Costs, Taxes, Closing: We hope to provide you clear answers to frequently asked questions
Preconstruction Purchases
If you are buying property from a developer, keep in mind that as the seller, he must issue you a factura (invoice) stating your purchase price. Save this invoice data on a USB in a safe place. You will need it when you or your heirs sell the property.
This evidence of the prior purchase price in the factura CFDI (the name of this invoice) is sent from the notary within 30 days of your purchase. The amount of money shown in the factura becomes your basis for capital gains. You will not have a basis for capital gains if you do not have this invoice; you will pay a higher tax rate.
The escritura alone is not enough evidence for proof of your basis in the property.
Resales
If you are purchasing a resale, the notary will record the basis in the factura (invoice) you receive and you will save the CFDI on a USB to keep in your safe.
When you are the seller, you can be a tax resident to help you in your capital gains savings. You will want a high basis, and a tax strategy from the notary to help you reduce the tax you will pay on your profit. You need deductions and one can be the real estate commission with IVA tax, and as a fiscal resident, you can ask for a reduction of tax as a formal taxpayer in the country.
Fiscal Tax Permanent Resident
You must be a permanent resident with the card issued by Immigration. You must be a tax resident (fiscal) also to be eligible for reduction of tax strategies available under Mexican tax law for ISR (Capital Gains).
You register in the SAT (our IRS), and you receive a formal tax number (RFC) as well as a constancia (description of your ability to be a tax resident). You confirm the property you are selling is your prime residence in Mexico.
Mexican Notaries
They are attorneys with specialized notary law expertise. In a real estate transaction, the notary is responsible for being without any bias toward the buyer and seller. Notaries are neutral to the individuals and accountable to the Mexican government. They are not your attorney advocate for you as a buyer or a seller.
Closing Fees for Buyers and Sellers
Clients ask about their closing fees. Are they included in the price of the property? No.
Who will pay them when buying and selling a home in Mexico? We follow Mexican law, and sellers pay commissions if applicable, trust cancelation, or assumption if the property is in a trust, as well as the cost to remove sellers from the Foreign Permit Registry. If a seller is going to give a POA [Power of Attorney] (I do not recommend doing this in Mexico), the seller will pay the cost to the notary. Other closing fees such as title search, no liens, property tax transfer fee, notary services, and registration in the state where the property is located, etc., are the buyer’s expense.
A notary is required to close the transaction. You should choose a reputable attorney as your advocate and a professional, experienced real estate agent. If you want to have an escrow, it is essential to understand there is no legal requirement for escrow; therefore, in this market of the Bay of Banderas, there are three or four dependable escrow companies. You must discuss who your notary, closing coordinator, or escrow company should be. It is common to have negotiations by the agents working for their clients to determine the best choices. Sellers who have gone to the trouble to know their capital gains before closing, can require a certain notary if their choice of notary has given them an acceptable cost of capital gains.
A public notary in the USA is nothing like a Mexican notary.
US notaries are not responsible for the legality of the document’s content and only certify the signer’s identity.
In Latin American countries, the notario is a high-ranking official with considerable legal skills and training. These notaries draft documents, provide notary legal advice, settle disputes, and archive important documents. A foreign document is not legal in Mexico unless the notary has witnessed it. A USA notary cannot provide any of those services.
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.
