The Comprobantes Fiscal Digital by Internet, or CFDI, is an electronic invoice format mandated in Mexico and used in certain Latin American countries. It serves as a digital tax receipt that provides all the details of a business transaction: the goods or services provided, their costs, and calculated taxes.
As an expat with a trust in the restricted zone there is a particular reason to know how to handle the sale of your property or what to tell your heirs (secondary beneficiaries).
If you closed on your trust in 2014 and now going forward, you have an important issue to be resolved.
This story begins with the day you closed at the notary office. You were told something about the notary was going to send in a few weeks this special factura.
CFDI will have two attachments, one a PDF and the other an XML file, which you need to download and save on your computer, and a USB for keeping with your escritura (trust deed) in a safe place.
The PDF will tell you what the XML file is supposed to say. What is this important information?
This factura should say what you paid for the property in Mexican pesos. The amount you paid is also in your escritura, but NOW and since 2014, the only way you can show your purchase price, which becomes your basis for tax purposes, with the amount in the XML file you have saved. And, the PDF is supposed to give you the correct price in pesos you paid that important day in 2014 or since then.
Why is this so important? First, find the CFDI which has the two attachments, not the closing costs or something else. You should be able to deduct the transfer tax you paid at closing when you sell. So, you need as many deductions as you can find.
The scary thing is expats now wanting to sell, find out they have no basis if there is any mistake in the XML file.
YOU NEED TO FIND YOUR FACTURA WITH THE XML FILE AND PDF ATTACHMENTS.
If the correct amount you paid is not in the code, you will have a lot of trouble getting sufficient deductions to save on your capital gains.
In 2014, under pressure from the US, the government agreed to follow very restrictive anti-money laundering laws. But also to protect the price you paid, the notaries now do not use the price in the escritura, in case it is tainted.
It is a big surprise for some unfortunate expats because the rule that the only proof of price paid is in an XML file will make it impossible for them to change.
Until the government accepts and wants to have redress for this unfortunate mistake, sellers will be paying higher capital gains than they should.
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.
