capital Gains Tax: Mexico tax law states that that tax is owed on any profit received when you sell your home or property. By law you have two options to calculate this tax and can use whichever is the lesser of the two options. OPTION 1: 25% of the gross sales amount with no deductions OPTION 2: 35% of the net profit( with deductions) The key to understanding these tax laws is to understand how to maximize your cost basis before you buy and not when you decide to sell. Capital Gains Tax Exemption: Mexico provides it's residents with a tax incentive for residents that sell their personal residences. This law states that after 2 years of ownership you may sell your persoanl home and be capital gains exempt. This tax exemption is for Mexican Nationals but also applies to some foreigners with their primary residence here in Mexico . As of September 1st. 2004 the following qualifications are required by foreigners for capital gains exemption. 1. A current FM2 immigration status. ( permanent resident) 2. Utility bills( electricity, water) in your name and the properties address for the last 2 years. 3. A signed sworn statement declaring that you do no own another home outside of Mexico. Dorado Properties has provided a quick review of some tax laws that a person is likely to encounter during their purchase or sale of a property here in Mexico . It is important to note that if you are a resident of the U.S and Mexico you may be subject to some tax laws for both countries and it is recomended that you always consult a qualified tax consultant on these applicable laws. We also recommend the web site www.mexicoconnect.com for further information on tax laws for business. |
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Dorado
Properties
San Diego CA. Phone/Fax : 1-619-819-5630 |
CALL FROM
U.S or CANADA 011-52-612-122-2221 |
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