Real Estate In Mexico. According to the Mexican Constitution, the direct acquisition of real estate by any and all foreign entities and individuals in what’s referred to as the “restricted zone” is expressly forbidden. This specific zone is comprised of of an area totaling 100 kilometers along the borders, as well as 50 kilometers along the seashore. In this zone, both land and buildings may only be acquired by Mexican companies and individuals.
On the other hand, real estate acquisition by foreigners outside of the “restricted zone” may be freely done as long as they have received prior approval from the Ministry of Foreign Affairs. Real estate transfers must always be arranged in a public deed that has been prepared by a Notary Public before then being filed with the Public Registry of Property that has jurisdiction over the actual property itself.
Here are three of the most common facts regarding real estate transactions in Mexico, including closing costs and taxes.
*In the event that the current property or land owner may not have already done so, a survey should be conducted. This will help to ensure that the surface, bounds, and metes are as accurate as they are stated in the title deed. In regards to the fees required for performing a survey, these will depend on the actual surface that is due to be surveyed.
*Income tax is another important factor, as it accrues on the overall capital gain of the seller, meaning that it is also seller-borne. If the seller is a Mexican citizen, the Notary Public will then be obligated to calculate, as long as withhold from the proceeds and payment of the seller’s income tax on the seller’s behalf. Essentially, prior to the transaction’s closing, the Notary Public will calculate the total amount before then receiving a check from the seller upon closing. In the event that the seller is a corporation, the Notary Public will have no obligation whatsoever to both withhold and calculate income tax.
*Real Estate In Mexico. Another factor to always consider is property transfer tax, which is a state tax, meaning that the overall rates will vary depending on the state. Generally, this type of tax will accrue at a rate of 2% of the higher of either the total value of the real property as has been appraised by the proper Municipal Land Department (or a similar office) or the total amount of the transaction itself. As opposed to VAT, or value added tax, property transfer tax will accrue on the transaction’s total amount. This means that, in other words, there will be absolutely no distinction between constructions and land. Property transfer tax is also borne by the buyer.