You are allowed to bring your car across the border. However, there are a few rules you need to follow. Once you reach the border you will be stopped at a check point about 20 minutes inside of Mexico. There you will need a certified copy of the car title or a certified letter from the lien holder that you have permission to cross the border into Mexico. You will also need a credit card; there is a small fee that must be paid on a credit card. You will then receive your blue and white tourist visa and a sticker to place in the window of your car. The sticker is to let the Mexican officials know at a glance that your car is legal.
You will also need to put on your border papers a list of everyone who will be authorized to drive your car while in Mexico. Tourist visas are good for 6 months. So make sure when asked "how long will you be in Mexico?" you receive all 6 months on your visa.
This way you will have enough time to reach your destination and apply for your immigration papers. Then you will go through a border check where they have the red light green light system just like the airport. If you receive the red light you will be stopped and your car and belongings will be inspected. Be prepared to pay a duty tax on any electronic equipment you bring across the border. Computers are a big question… laptops are acceptable to bring in; used stand-alone computers are not allowed to cross the border. New computers in the original box are "said" to be acceptable to bring across the border, but you will have to pay tax. You can buy computers down here for a reasonable price with all of the latest software. Remember to be patient and understanding when dealing with the locals and any type of border or check point official, the fastest way to slow a Mexican down is to raise your voice.

HISTORY ON BUYING IN MEXICO
In 1917 despite all of the sparring between the Mexican government and the Mexican rebels, Carranza got a convention together in Queretaro to formulate political and social goals. The result was the constitution of 1917. The constitution, among other things, gave communal or ejido land to every Mexican village. This land was given by the government to the villages for use only and could never be sold away to the highest bidder. All land was to be either communal land for use only or owned by Mexican Nationals only. This law was greatly placed in effect for the past problems with the Spanish, French and Americans, controlling both land and waterways in Mexico. In 1973, a constitutional amendment known as the Foreign Investment Law allowed foreigners to purchase property anywhere in Mexico, except in the restricted zone. The restricted zone, stated in article 27, is 50 km (32 miles) from high tide and 100 km (64 miles) from any border. The largest problem with this amendment is that most of the foreigners wanted to purchase specifically in the coastal and border areas. In January of 1994 NAFTA had been finalized and President Bill Clinton gave a multibillion-dollar loan to Mexico. In succession with NAFTA Mexico passed another amendment to the constitution that foreigners could now own property in the restricted zone with a bank trust or fideicomiso. The trust system circumvents the constitution allowing foreigners to legally own in the restricted zone.

How does a Trust deed work?
The bank (know as the trustee) holds the trust deed for the person or persons purchasing the property (know as the beneficiaries). This property is not part of the bank’s assets and cannot be subject to any lien or attachment for any bank obligations The beneficiaries has all ownership rights to the property and may sell, lease, mortgage or pass on to their heirs as desired under law. A bank trust is not a lease.

The Mexican government established the trust agreement as a way of protecting foreigners interested in owning property in Mexico. The reasoning was that by making ownership pass through the trust process, there would be an automatic review of the transaction to ensure it was legal and unencumbered. The bank is required to check ownership, insurance and indebtedness of the property, providing further protection to the foreign owner. In the past numerous foreigners have purchased property, illegally and with liens unknowingly. At that time there was no way to protect the foreigners because there was no check and balance system. With the new laws and the influx of professional real estate agents your transactions are now safe and protected. Please do not purchase property without a professional agent. Many people are lured into "cheap beach front property", remember anything that seems too good to be true probably is.

A trust may be granted and extended in 50-year periods. If you purchase property currently held in a trust deed, a new 50-year period can be established or the existing trust deed may be assigned to the purchaser. Trusts are renewable at any time by simple application with the bank. It was never the intent that these properties pass back to the government at the end of the trust period. This is a common misconception and fear of most buyers. In fact at the end of the 50-year period the owner has an additional 10 years to renew the trust with the bank.

Trustee Fees
There is a fee of approximately from $500.00 US dollars to $ 800.00 US dollars to open your trust account and an annual fee as long as you have the trust. You need to check with your real estate agent on actual fees to set up the trust as they can vary from bank to bank. This fee pays for the paperwork and government reporting on your behalf. To open your trust account you will need your accepted offer for purchase, a photo ID and 10% of the purchase price of your new home. At that time you will also receive wiring instructions, to wire the remaining money into the bank when you return home. Do not give anyone any money that is not being handled by a bank escrow representative. You should sign a bank contract with a banking official at the time you put down your deposit. Your real estate agent with help you with setting up your escrow account.

Taxation
Property taxes are very low in Mexico as a whole. The property tax – known as predial is .1% of the assessed value. Taxes are paid annually, with the assessed value determined at the time of sale. If you purchase a property of $100,000.00 US dollars your annual tax rate would be $100.00US dollars. The reason taxes are so low is due to the fact that they have never been a source of revenue for the Mexican government.

The Closing Process
The closing process takes between 30 to 90 days. While you are waiting to close your real estate agent is working with the bank to set up your escrow account, with the notary to prepare your legal deed and closing papers and to check if there are any liens or problems with the title of the property. Closing costs are paid by the buyer and are usually about 6% of the purchase price. 2% sales tax to the Mexican government, 4% to other closing costs, such as title search, attorneys fees, filing of all legal documents and closing deal. Ask your real estate agent. for a good faith estimate of the closing costs for your purchase. The seller is responsible for his or her capital gains tax and any real estate fees owed on the property at the time of sale. The buyer does not have to be present at the time of sale. However, a power of attorney will need to be given to your real estate agent. to help to execute the closing process for you.

The Notary
The notary is a government appointed official that helps to close and educate you through the closing process. The notary represents a high level of legal standing and their services are required for the transfer of real estate property. The Notary is the attorney of record and the unbiased, official representative of the government. A notary has a fiduciary responsibility to both parties and sanctions the contract from a tax and legal point of view. A notary must first be an attorney and then must take special instruction in real estate law to become a notary. Once he has finished his instruction the attorney must then be appointed by the government. This "Notaryship" can also be taken away by the government should he not follow the rules and regulations. Your real estate agent will refer you to a Notary that he knows and trust.

PROPERTY OWNERSHIP THROUGH A CORPORATION
This is a question that is very frequently asked. In 1994 change in the Mexican Foreign Investment Law allowed a Mexican corporation to be 100% foreign owned. You are also, in a corporation, allowed to own title, with out a bank trust, in a restricted zone. This is a great benefit for foreign business owners. However, this is not the answer for everyone. Commercial property carries higher water, electric and phone rates. You also are required to do additional government reporting and tax payments. You can not own a single-family residence in a corporation. The government had cracked down on purchasing property in a corporation unless it is actually for business use. The trust deed is just as safe and less problems with the government.

Maintaining Your Property
Many property owners leave their property for some time during the year. If you have a condo you pay your monthly fees and they will maintain your property area. Homeowners should consider hiring a property management agent to handle the upkeep and bills of your home while you’re out of town for any length of time. Our real estate firm  has a property management division for this purpose, please ask our sales agent for more information.For a direct contact please contact Mr.Alejandro Trevino our  property management division manager.

Insurance
There are various types of insurance in Mexico. You can receive health, life, auto and property insurance. The rates are relatively low and should be purchased for your piece of mind. Our sales agent can help you to set up your insurance policies and can refer you to a reputable insurance company.

Financing
Real estate transactions in Mexico have historically been all cash deals. Recently, the Mexican market has been opened up to financing. There are different types of financing available. We offer a choice of finance companies which finance in Mexico. i.e. www.financinginmexico.com They can also help you with second home tax breaks in the U.S. As your Real Estate Company we would also like to help and educate you on the financing of your home so feel free to ask any question necessary. Ask our sales agent to set up an appointment with the mortgage representative to help handle all of your financing needs.
 

EJIDO PROPERTY IN MEXICO

Most of the people purchasing property in Mexico are looking for that "really great deal" Beach front property for really cheap! People need to be educated and realize if something looks to good to be true "it probably is". Many years ago in Mexico most of the land was owned by Hacienda owners. The Hacienda owners owned a majority of the land and offered work to the local people for minimum pay. The revolution changed all of that. During the Hacienda the rebels over threw the Hacienda owners. The government parceled up the land and gave a piece to each of the local Mexican families. The land was to be used to raise their families or farms or whatever they chose to do with the land. However, the land was only given to them for their use, they did not own the land. This land is called Ejido land. Ejido land could be taken back by the Ejido Association at any time they saw fit for numerous reasons. Ejido land is not allowed to be sold except under certain rules and can never be owned by a foreigner. A Mexican must ask permission from the Ejido Association for the permission to sell to another Mexican. If granted, it is acceptable to sell it, if denied they cannot legally sell it. Many foreigners own Ejido property both knowingly and unknowingly. Many foreigners have purchased ejido property, without legally being able to own it and they do not even have title. Many foreigners purchase this because it is much cheaper to obtain and some of the property is beach front. The reason it is so much cheaper is because the foreigner does not gain title to the property, the title must be in a Mexican’s name. It is also cheaper because it is illegal to sell. It is illegal to promote, sell or buy ejido land. Make sure you know exactly what you are purchasing and are working with your agent and a local notario. Some of the ejido property is in the process of changing and becoming regularized (or privatized) and will be available for sale once the process in completed.
 

Taxes in Mexico: What are you up Against?
I am always a little surprised at the number of people that we meet that believe Mexico is a bona fide tax haven. Mexico is a tax haven only to the extent that the country has not had the resources or will to enforce its own laws. In fact, the country has one of the lowest tax collections as a percentage of its GDP in Latin America and among the member nations of the Organization of Economic Co-operation and Development. The needs of the country and the demands of a new found sense of democracy are forcing the government to make its tax collections more efficient and fair, pursuant both to the existing laws and to the international tax treaties that Mexico has signed with several countries. The purpose of this article is to summarize the major taxes that the foreign community is exposed to in Mexico.

Tax Residence and Tax Treaties
Mexican tax residents are taxed differently than non-residents. As a general rule, non-residents are subject to higher taxes than residents.

The tax treaties Mexico has signed and local law establish who is a tax resident. Tax treaties also set forth the tax rates for different types of income. The main purposes of these treaties, however, are to provide the manner in which double taxation will be minimized, as well as to establish how countries will exchange information on their respective taxpayers. The Canadian and US tax treaties both establish that nationals of their country who are resident in Mexico may be subject to Mexican income taxes pursuant to local law.

As of 2004 the Mexican fiscal code has a new definition of "tax resident". Before 2004, a person needed to be in the country 183 days to be considered a tax resident. As of this year, tax residents are all those who have established an abode in Mexico irrespective of the time they have spent in the country. The law also provides that if they have one home in Mexico and another abroad, they are considered a tax resident in the place where they have their center of vital interests. Mexico will consider that that center of vital interests is in Mexico if over 50% of their income is derived from Mexican sources.

The main repercussion for the foreign residents is the effect it will have on the ability of foreign residents to obtain a homestead exemption on the sale of their principal residence in Mexico. If the homeowner has only one home, and that home is in Mexico, then they should be able to get a homestead exemption. However, if they have one home in Mexico and another in the US, it will be more difficult for the homeowner to get an exemption, especially if their income is not derived from Mexican sources.

In practice, it will be very difficult for the Notario , the attorney required by law to draft the deed and withhold taxes, to know if the homeowner has another home outside the country. However, I can see that some Notario's may request to see a Mexican tax return to prove that homeowner does in fact have his or her center of vital interest in the country.

The flip side is that those foreign residents that have a home in Mexico and abroad, and who derive most of their income from sources outside of Mexico, need not worry about reporting and paying Mexican income taxes. A clear example of these people are "snow birds" that spend six months in Mexico and six months abroad.

Income Taxes
Mexico taxes it residents on worldwide income pursuant to Article 1 of the income tax law. It is important to note that Mexico allows for a foreign tax credit for any taxes paid outside of Mexico. The US and Canada also allow for foreign tax credits. In effect, the taxpayer will pay taxes in both countries, but will also have offsetting tax credits. The net result is that the taxpayer usually pays an amount of taxes equivalent to the highest tax bracket among both countries.

As of last year, Mexican financial institutions have begun to request that US citizens provide a US social security number in order to open an account in Mexico. TheSAT (the Mexican equivalent to the IRS) is sharing any information with the US at this point. Once the Mexican authorities have access to the taxpayer's social security number they can also receive tax information from the IRS on that particular individual. Eventually, the US and Mexico will regularly exchange information on their taxpayers, just as Canada and the US do now.

If you have a bank account in Mexico that pays interest, the financial institution will withhold a small percentage of your principal for income taxes. If you are not a resident, this is the most you will pay on this particular income and you will not need to file a Mexican tax return. If you are resident, you can generally credit this amount on your annual Mexican tax return.

Mexico does not have the problem of double taxation of dividends that the US has. Dividends paid by Mexican corporations are usually paid after tax and are received by Mexican residents tax free. Non-residents will pay a tax in Mexico pursuant to treaty rates.

Capital Gains Taxes
The concept of capital gains taxes is not as well developed in Mexico as it is in the US or Canada. Generally, the tax rate applied to gains is the same as the taxpayer's marginal tax bracket. Most expatriates will face a capital gains issue when they sell Mexican real estate. Non-residents must pay 25% of the gross amount of the transaction. Art 189 Ley del Impuesto sobre la Renta

Mexican tax residents can obtain a capital gains exemption of the sale of a principal residence. If the property is not a principal residence, they must pay taxes on the gain based on their marginal tax bracket. The Notario will withhold a percentage of the gain and the taxpayer must pay the difference, or apply for a credit, with his or her annual tax return.

How the gain on the sale of real estate is calculated is based on the "declared value" stated in the deed, known in Mexico as the "escritura" . Historically, the declared value has been significantly lower than the fair market value. Often, the purpose of having a lower value is to pay less in the way of transfer taxes. While common practice, the habit of declaring a value that is less than the fair market value is not legal in most states. The Mexican tax authorities have realized that they are losing significant amounts of tax revenue by not paying closer attention to these declared values and have begun to scrutinize these transactions more closely. The result is that the declared values in many parts of Mexico are much closer to the fair market values than they were ten years ago.

One result of this increased scrutiny is that Notarios are much more careful about the declared value they are willing to accept in the deeds that they prepare. Therefore, people that have artificially low declared values in their deeds may need to pay more in capital gains than they would have otherwise if they had used the transaction value. We have even seen people sell real estate at a loss and still have to pay capital gains taxes.

Our recommendation is to make sure that the value declared on the deed is as close to the full transaction cost as possible.

Gains from the sale of securities traded in the Mexico are tax free. Interestingly, the stocks of the Dow Jones Industrial average began trading on the Mexican exchange in 2003, but currently these are only available to institutional investors.

I hope you find our websites helpful and we look forward to the opportunity to represent you . If there is something you cannot find within our web pages please contact us via email or call us and we will be happy to help you.

I look forward to the opportunity of representing you.

Sincerely yours,

Ricardo Barraza.
Broker/Owner
Exclusive Buyer's Agent (EBA)®
Certified International Property Specialist (CIPS) ®
Certified Realtor® - Profesional Inmobiliario Certificado® ( P.I.C.)
Member of the Mexican Association of Real Estate Professionals (AMPI) and member of the "N.A.R" (The NATIONAL ASSOCIATION OF REALTORS®)

call us toll free : 1-866-587-2481
Cancun Mexico : 011-52-998-8840434

For more information contact us at ricardojbarraza@yahoo.com
 

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