Advice From the Accountants at MexTax About Capital Gains

Real estate transactions in Mexico typically involve a profit for the seller, and on that profit, the seller is expected to pay capital gains tax. The tax is classified as ISR (Impuesto Sobre la Renta) and applies as an income tax. Whether you are a foreigner or Mexican national, you will be subject to this tax. However, an experienced Mexican accountant can assess your situation and find the best way to reduce or avoid the capital gains tax.

Before you complete the sale of your property, you are advised to seek the advice of an accountant in Mexico. The assessment of capital gains tax in Mexico can be complicated and will vary in each situation and change over the years. You need an experienced tax accountant who stays on top of the tax laws and who will ensure you receive the best tax break possible.

A few points to consider regarding capital gains tax

• Since the notary is responsible and liable for collecting and transferring the tax to the treasury on residential transactions, you need to investigate how they perceive the exemptions and tax laws. For instance, the law does not require a foreigner property owner to have permanent or temporary resident status, yet the property must be their primary residence so each notary may interpret this law differently.
• Commercial property tax assessments will differ from residential properties. Business owners should consult an accountant to assess deductions and tax obligations.  
• What are your capital tax obligations regarding your country of origin?
• Gain deductions by reviewing home improvements, such as additions, a new roof or amenities, with an accountant and provide proper facturas (official receipts) for all expenses.
• How will the tax break affect co-owners of a property? Can both owners claim the tax break for a primary residence?
• What percent is the capital gains tax? This amount varies greatly and must be reviewed by an accountant to ensure you receive the greatest deduction possible. The tax may be assessed at 25% of the gross sale with no deductions, or range from 1.92% and 35% on the profit, (the purchase price less exemptions and deductions).
• Does your property qualify as a primary residence?

Proving you are selling your primary residence, and that you have resided in the home for a minimum of three years is one way to reduce the capital gains tax.

• The seller must hold an RFC Registro Federal de Contribuyentes (tax registration number), and the property cannot exceed three times the size of the home.
• What if the seller is a non-resident of Mexico without an RFC?  An accountant will review the expenditures to determine if they qualify for tax deductions.

Send an email to contact@mextax.com.mx for a consultation and learn how you can save on your capital gains taxes.