Americans can buy property in Mexico, but there are restrictions in certain areas. Mexico welcomes foreign investment. It offers a varied selection of real estate to buy or rent. There are currently no restrictions on foreigners owning property in Mexico. However, restrictions exist on where you can buy property as a foreigner.
The Mexican constitution allows Americans to own property in non-restricted areas but must use a trust to own property in restricted areas. These areas are borders, beaches, and oceanfronts, with maritime and restricted zones.
Mexico applies a capital gains tax on residential property. There are certain deductions for the value of the gain. The purchase price, less costs, allowable exemptions, and deductions are all in pesos. This fact is not commonly known by expats who buy in US or Canadian dollars. The foreign currency amount of a purchase is recorded in the transaction in Mexican pesos.
The purchase cost, less exemptions, and deductions are in pesos, not US or Canadian currency. So, whatever you paid in currency for the purchase price is recorded simultaneously in the escritura (deed) as the Mexican peso currency exchange on the day of closing.
You do not need to be a permanent resident of Mexico to buy property. Many foreigners own Mexican properties without having residency status. Owning property can be a pathway to getting residency, but it’s not a requirement for the purchase.
However, when selling and wanting to pay less tax, you need to be a permanent visa resident and registered with the tax authority as a fiscal resident. You are then eligible to apply for a partial tax exemption as a Mexican can or a better strategy from the notary. What ISR you pay is determined by having or not having fiscal residency. Being a tourist, you can have a property, but you will not have as many options when you sell of what you need to pay in ISR.
We are fortunate to have choices of where to live and work in North America. We have been able to work with each other and remain civil. Living and working together has given us knowledge of how we are different as well as how we are similar. Our choices may be different in the future because all three of us, Canada, the United States of America, and the United States of Mexico, are going through changes in our economy, political structure, religion, work ethic, and quality of education. We need to be aware of where we are and what is happening to what we knew as North America.
This article is based upon legal opinions, current practices, and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.
