Today we’re here to talk about the closing taxes and other costs and expenses you should take in consideration when buying or selling property in Mexico.
Whether it is land, an apartment or a house, you can get great value for money in comparison to prices in the US and Europe.
Although, prices in some areas have increased dramatically in recent years, care should be taken in assessing a property’s true value.
Mexico’s land costs can be lower. Similarly, building and maintenance are cheaper. Also the cost of ownership (taxes, utilities) is very low.
Closing Taxes and Expenses: Buying
This Tax is paid on the sale value of the property and is equivalent to about 2% depending on the State in which you buy.
You will pay it whether the property is sold, transferred, donated, placed into trust, split off or merged.
VAT (Sales Tax)
No Value Added Tax (Sales Tax) is payable on residential property. Commercial Property transactions are liable to VAT at the current rate in addition to the Acquisitions Tax.
In order to have the Public Records updated, a 1.3% fee (based on the value of the transaction) is paid by the buyer.
Public Notary Fees
You will have to pay fees for services provided by the Notary Public. These are about 1.5% of the transaction value, plus the cost of the official appraisal (as described in Valuation section, for tax purposes).
To avoid unexpected expenses when buying or selling a property always request a full disclosure disbursement before closing.
If you purchase property within the 50/100km restricted zones, you will need a bank to set up and manage a trust for you. Set-up fees can cost up to US$1500, 00 US with annual service charges of $500.00 US plus VAT.
Lawyer / Attorney Fees:
If you hire a lawyer / attorney, you will also need to pay him/her with fees for services they undertake on your behalf. Negotiate these in advance.
Land / Building Surveys
If you need to undertake any land or building surveys, these will have to be paid for separately. Cost will depend on type, extent and complexity of surveys undertaken.
Foreign Office Permit
Your permit from the Mexican foreign office will cost around US$150.
If you are buying a property in a gated community be sure to check on the monthly service fees. Charges depend on the number of homes and amenities each development offers.
When you buy property in Mexico, you would do well to consider purchasing Title Insurance.
Rates are based on the sale value of the property and are charged at around US$5-US$5.50 per US$1,000 of the value.
Closing Taxes and Expenses: Selling
When you sell a property in Mexico, you will be subject to the fees of any professional services you contract, plus the following taxes and fees:
Income Tax on Property Gains
If the home has not been your main residence for at least the last two years, will be required to pay income tax on the property.
You may either pay 20% on the gross amount of the transaction, or elect to pay 38- 40% tax on the net profit obtained from the property.
This law prevents short-term speculation on the property market. Commercial property is taxed at above rates, regardless.
If you employ an agent, expect charges of 7% of the value of the sale as a fee. You will also need to pay VAT (Sales Tax) on agent fees, request a legal invoice
Some agents will point out that foreigners don’t have to pay VAT since they don’t have a RFC number (Mexican Tax ID). That is far from true as the agent invoice can help you offset capital gain taxes.
Always request a closing statement from your agent showing all expenses you incurred at closing.