If
you own real estate, used for housing, (apartments, houses, etc.) and fulfill the few
requirements the law establishes to apply for tax exemption, you will save thousands of
dollars in Capital Gains taxes if and when you sell the property.
In México "CAPITAL GAINS TAX" is part of the tax known
as IMPUESTO SOBRE LA RENTA, "ISR" which taxes individuals and corporations
INCOME.
The tax exemption benefit is given only to individuals who live in
México for more than 182 days a year, such as Non-Immigrants (Visitante no Inmigrante),
Immigrants (Visitante Inmigrante), Permanent Residents (Inmigrados), and Mexican Citizens.
A foreigner without -at least- a non-immigrant status (FM3) will
pay higher income taxes and/or not receive the tax exemptions given to Mexicans and
foreigners who FULFILL THE FOLLOWING REQUIREMENTS:
1.- Have a telephone line or bank account, for at least 2 years
previous to the sale.
2.- Own the property for at least 2 years previous to the closing
date. (This is proven with the telephone bills and/or bank statements), and
3.- Have an FM-3 visa (Non-Immigrant) or better migratory status
that proves that you have lived in the country of México for more than 182 days, a year,
for 2 years previous to the sale.
Your FM3 visa will have an entrance and exit page, which
Immigration will stamp every time you enter and leave the country. You should be able to
keep a record of the number of days you stayed in México.
If you do not have a telephone or bank account, you can also use
electricity or gas receipts. All documents should show the address of the property and
must be in your, your spouse, parents or children's name.
Your stay in México does not have to be consecutive. You can
leave and come back as long as you stay more than182 days in one year.
The General Population Act establishes the requirements that must
be met by foreigners who wish to obtain any of the migratory statuses described by the
Act. (Tourist, FM3, FM2, permanent resident, citizen, etc)
If you fulfill the above requirements, you WILL BE EXEMPTED FROM
PAYING CAPITAL GAINS TAXES WHEN SELLING YOUR REAL ESTATE.
Other acts that exempt one from paying the tax are:
1.- Donations to your spouse, parents or children.
2.- Inheritance* (It is important that you name death
beneficiaries and that their names are included in the deed).
3.- Selling, for the first time, regularized land (ejido land that
has been deeded).
4.- Bona Mobilia* Personal property that is not real estate.
(Restrictions apply).
If you are one of those owners who, every time they come to
México, you do it on a tourist VISA, it will be hard to qualify for tax exemption, since
a tourist card allows you to stay in the country for periods of only 180 days at a time.
Besides, airport immigration will request that you return the Tourist card to them when
you leave México, which will leave you with no record of the amount of time you have
stayed in the country.
Tourists, who have purchased real estate and wish to sell it, will
have two options when paying their income tax (capital gains tax)
· First Option: 20% of the total sales price.
Example: if you are selling the property for $100,000.00 USD, you,
as the SELLER, will have to pay $20,000.00 USD in taxes.
· Second Option: Mexican law provides that foreigners can opt to
pay 40% on the amount that represents the difference between the purchase price and the
selling price.
Example, if you purchased your home for $100,000.00 USD and today
you sell it for 120,000.00 USD, then, you will pay 40% of $20,000.00 USD or $8,000.00 USD.
The second option is generally better, if you have owned the
property for a number of years. The original purchase price shown in your deed is updated
(inflation, value growth, etc). and is used as the actual purchase price.
If you know, based on the information you have read so far that
you do not qualify for tax exemption, request that your attorney or real estate agent help
you figure out which option is best for you. Your attorney should obtain an estimated tax
to pay, before you decide to list your property for sale.
At closing, the notary issuing the deed, will also calculate and
collect all applicable taxes, including: transfer tax, property registration tax and
capital gains tax.
I hope that this article is as clear as possible. Of course each
case should be analyzed individually. A real estate attorney or professional real estate
agent will help you find the best legal way to help you save on taxes. A few hundred
dollars investment now could mean thousands of dollars savings in a future transaction.·
