by Kevin Graham, Costa Maya Living (July 2014)
In January some new laws regarding real estate were enacted and, just like every new law, they took some time to be put into place. These laws all benefit foreigners to purchase and own property here. As a real estate professional, it's my duty to share this information with all our clients. If it all seems a little overwhelming ... don't worry, I am here to guide you through the process along with excellent English-speaking attorneys for whom my clients have given the highest recommendations.
As a review, foreigners can own property anywhere in Mexico. All of the Mexican Caribbean coast falls into a "Restricted Zone" and it will have to be held with a Fideicomiso (Bank Trust) OR a Mexican Corporation. The Restricted Zone is defined as any property that lies within 50 KM from the coast. A Fideicomiso is a bank trust that holds title to a property in the Restricted Zone with the foreigner as the beneficiary.
There has been a move to TOTALLY remove the requirement to hold property in bank trust or corporation but it still lacks the approval of a second branch of government. This still could take years, and when that happens it's totally reasonable to expect prices to rise significantly. All the signs are pointing to purchase now while prices are so very affordable and owning property here is totally safe.
Because of the extent of this information, this issue will only cover the changes in Tax Law for 2014. If you would like a copy of the first two parts of this series covering Bank Trusts and Mexican Corporation, just send me an email.
Taxes are levied on income just like any other country including the use of real estate and the sale of real estate. The last reform concerning the "Cedular Tax" was published on February 19, 2014. Any person who sells a property is responsible to pay the Cedular Tax. Sales of real estate incur the Cedular Tax with the following exception: when the house is used as a home (for residential use). The owner will have to prove the use of the real estate as a residential home with some sort of bill such as Internet, satellite service or electric (if it's available).
Before the reform, residential homes were not taxed even if the seller didn't live in the house, but now it is restricted to the home of the sellers.
The Cedular Tax is 2% in the state of Quintana Roo and 5% in the state of Yucatán (another great reason to buy in Costa Maya!).
The other tax is called the CAPITAL GAIN TAX OR INCOME TAX (ISR). There is an exception of this tax for residential homes for the sale of a home of less than $275,341.63 for a residential home.
For the sale of a home for more than $275,341.63 the Seller is responsible to pay income tax for the amount on top of that amount.
This may sound a little confusing now but the attorneys we work with here will help you save all that is possible when it's time to sell. In any case the amount is so much lower than you'd pay in the U.S. or Canada.