In México we currently have four categories of real estate property: commercial, industrial, rural and residential.
Taxes apply to everyone, regardless of national origin.
There are four (4) different taxes that are associated with real estate.
The first tax is called “Predial”, which is a property tax imposed by city governments and it must be paid at the beginning of the year. It's confusing because it exists at a Federal Level however paid locally.
This tax is to be paid annually and if a seller is not current upon sale of the property, the seller will have to pay back taxes and interest, and the notary will request a current no-fiscal-liens certificate issued by the city government in order to sell the property.
The second tax is the IVA. This is the value-added tax or VAT (A federal tax) and must be applied to any purchases related to real estate transactions. This tax is now at 16%.
The third tax is called Land Acquisition tax (ISAI) and it is imposed by city governments, therefore its a municipal tax. This tax is the equivalent of 2% (Nayarit) to 3.5% (Jalisco) of the value of the transaction and it is the responsibility of the “Notario Público” (Notary Public) to calculate and withhold on behalf of the city government.
The fourth tax is called “Capital Gains Tax”, (A federal tax) it is imposed on the profit obtained on the purchase price. “Income tax" up to 33-35 % the worth of the transaction.
Capital Gains Tax is applied to:
a) Industrial real estate.
b) Commercial real estate property.
c) Rural property.
d) Residential properties.
There are several "Strategies" commonly used to reduce or avoid some of the aforementioned taxes. Please consult with an honest professional before signing anything.
There is a Capital Gains exception that can be obtained by anyone living in a given property every 3 years (flipping).
Our strategy at Burmeister Consulting can be applied towards capital gains and IVA in some cases.
All our strategies are customized and not applicable to every single transaction, a consultation by one of our experts is required.
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Burmeister Consulting