BajaNomad

Selling Real Estate in Mexico-2024

JDCanuck - 6-18-2024 at 09:08 PM

Might be worth a new topic, as it appears there are now capital gains exemptions for Residents selling their real estate in Mexico. Heres what Mexlaw has to say as of March 2024:

https://mexlaw.com/are-you-considering-selling-your-mexican-...

[Edited on 6-19-2024 by JDCanuck]

surabi - 6-18-2024 at 10:57 PM

Those aren't new regs, although percentages and details may of course change over time. There has always been the capital gains exemption for a primary residence if you have permanent residency. I was aware of it at least 16 years ago.

oxxo - 6-19-2024 at 05:21 AM

Indeed, things have changed over the years. Twenty years ago, when I purchased my property, I was under the impression that Capital Gains exemptions were only available to Mexican nationals. It was suggested that I get a CURP (I believe that is the same as Residente Permanente, please correct me if wrong), because the regulations were changing at that time and those with a CURP might be able to get some limited exemptions.

It makes no difference how things were in the past, it only matters to me how things are NOW. The linked article is very interesting, because it mentions the exemption for a primary residence in Mexico may be available to each person named on the Fideicomiso if occupied as such for 3 years:

"Additionally, if you are a co-owner with your spouse, both you and your spouse can claim the property as your main residence and both can claim the deduction for a further reduction in capital gains."

This is a very helpful discussion. I am going to be checking on this further because it may apply to me Stat.

PaulW - 6-19-2024 at 07:19 AM

The link is a good refresher.
Having a home in what we call a campo avoids capital gain and all the other items referenced in the link. Having real-estate in a campo masks the purchase or selling because the property is really owned by the campo owner which is not being sold.
Of course new details come with selling you property that is located on leased land.
The real issue if finding a campo the has attributes of owning a home with the usual Fidicomiso.

pacificobob - 6-19-2024 at 07:40 AM

Excellent link. Mexlaw is a great resource. Thanks jd

surabi - 6-19-2024 at 09:53 AM

Quote: Originally posted by oxxo  
It was suggested that I get a CURP (I believe that is the same as Residente Permanente, please correct me if wrong),


A CURP is a personal identification number, similar to a Social Security number, issued to all Mexicans at birth, and to all temporary or permanent residents. It has nothing to do with permanent residency, other than the fact that they aren't issued to tourists, and certainly isn't "the same".

A CURP is automatically issued to all new residents, and appears on your residency card. If you became a resident before they started doing this, it's easy to get one or to generate an official paper of your CURP- you can do it online and it is free.

[Edited on 6-19-2024 by surabi]

[Edited on 6-20-2024 by surabi]

JDCanuck - 6-19-2024 at 11:14 AM

The primary conditions for reduced cap gains seem to be length of time it was your permanent residence as well as the percentage of the property the construction occupies. They did mention different Notaries may interpret these differently so it still seems a bit variable.
Perhaps this is where hiring a trusted real estate tax lawyer or accountant is well worth the money you pay them as we did, especially if you like myself are very uneasy interpreting Spanish language on documents or are essentially Spanish illiterate. Google is not the best way to delve into these matters.

Note: Even on our original Fideicomiso generated at the Notaries office there were errors in our names and we had them corrected before we signed.

oxxo - 6-19-2024 at 12:23 PM

Quote: Originally posted by surabi  

A CURP is a personal identification number, similar to a Social Security number, issued to all Mexicans at birth, and to all temporary or permanent residents. It has nothing to do with permanent residency, other than the fact that they aren't issued to tourists, and certainly isn't "the same".

A CURP is automatically issued to all new residents, and appears on your residency card. If you because a resident before they started doing this, it's easy to get one or to generate an official paper of your CURP- you can do it online and it is free.


Gracias @Surabi. The fact that I do have a permanent resident card, for a long time and more than 3 years, means that I should have a CURP number appearing on my card as a "resident" or can get one as a "resident." Am I understanding correctly? I am out of town and I don't have my resident card handy, but I will check when I get back.

For What it is Worth.......

SFandH - 6-19-2024 at 01:05 PM

I've been using AI (ChatGPT 3.5) to help me through estate planning and I think it is great. So, I asked it about Mexican real estate.

--------------------------------------------------

Question:
What are the capital gains tax in Mexico when you sell your house?

ChatGPT Answer (in a few seconds):

When selling a house in Mexico, capital gains tax (ISR - Impuesto Sobre la Renta) is applied to the profit from the sale. Here's a comprehensive guide to understanding this tax:

1. Determining Capital Gains
Capital gains are calculated as the difference between the sale price and the adjusted acquisition cost, which includes the original purchase price plus improvements, inflation adjustments, and allowable deductions.

2. Exemptions and Special Considerations
Primary Residence Exemption:
For a property that has been your primary residence, you may qualify for a tax exemption if:

You have lived there for at least 5 years.
The sale does not exceed 700,000 Unidad de Medida y Actualización (UMA) (approximately MXN 6.8 million or USD 370,000 in 2024).
This exemption can be used once every three years.

3. Tax Rates
Resident Individuals:
For Mexican residents, the capital gains tax rate is the greater of:

20% of the gross sale price.
1.92% to 35% of the net gain, depending on income levels.
Non-Resident Individuals:
For non-residents, the tax is:

25% of the gross sale price without deductions.
Alternatively, 35% of the net gain if deductions can be substantiated and a tax representative is appointed.
Companies:

Resident companies pay a flat rate of 30% on the net gain.

4. Allowable Deductions
Acquisition Cost: Purchase price plus expenses related to the acquisition.
Improvements: Costs of construction, remodeling, or improvements.
Inflation Adjustment: Adjustment for inflation over the period of ownership.
Notary Fees and Legal Costs: Fees for legal and notary services related to the sale.

5. Calculation Example
Let’s illustrate this with a hypothetical example:

Scenario:

Purchase Price: MXN 2,000,000
Sale Price: MXN 5,000,000
Ownership Period: 10 years
Deductions: MXN 500,000 (for improvements and allowable costs)
Capital Gain Calculation:

Adjusted Acquisition Cost: MXN 2,000,000 (purchase) + MXN 500,000 (improvements) = MXN 2,500,000
Capital Gain: MXN 5,000,000 (sale) - MXN 2,500,000 (adjusted cost) = MXN 2,500,000
Tax for Resident Individual:

20% of MXN 5,000,000 (gross) = MXN 1,000,000
Assuming a progressive rate results in 30% of MXN 2,500,000 (net) = MXN 750,000
The individual would pay the higher amount, MXN 1,000,000.

6. Filing and Payment
The tax is typically withheld by the notary at the time of the sale and paid directly to the tax authority, Servicio de Administración Tributaria (SAT).

7. Documentation Required
Proof of purchase and sale prices.
Receipts for improvements and related expenses.
Official appraisal documents.
Notary and legal fees documentation.
Consultation

Legal Advice:
Due to the complexities and potential for significant tax liability, consulting with a tax advisor or legal professional in Mexico is advisable for personalized guidance and to ensure compliance with local regulations.

---------------------------------------------
https://chatgpt.com/


[Edited on 6-19-2024 by SFandH]

So says ChatGPT

SFandH - 6-19-2024 at 01:10 PM

In Mexico, the CURP (Clave Única de Registro de Población) is a unique identity code assigned to each resident and citizen. It serves as a personal identification number for various administrative processes. Here's a detailed breakdown:

1. Purpose
The CURP is used for:

Government services and documentation
Tax purposes
Employment records
School and university enrollment
Healthcare services
Voting registration

2. Composition
The CURP is a combination of 18 characters, derived from personal data:

First letter and first internal vowel of the first surname
First letter of the second surname
First letter of the given name
Date of birth (in the format YYMMDD)
Gender (H for male, M for female)
State code or "NE" for foreigners
First consonant of each of the first surname, second surname, and given name (excluding the first letter)
A two-digit disambiguation code assigned by the National Population Registry

3. Example
For someone named Juan Pérez Gómez, born on January 15, 1985, in Mexico City, the CURP might be:

Copy code
PEGJ850115HMCMNN02
P (first letter of the first surname Pérez)
E (first internal vowel of the first surname)
G (first letter of the second surname Gómez)
J (first letter of the given name Juan)
850115 (birth date: 1985-01-15)
H (gender: male)
MC (state code for Mexico City)
M (first consonant of Pérez after the first letter)
N (first consonant of Gómez after the first letter)
N (first consonant of Juan after the first letter)
02 (disambiguation code)

4. Obtaining a CURP
To obtain a CURP, individuals must:

Mexican Citizens: Apply at the Civil Registry or the National Population Registry.
Foreign Residents: Apply at immigration offices or certain authorized government offices.
A CURP card or a printed format is provided upon successful registration.

5. Usage
The CURP is widely accepted across different sectors for identification purposes. It helps in unifying personal data and simplifying bureaucratic procedures in Mexico.

JDCanuck - 6-19-2024 at 02:21 PM

Man...both those posts were extremely helpful. I learned a lot from them, including that 6.8 million exemption if you have lived here 5 years to be used only once every 3 years for residents. I could not find that anyplace. If i read that right it is based on the total sale price, not the capital gains on it. So anything sold for less than 6.8 million pesos would not be taxable for any cap gains. Anything sold above that would have cap gains taxes on the excess. Another good reason to keep the investment in any property below that value.

surabi - 6-19-2024 at 06:59 PM

Quote: Originally posted by oxxo  


Gracias @Surabi. The fact that I do have a permanent resident card, for a long time and more than 3 years, means that I should have a CURP number appearing on my card as a "resident" or can get one as a "resident." Am I understanding correctly?


Yes, the CURP is on the front of the card, it's the last thing that appears there. My card was issued in 2013, I don't know whether the cards had the CURP on them before that.

oxxo - 6-19-2024 at 08:38 PM

Quote: Originally posted by surabi  

Yes, the CURP is on the front of the card, it's the last thing that appears there. My card was issued in 2013, I don't know whether the cards had the CURP on them before that.


:thumbup: LIKE

pacificobob - 6-20-2024 at 07:17 AM

Has anyone consulted with mexlaw? I will be applying for Mexican citizenship this fall and will be shopping a guide service. Any other reputable companies to consider?

surabi - 6-20-2024 at 08:08 AM

Quote: Originally posted by JDCanuck  
Man...both those posts were extremely helpful. I learned a lot from them, including that 6.8 million exemption if you have lived here 5 years to be used only once every 3 years for residents. I could not find that anyplace. If i read that right it is based on the total sale price, not the capital gains on it. So anything sold for less than 6.8 million pesos would not be taxable for any cap gains. Anything sold above that would have cap gains taxes on the excess. Another good reason to keep the investment in any property below that value.


The amount isn't set- it is pegged to the Mexican UDI, which fluctuates.

"The flat-rate exemption is the peso equivalent of 700,000 UDIs. At the time of writing, 700,000 UDIs equates to approximately $4.37 million Mexican pesos, and you can deduct this amount from the sales price if you qualify."

SFandH - 6-20-2024 at 08:25 AM

This page currently has 8.13 pesos per investment unit.

700,000 UDIs = 5,689,468.40 pesos

https://ikiwi.com.mx/calculadoras/convertidor-udi-pesos/

oxxo - 6-20-2024 at 08:40 AM

Quote: Originally posted by pacificobob  
Has anyone consulted with mexlaw? I will be applying for Mexican citizenship this fall and will be shopping a guide service. Any other reputable companies to consider?


I don't know MexLaw, but I did consult with a Mexican attorney specializing in citizenship last month in Los Cabos. Here's what she told me in Engish, if I understood correctly:
- You must have a Residente Permanent visa which is currently a 5 year (I think) process at this time. I already have one for over 10 years now.
- Then you must have your original birth certificate "apostillized" at a Mexican consulate in your home country (current passport country) which could take months for an appointment (Mexicans are not real pleased with US immigration policy and the hoops that are required for entry to the US)
- You must be able to PROVE that you have lived FULL TIME in Mexico for 18 out of the last 24 months.
- Be able to prove financial self-sufficiency
- After that 24 months you must make a trip to D.F., with your Mexican attorney, for an interview conducted completely in Spanish to present your application and applicable paperwork.
- IF approved for potential citizenship, which could take several months (Mexicans are not real pleased, etc. etc.) you will be invited back to the Immigration office in D.F., with your Mexican attorney, for your citizenship interview, conducted completely in Spanish and tests in Spanish - History and Culture (waived if you are a senior citizen as shown on your birth certificate) and Spanish Language (required of everyone despite age). You will be given something to read written in Spanish and you will be asked to write a detailed summary in Spanish of what it said.
- The primary advantages of becoming a citizen FOR ME would be: I would be allowed to vote, I would be allowed to demonstrate, And I would be allowed to extinguish my Fideicomiso which would save me about USD 600 per year.
- For me, it would be a 2 or 3 year process and about USD 5000 in attorney fees.
- Currently, I am able to pass freely between the US and Mexico with my resident card and accomplish everything I need to, without Mexican citizenship.

I have determined that Mexican citizenship is not something I want to do at this time. Your situation may be different. I encourage everyone to consult with their own attorney in Mexico to get specific information from them with regards to your personal situation and citizenship.

Buena Suerte Amigo

oxxo - 6-20-2024 at 10:14 AM

Quote: Originally posted by lencho  

I'm surprised. It's been years since I've gotten apostilles for anything, but at that time that was done by the Secretary of State's office in the issuing state.

Doesn't really seem in the competence of a foreign consulate, to validate documents issued by state government offices with which they have no direct connection. ?


You are correct, I wasn't clear. You have your birth certificate apostillized at the nearest Secretary of State office in the issuing Country. You then make an appointment in the nearest Mexican Consulate (could take a couple of months are more) to be authenticated by that office.

Thanks for the clarification @lencho