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Whether you are a Mexican national, a Mexican resident or a foreigner, if you are selling your property in Mexico, you may be liable to pay a capital gains tax.There are ways to reduce or claim exemption from capital gains. Before you complete the sale of your property, you should seek the advice of an accountant in Mexico. The assessment of capital gains tax in Mexico can be complicated and changes over the years.

Deductions vs. No Deductions

The rate of capital gains tax varies greatly and must be reviewed by an accountant to ensure you receive the largest deduction possible. For example, with no deductions, the tax may be assessed at 25% of the gross sale of the property. Or, it could range from 1.92% – 35% of the profit.

Pesos not Dollars!

All real estate transactions are recorded in Mexican pesos, regardless of whether you negotiated the purchase price and paid for your property in USD or CAD. You must consider the official exchange rates when calculating a gain. Let’s say you bought your property on January 1, 2010 for $100,000 USD and you sold it on January 1, 2023 for $100,000 USD. In USD, it appears there is no gain. However, you must use the exchange rate provided daily by the The Diario Oficial de la Federación to convert the purchase and sale prices into MXN.

Exchange rate 1/1/2010: $13.0437 x $100,000 USD = $1,304,370 MXN

Exchange rate 29/4/2024: $16.9615 x $100,000 USD = $1,694,150 MXN

Capital Gain = $389,780 MXN or $22,980.27 USD

*The exercise is for explanatory purposes only. We recommend contacting us to review each specific case in detail.

Mexican Resident vs. Non-Resident

There are significant benefits to having permanent or temporary residency in Mexico when it comes to reducing or being exempt from capital gains tax. A non-resident without an RFC or CURP will be liable for 35% capital gains tax. As a property owner, you should consider obtaining Mexican residency in order to reduce or even eliminate your tax liability should you decide to sell your property.

As a foreigner with Mexican residency, you receive the same consideration and benefits as a Mexican national which means you may be eligible for a complete exemption of capital gains. If you are able to prove that you are selling your primary residence and that you have resided in the home for a minimum of three years, you may be eligible for the exemption from capital

gains. Additionally, you must have an RFC (Mexican tax ID number) and CURP, and the property cannot exceed three times the size of the home.

As a Mexican resident, if you do not meet the above criteria for complete exemption from capital gains, you are able to still reduce your tax liability by applying deductions from improvements made on the property. You will be required to provide all official invoices (facturas) for property improvements and other related expenses such as broker fees, legal fees, and taxes paid. If you do not have an official invoice issued by the service provider and registered with SAT, the improvements and fees will not be eligible for a deduction.

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.

The Role of Notaries

Notaries are responsible and liable for calculating and collecting the tax on residential transactions. Notaries may also interpret and apply tax laws differently. It is important to understand how the notary considers, for example, eligibility of deductions or residency status of the seller.

Sales of commercial properties are not handled by notaries and business owners should consult an accountant to assess deductions and tax obligations.

How a Mexican Tax Expert Can Help

Navigating the intricacies of the capital gains tax in Mexico is best handled by a professional. Our professional and experienced team of tax experts can review all of the requirements for deductions and exemptions to be sure you qualify and provide you with expert advice on steps to take if you don’t qualify for an exemption or reduction. Please contact our team today.

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The General Assembly must be governed by a public deed that stipulates the organization and administration of the condominium, in addition to designating a person in charge of carrying out these tasks. These are normally carried out in either ordinary or extraordinary assemblies. 

Ordinary assemblies must be held at least once every six months and must discuss topics such as appointing or removing the condominium administrator, establishing the obligations and faculties of the administrator, establishing the moratorium rates for the condominium owners, examining the account statements provided by the administration, reviewing budgets, establishing quotas for maintenance expenses and in general, topics of common interest among the condominium owners. 

In the case of the extraordinary meetings, there is no specific rule regarding frequency, since they attend to the needs of the condominium and can be held as many times as necessary. However, there are issues that, according to the law, must be exclusively debated in these meetings. For example, any modification to the articles of association of the condominium property regime and its regulations, the voluntary extinction of the condominium property regime, or even a lawsuit against a condominium owner in the event that he/she repeatedly fails to comply with his/her obligations and incurs in violations of the articles of association and the Condominium Regulations. 

It is worth mentioning that the meetings of the Assembly, whether ordinary or extraordinary will be held at the condominium property, except in cases of force majeure (an act of nature) or to facilitate the participation of the interested parties. In both cases, the condominium owners may opt for a remote meeting, through the use of any digital platform that facilitates and allows the image of the condominium owner to be projected in real-time under the conditions determined by law. 

Likewise, the announcement for meetings must be duly made in accordance with the law and the condominium regulations, since there are legal requirements that must be met, and which are imposed to ensure that all the condominium owners are aware that a meeting will be held, allowing them the right to participate and vote, otherwise, the meeting would be null and void. 

Finally, at the end of each of the meetings, the meeting must be recorded in a public deed and registered in the Public Registry of Property and Commerce for its legal effects. 

If you would like to know more about the subject or would like personalized legal advice, do not hesitate to contact us. 

Our experience and professionalism have always allowed us to provide world-class service to our clients. 

Contact us today. 

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First, you will be required to complete the form in which you will provide your company’s information (the Foreign Legal entity Shareholder): names, shareholders, type of business, etc. In that form you will be asked to attach certain documents; note that MexLaw uses high security decryption to guarantee that your data is secure. We ask that your documents are legible, in the event that any of these are photos or scans.

If you want to create a corporation in Mexico it must have two of more persons or foreign companies as shareholders and the notary public will require the notarized and apostilled or legalized (depending on the country it was created) documents of your foreign company. You can define the percentages of each shareholder, but the second shareholder must possess at least 1 per cent.

Your assigned Mexlaw lawyer will then assist you with the instructions for the notarization and apostille or legalization of your documents. You must first go to a notary public to attest and obtain the Notary’s signature on your documents (please consult your lawyer to confirm the place where you may have the documents notarized).

Apostille or legalization are processes of authentication for any legal document so that it will be recognized as legal and valid in the country where you need it. The apostille or legalization process will be subject to the country where you are located or where your foreign company has been incorporated.

These processes apply to the following cases:

Due to Mexican regulations, all of the shareholders of the Mexican legal entity that will be created must be present to sign the documents before the notary public; if you or any shareholder were not able to personally come to sign, you can grant a power of attorney for us to represent you at the signature of your Mexican legal entity documents before the notary public. For this, we will need the power of attorney to be notarized and apostilled or legalized according to the country in which it will be granted.

If the place in which the document will be executed is part of The Hague Convention you will have to go through the apostille process. This is a way to legalize your documents so they can be used in Mexico. The apostille process is carried out at the secretary of state of your city. For example, if you are located anywhere in the United States of America, you will have to go to the corresponding secretary of state and file the paperwork there.

In case the country in which the document will be executed is not part of The Hague Convention, you will have to go through the legalization process. This process must be done at the Mexican Consulate or secretary of state in your city. For example, if you are in Toronto you will have to go to the Mexican consulate in that city to legalize your document and be able to use it in Mexico.

*Please note that all of the documents that were in English must be translated to Spanish by a certified translator*

Once your documents are properly executed, your MexLaw lawyers will then be able to proceed to sign the documents of your Mexican legal entity; once the documents have been signed, they will proceed to have your corporation registered at the Public Registry of Commerce and the National Registry of Foreign Investment and obtain your RFC (Mexican Tax ID). Our local MexLaw team will continue to support you after your corporation has been set up and offer you legal protection here in Mexico.

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