Owning in Mexico
MEXICAN PROPERTY TRUSTS
(Fideicomiso)
In 1994, amendments to the Constitution permitted foreigners to purchase and own real estate in Mexico located within the "restricted zone" which is all land within 60 miles of a national border and within 30 miles of the Mexican Coast. This Law permitted ownership through a land trust or "Fideicomisco".
A "Fideicomisco" is a Mexican Trust. The way it works is the Mexican Government issues a permit to a Chartered Bank of your choice doing business in Mexico. This allows the bank to act as the Administrator for the owner of the property. The bank acts as the "Trustee" for the Trust and the Owner is the "Beneficiary" of the Trust. The "Beneficiary" rights are very similar to Living Wills or Estate Trusts in the U.S.
The law authorizes Mexican banking institutions to act as trustees. A trustee takes instructions only from the beneficiary of the trust (the foreign purchaser). The beneficiary has the right to use, occupy and possess the property, including the right to build on it or otherwise improve it. The beneficiary may also sell the rights and instruct the trustee to transfer title to a qualified owner.
Many people refer to the trust arrangement in Mexico as a lease agreement... this is not true. The home or property that you buy will be put into a trust with you named as the beneficiary of the trust - you are not a lessee. You have all the rights that an owner of property in the U.S. or Canada has, including the right to enjoy the property, sell the property, rent the property, improve the property, etc.
The fideicomisco is a Trust Agreement with the Bank; and therefore considered a contract that must have an end date. This is the reason for the 50 year term. A beneficial Owner can renew the trust for an additional period of 50 years within the last year of each 50-year period, and this process can be continued indefinitely, providing for long term control of the asset.
Return to Top of PageTAXES
Property Taxes are very low in Loreto, BCS, and average about $200 USD per year for a Village Home.
The Mexican tax system has been subject to comprehensive tax reform legislation enacted principally in 1986 and 1988. Although 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 truer when as a foreigner it is possible that two countries may claim tax jurisdiction 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 claim as a tax resident? When is a property subject to tax? And to know exactly what taxes you can be subject too. ReMEXICO Homes of Loreto 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 an extremely important part of real estate ownership in Mexico.
Closing Costs:
The Trust Transfer Deed is prepared by a Notario Publico, who is appointed by the President of Mexico, and has the same powers as a Federal Court Judge in the USA. It is their responsibility to conduct all due diligence and ensure that all parties are protected, and all laws and regulations are upheld. The Notario Publico provides and guarantees irrevocable, indefeasible title to your property. For this reason, US Title Insurance is redundant when you have a Notario involved. The Closing costs are expensive and will average 5% to 7% of the purchase price. This includes the Mexican transfer tax which is 2% of the Purchase Price, Notario fees, Bank Trustee fees, Foreign Affairs Permits, Appraisals, Consents, legal fees, translations, etc.
Inflationary Credits:
As soon as you have paid your 2% acquisitions tax you are now eligible to receive an 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 substantial in some cases.
Capital Gains Tax Exemption:
Mexico provides its residents with a tax incentive when they sell their personal residences. This tax exemption is for Mexican Nationals and can also apply to foreigners who have Immigration status and primary residence in Mexico. Consult your Mexican Consulate for more information.
Disclaimer: *ALL INFORMATION IS TO THE BEST OF OUR INFORMATION AND SUBJECT TO CHANGE. PLEASE CHECK WITH YOUR LEGAL AND TAX EXPERTS FOR MOST CURRENT RULES.