Taxes for Realtors
Updated: Jan 3
The Real Estate industry in México isn't as caught up with regulatory reforms as one would desire when purchasing a property.
AMPI, the Mexican Association for Real Estate Professionals is not a regulated entity.
It's a combination of the eagerness to sell with the lack of training within the industry.
9 out of 10 Real Estate Operations are not working as they should.
Below, I will try to outline how a real estate operation should work:
For this explanation, you should be familiar with the concept of FACTURAS and RFC, if you're not familiar with facturas take a look at other posts in this blog that refer to facturas and rfc, and become familiar with those terms first. Why? Because every transaction in México requires the issuance of a factura. It's a legal receipt. And every factura requires an rfc. There is a "general" rfc used for transactions where the buyer doesn't have one however rfc has become an obligation for everyone and it's needed for everthing from purchases to even connect electricity to the property. It is best to have one when requesting your factura.
Now, with Real Estate properties, there is a Seller, a Buyer, and middle men, call them broker, agent, notario, bank, and escrow company. I will explain first without the middle men.
The rule is: Seller must issue a factura to Buyer, and Buyer must get factura for purchase.
If the buyer doesn't get a factura, their investment cannot be deductible at all, if they sell this property the capital gains will be paid on the entire amount.
What happens if the seller is a regular person and is legally unable to issue a factura?
The notario issues one on the behalf of the seller.
What about the middle men?
It works the same but with more layers.
Buyer pays for property, deposits into escrow, upon signing, monies get distributed to seller and broker via BANK TRANSFER, then the corresponding facturas are issued as follows:
-Buyer gets possession of the Property, the deed and a factura for the entire amount of the property/transaction, the monies paid are all laid on the factura.
-Seller gets his money and issues an income factura to the broker and buyer, if seller can't issue the factura, the notario does.
Then For tax purposes:
The broker pays their agent and if applicable, also pays the other broker/agent involved in the transaction. In return, the broker gets a factura from each of them, (both the agent and the other agency must issue income facturas for their commissions) the broker deducts these facturas and pays taxes on the remaining money (their profit).
Agent correspondingly pays taxes on this income factura issued to their broker (income) after their deductions. Somewhere in the neighborhood of 30% tax bracket.
That's it. Straight forward.
The use of PAGADORAS or Payroll Companies is illegal.
How can Burmeister Consulting help?
-For Brokers and Agents: we can lower the tax burden for each agent through our Copyrighted ©️ strategy.
We can also lower the tax burden for Brokers without incurring in simulated operations, fake facturas, etc.
Lastly, we could do the Accounting for both.
-For Buyers and Sellers: represent you in the transaction or act as an external advisor, help maximize deductions for capital gains.
-Translation of documents.