Fideicomiso (Bank Trust)

All foreign individuals purchasing property in a restricted zone (within 100 km of the Mexican border or 50 km from the coast) must purchase the property using a fideicomiso (bank trust).

Fideicomisos should be considered by foreigners who:

Will use their property for personal use (will not receive rental income).
Are considering obtaining Mexican residency.
Will rent their property for income and have Mexican residency.

If you plan on renting your property for income, you need to consider your Mexican tax obligations. One of the requirements for anyone earning income in Mexico is that you must declare any and all income with the tax authorities. To declare taxes, you must register with the authorities and obtain a Mexican tax ID known as an RFC. RFCs are only available for foreigners with Mexican residency, Mexican citizens, or Mexican corporations.

Some property owners without residency who rent their properties held in a bank trust do so via online rental companies such as AirBnb. However, without an RFC, the online rental companies are required to retain 36% in taxes.

If you are planning on renting your property but not planning on obtaining Mexican residency, you may want to consider the next option.

Mexican Corporation

Another option for foreigners buying real estate is to open a Mexican corporation. By creating a Mexican corporation, foreigners can avoid the fideicomiso process as the property would be purchased by the Mexican corporation.  Mexican corporations should be considered by foreigners who:

Plan to rent their Mexican property for income
Plan to purchase more than one rental property
Have no plans to obtain Mexican residency

When renting a property owned by a Mexican corporation, the corporation will be issued a Mexican tax ID (RFC) and make monthly income declarations. There is a lot more involved in owning a Mexican corporation so it is important to discuss this option in detail with a qualified Mexican attorney.

Making a Decision

Whether renting your Mexican property for income or using it as a vacation destination for you and your family, it is important to know the options available to you. It is also important to understand which option best fits your needs. You should always have a professional attorney discuss and review your options with you. To learn more about which option is best for you, please contact the Mexican legal team at Mexlaw. Our experienced team of professionals is best equipped to help you make the right decision for your purchase.

For information, please contact us here.

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Closing Costs: What to Expect?

You should expect to pay the following fees when closing on a property in Mexico:

Notary Fees

In Mexico, any legal acquisition of property must be administered through a Notary. A Notary (Notario Publico) in Mexico is an experienced lawyer, selected and appointed by the Mexican Government. All real estate purchases must be registered with a Notary, and they are legally responsible to ensure the property’s title is clear and properly recorded with the public registry. The fees paid to the Notary are based on the purchase price of the property.

Bank Trust Fees (Fideicomiso)
Bank trust fees can vary by financial institution and depend on whether you are doing a transfer of trust or opening a new trust. The fees quoted will also include the first year’s trust payment.

Legal Fees
Legal fees paid to Mexlaw will include the closing services provided by our experienced team of Real Estate Attorneys. For a complete list of our services, please visit our Real Estate Legal Services section.

Taxes & Duties
The taxes and duties paid at the time of closing include:
o Registration of the title deed at public registry
o Transfer Tax
o Government Closing Documents & Appraisal – these are required by law and based on the purchase price of the property.

Taxes & Duties: Why so High?

Many buyers are surprised to see that the taxes they pay at the time of closing are much higher than they are used to paying in the United States and Canada. The reason is the Mexican Government collects a large percentage of the property taxes at the time of closing.

While this may seem like a lot to pay, you will be pleasantly surprised when it is time to pay your annual property tax, known as the predial. Annual property taxes are very low in Mexico as the tax is calculated at a fraction of what your property is actually worth. Additionally, many municipalities offer significant discounts (up to 25%) if you pay early. Annual property taxes are due in January so discounts will be offered starting in December.

For additional information about closing costs, property taxes, and Mexican real estate services, please do not hesitate to reach out to our team of professionals at Mexlaw. We would be happy to provide you with a free Estimated Closing Cost for your property.

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That brand is what will ultimately generate in the public that awareness of quality of the product or service that is being offered.  It will make a different impression from the rest of the products of the competition.

Therefore, the registration of the trademark and its corresponding logo is an important and necessary process, when introducing a new product or service in the market or entering a new market with an existing brand. The object is to obtain exclusivity by its use, and thus prevent others from exploiting it.

Otherwise, anyone could present to the public similar products or with characteristics so identical that they could generate confusion with consumers and weaken the effort that was invested in the brand.  This will correspond in a financial loss for the business.

In Mexico, the regulatory body called the Mexican Institute of Industrial Property (IMPI), has the legal authority to administer the country’s intellectual property system. This means that it will be responsible for registering the trademarks filed and having a global registration that prevents two trademarks with similarities that could lead to confusion.

Trademarks are registered with IMPI by filing the appropriate documents with samples of the trademark and logo and by providing as much detail as possible as to color and letter font or size. An element that is equally important is a comprehensive description of the product or services that is associated with that trademark. Vague or ambiguous terms will lead to unnecessary contestation or, worse, impossibility to defend the trademark in the event of a contestation. For example, a client recently registered (on their own) a trademark in Mexico associated with “swimming pool cleaning and maintenance”.  Within days they received multiple notices of contestation from numerous competitors attempting to defend their trademarks as the service was so vague that it may infringe on their trademark.  MexLaw intervened, settled all the claims by withdrawing the vague trademark application and filing a new one with a more precise specification of the product.  This represented unnecessary delays and expenses to the business.

Another particularity of filing a trademark application with IMPI is the speed with which they are considered and approved. This indicates that it does not necessarily do a thorough examination and review of its registers to identify potential conflicting names.  Therefore, it is up to the trademark owner to monitor applications and quickly file oppositions in the event of possible conflicts.  IMPI will respond with an initial reply (whether confirming or reject the complaint) and then the trademark owner must enforce that decision by taking legal action to have counterfeited products destroyed or removed from the market.

Finally, another difference with Mexican trade names (name of the corporation) and those in other jurisdictions is that the corporation’s business name does not benefit from exclusive protection as is the case elsewhere in North America.  For example, a client recently incorporated a Mexican subsidiary of its American counterpart with the same name.  Several months later it became aware that a Mexican Company registered a trademark like its Corporate name.  All attempts to have this trademark cancelled or modified failed as Corporate names in Mexico are not trademarks and therefore do not benefit from any protection.  Therefore, it is strongly recommended to register a trademark although the name of the corporation is similar to the trademark being registered.  Especially if the product or service provided is associated with that name.

It is therefore recommended that if you intend to establish a business in Mexico, and start making use of a trademark, consult an expert lawyer on the subject. They can advise and support you in the registration process, which will provide legal certainty in its use, and avoid the possibility that your trademark may violate the rights previously obtained by another person. Once the registration has been validly obtained with IMPI, it will entitle you to the exclusive use of the trademark, which will generate protection that can be exercised through civil and criminal actions when any third party infringes that right.

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It is important to research the underwriting Mexican Insurance company, not only the broker that sells you the policy. Ensure the company you sign with has an English speaking customer service team available for questions and if you need to make a claim, how available are they? do they have a local office, you do not want to be waiting on a representative from another state.

 Is the insurance company underwriting your policy financially sound?

Is your broker licenced and knowledge about the policy? It may not be the best idea to go with the cheapest policy.

When in Mexico, your auto insurance policy must cover your personal liability, as well as your lawyer and provide a bail bond, because you will be detained until blame is assessed if you are in a serious accident. Your broker and the insurance company should provide local support services so that in the event of a claim, you are able to call for help.

Make sure your policy documentation is absolutely clear about the procedure you need to undertake in the event of an accident and any subsequent claims. You should report your claim at the scene of the accident, you can not wait till you get home to Canada or the US to report or file a claim. You may be required to provide a police report when you.

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