BajaNomad

Trust fees

JZ - 6-18-2006 at 11:39 AM

Can someone post the various fees to establish a trust and the variables. Are there signficant price differences depending on the bank you use?

longlegsinlapaz - 6-18-2006 at 02:42 PM

If you're only talking the annual bank fee; as of just over 2 years ago, all banks' fees on a fideicomiso became regulated & the annual fee is currently $440 USD ($400 fee/$40 tax). If you're talking the entire fideicomiso process & notario fees, that can vary depending on several things, but plan on $3,000-$4,000 USD. My actual costs in February 2004 to obtain a fideicomiso on a straightforward land purchase (owner had title & no ugly monsters raised their heads; well, beyond the fact that the owner refused to pay his back taxes, which were less than $1,000 Pesos & which I chose to pay because I wanted the property!) were:

Bank $1,861 USD
Notario $14,000 Pesos
Property Survey $300 Pesos

....for an approx USD equivilent of $3,561 ($3,661 USD including the back taxes!)

bajajudy - 6-18-2006 at 03:36 PM

If, in fact, you are talking about the bank fees to administer your trust, be sure that they say that they cannot be raised. Some say that they can be raised 10% a year. Both of mine say that they cannot be raised. Well worth the effort to try for that clause. Or at least check and see what increases are allowed. Perhaps you could talk them down, if they are above 10%.

jerry - 6-18-2006 at 05:15 PM

mine started at$330 including tax a yr and it goes up10% every 5 yrs but i got it about 8 _9yrs ago total cost then was $2500 including the 500 i paid a guy to had carry it throu still took about 9 months

JZ - 6-18-2006 at 05:44 PM

I'm asking about the fees to "establish" the trust. What are the variables that come into play, is the value of the property one of them?

jerry - 6-18-2006 at 05:51 PM

wasnt on mine

oladulce - 6-18-2006 at 07:18 PM

Your acquisition tax is based on the sale price- 2% of the purchase price.

Not sure if the notario fees are a percentage of the sale price, or a set fee.

Also, our newest fidei. has the annual fees quoted in pesos ($4000 pesos + 10% tax) which should save a little over those which are based on dollar amounts.

I just sent the notario $1800 dollars for just the "foreign relations permit" from Mexico City for a 5000 sq. meter lot. This is what we paid for the permit on the adjacent , same size lot 2 years ago. This is almost double what I recall paying 5 years ago for a much smaller property. So I'm not sure if the price for the permit went up, or if it's based on the size of the property.

I do know that the investment clause (the amount you're "required" to invest) which is part of this permit is based on the size of the property. For our initial 5000sq meter lot, the investment requirement is $400,000 US dollars.

All we can do is laugh when we find out what the investment clause will be on the new lot which we bought to give us some open space and is another barren, rocky, cholla covered piece of dirt way outside of town with no road , no water and no power provided.

[Edited on 6-19-2006 by oladulce]

JZ - 6-18-2006 at 07:48 PM

Aquisition tax is 2% of purchase price? Really? That seems very high ($10K on a $500K purchase). I haven't heard of anything that high. And how does that relate to trust establishment.

What is a foreign relations permit?

oladulce - 6-19-2006 at 01:44 AM

The acquistion/transfer tax is not a part of the fideicomiso process, but is required in a Mexican real estate sale and everybody (mexicans, foreigners, etc) pays it. It's calculated by the notario and he will collect the tax usually at the end of the process so it's often combined with other fees.

This tax is the one that gets people in trouble. Because it's a percentage of the sales price, buyers have been tempted to low-ball the property value and claim the avalou (local property assessment) rather than the actual price they paid. There can be a huge difference in your local property tax assessment value and your purchase price. It seems like they're saving big bucks until they decide to sell the property and are faced with an enormous "gain" on which their capital gains tax is based.

Example: You paid $75,000 dollars for a property and the avalou assessment value was only $10,000 dollars. You decide to claim the avalou as your purchase price in order to pay less in transfer/aquistion tax, and this lower amount is recorded in your fideicomiso.

After investing $300,000 in building and improvements, you later sell the property for $400,000. Your capital "gain" on paper is $390,000 dollars and you'll pay 35% of that amount in capital gains tax at the time of sale. (Paying 25% of the sales price in tax is the other option). Had you claimed your actual purchase price of $75,000 at least your capital gain would only be on $325,000 . There's much more to capital gains taxes, but this is highlights and how the transfer tax comes in to play.

The official transfer tax calculation form is in your fideicomiso and is called "Declaracion para el pago del impuesto sobre adquisicion de inmuebles".

The "foreign relations permit" is just an easier way to say the "Permiso de la Secretaria de Relaciones Exteriores". It is the main component of your fidei and you have to apply for the permit from Mexico City. Either the bank or the notario will actually apply for you.

The bank is merely the administrator of your fidei. The Sec. of Relaciones Exteriores are the ones who give you permission to obtain a fidei, and who inform the bank of pertinent laws (Ley de Inversi?n Extranjera) and requirements and restrictions to be included in your document.



[Edited on 6-19-2006 by oladulce]

bajalou - 6-19-2006 at 08:07 AM

Quote:
Originally posted by oladulce


After investing $300,000 in building and improvements, you later sell the property for $400,000. Your capital "gain" on paper is $390,000 dollars and you'll pay 35% of that amount in capital gains tax at the time of sale. (Paying 25% of the sales price in tax is the other option). Had you claimed your actual purchase price of $75,000 at least your capital gain would only be on $325,000 . There's much more to capital gains taxes, but this is highlights and how the transfer tax comes in to play.


[Edited on 6-19-2006 by oladulce]


From this example, you're saying that the "Improvements" cannot be used to offset the capital gains tax. Even with facturas for all the expenses?

oladulce - 6-19-2006 at 09:16 AM

You're right Bajalou, I was trying to keep my explanation brief but should have clarified that you can be liable for 35% of the gain (or 25% of the sales price) and it will be up to you to apply any allowable deductions when you sell to attempt to reduce the capital gains tax you'll have to pay.

I should have emphasized that there's alot more to capital gains tax too and in some situations, people are not even liable for the tax. Mexicanos do not have the same capital gains tax on residential real estate so I'd bet they almost always lowball their documented purchase price to pay as little transfer tax as possible.

The key point is the direct relationship between your documented purchase price, (which determines the 2% aquistion tax that pay) and the capital gains tax you may be liable for when you sell.

oladulce - 6-21-2006 at 08:18 AM

That's a good annual fee Kate. What bank is yours with ?

longlegsinlapaz - 6-21-2006 at 09:48 AM

Existing fideicomisos honor the terms of the original agreement; my original was locked in at $300/$30 tax for 5 years....but about 2 years ago, ALL banks went to a regulated fixed annual fee of $400 USD/$40 tax. So there's no more price shopping for annual fideicomiso fees.

JZ - 6-21-2006 at 10:08 AM

Thanks Kate for sharing the exact trust fees. Is this roughly what others are paying.

longlegsinlapaz - 6-21-2006 at 07:53 PM

Kate:

My sources were the banks here in La Paz...they said the same thing, that's it's now a regulated amount, no more competive shopping around....BanaMex, BanNorte, HSBC & BanCrecer (which is where my original fideicomiso was) all independently gave me the same spiel. I went with HSBC this time; they were recommended as being faster & more on top of things...I agree!

Bruce R Leech - 6-22-2006 at 08:57 AM

Quote:
Originally posted by oladulce
The acquistion/transfer tax is not a part of the fideicomiso process, but is required in a Mexican real estate sale and everybody (mexicans, foreigners, etc) pays it. It's calculated by the notario and he will collect the tax usually at the end of the process so it's often combined with other fees.

This tax is the one that gets people in trouble. Because it's a percentage of the sales price, buyers have been tempted to low-ball the property value and claim the avalou (local property assessment) rather than the actual price they paid. There can be a huge difference in your local property tax assessment value and your purchase price. It seems like they're saving big bucks until they decide to sell the property and are faced with an enormous "gain" on which their capital gains tax is based.

Example: You paid $75,000 dollars for a property and the avalou assessment value was only $10,000 dollars. You decide to claim the avalou as your purchase price in order to pay less in transfer/aquistion tax, and this lower amount is recorded in your fideicomiso.

After investing $300,000 in building and improvements, you later sell the property for $400,000. Your capital "gain" on paper is $390,000 dollars and you'll pay 35% of that amount in capital gains tax at the time of sale. (Paying 25% of the sales price in tax is the other option). Had you claimed your actual purchase price of $75,000 at least your capital gain would only be on $325,000 . There's much more to capital gains taxes, but this is highlights and how the transfer tax comes in to play.

The official transfer tax calculation form is in your fideicomiso and is called "Declaracion para el pago del impuesto sobre adquisicion de inmuebles".

The "foreign relations permit" is just an easier way to say the "Permiso de la Secretaria de Relaciones Exteriores". It is the main component of your fidei and you have to apply for the permit from Mexico City. Either the bank or the notario will actually apply for you.

The bank is merely the administrator of your fidei. The Sec. of Relaciones Exteriores are the ones who give you permission to obtain a fidei, and who inform the bank of pertinent laws (Ley de Inversi?n Extranjera) and requirements and restrictions to be included in your document.



[Edited on 6-19-2006 by oladulce]


dont forget you must pay the US I.R.S there capitalgans tax also.

every one who gets a fideicomiso must file a form with the I.R.S. imeditaly or face penalties of up to 35% of the sale Price. then you file a form every year after until you sell the property. this costs you nothing. but at the time of sale you must pay capital gains tax to the IRS. Bummer.

all Mexican banks now report new fideicomisos and transfers to the IRS.

so up to 60% of your sale money can be taxed. Maybe those land leases are not so bad after all:o

Bruce R Leech - 6-23-2006 at 06:04 AM

Quote:
Originally posted by morgaine7
Originally posted by Bruce R Leech
Quote:
every one who gets a fideicomiso must file a form with the I.R.S. imeditaly or face penalties of up to 35% of the sale Price. then you file a form every year after until you sell the property. this costs you nothing. but at the time of sale you must pay capital gains tax to the IRS. Bummer.


Bruce ... is this the one you mean?
http://www.irs.gov/businesses/small/article/0,,id=148849,00....
:?::?:



I don't think that is the one. the best thing to do is get in touch with your tax lawyer or accountant and explain your situation.

also all foreign corporations must be reported and filed annually