Can Foreigners Buy Property in Mexico? Bank Trusts vs. Corporations
A common question asked of real estate agents is “Can foreigners purchase property in Mexico?” The simple answer is absolutely! Not only is it possible, but it is also quite popular, especially in tourist destinations like the Riviera Maya, Puerto Vallarta, Riviera Nayarit, and Baja California.
Restricted Zones, Individual Buyers, and the Bank Trust
In your research, you may have heard of “restricted zones” in Mexico. These zones are any property within 100 km from Mexico’s international borders and 50 km from the coasts. According to the Mexican constitution, no foreigner may acquire ownership of any land or water within these zones.
However, an amendment was made to the Constitution to allow foreigners to own this land through what is known as a Fideicomiso (or Bank Trust). Foreigners can acquire real estate through a bank trust which grants them the use of the property for 50 years and the trust is renewable every 50 years.
Consider Creating a Corporation to Purchase Multiple Properties
A foreigner can also acquire property by establishing a Mexican corporation. There are a variety of different corporations that can be established so it is necessary to seek professional advice from a lawyer to determine the best option for you and your interests.
A Mexican legal entity has the capacity to acquire real estate in the national territory just as a Mexican citizen would so there is no need to create a bank trust to act as the intermediary. However, Mexican legal entities of any kind have tax and legal obligations they must comply with, such as the provisional payment of taxes on a monthly basis and a definitive payment of taxes on a yearly basis.
Another thing to consider is that a Mexican legal entity can acquire as many real estate properties as it desires with no restrictions to the maximum number. This is an effective way to invest in real estate in Mexico as the company may also deduct expenses related to its operation.
Comparing the Differences
| Bank Trust
|
Corporation
|
|
| Who can create?
|
• LLC/Inc
• Individuals |
• LLC/Inc
• Individuals |
| Costs
|
Average set up costs:
$1,000.00 USD permit $550.00 USD acceptance fee $550.00 USD 1st annual fee (payable in advance)
Maintenance: $550.00 USD annual fee
|
Average set up costs: $2,000.00 – $2,500.00 USD notary fees, rights of registration, notices to Foreign Affairs MinistryMaintenance:$800.00 USD Accountant Fees (Depending on the operations company has)Shareholders meetings (if required)Acquisition notice (when acquiring a real estate property) |
| Turnaround Times
|
Creation of bank trust: 45 calendar days minimum assuming all documentation is complete
Receipt of certified copy: 1-2 weeks after closing date
Receipt of Title: 3-4 months |
Creation of Corporation with tax ID: 30 working days assuming all the documentation is complete.
Receipt of e-signature (e.firma): TBD
Creation of bank account: one month (depending on the financial institution) |
| Yearly Taxes
|
Property tax
|
Property tax
Income tax / Capital gains Sales tax
|
| Rental Policy
|
Long term: Yes
Digital Platforms: ● Nonresidents: 20% income tax, 16% sales tax. ● Temporary or permanent resident with Mexican tax ID: 10% income tax, 8% sales tax up to a maximum income of $300,000.00 MXN/yr |
Long term: Yes
Digital platforms do not withhold taxes from the income obtained through the platform, but will be considered for the declarations that the company has to file. |
| Sale of the property
|
Capital gains/exemption: determined by & payable to notary
Extinguishment of bank trust fees
Real estate commissions |
Capital gains: payable straight to the Mexican tax authority
Real estate commissions |
Deciding Which Option is Best
Before embarking on any major decision when investing internationally, you should consult a qualified and experienced lawyer who can help you make the best decision based on your needs, desires, and abilities. Contact Mexlaw today to speak with one of our highly-experienced real estate attorneys to help you make the best decision for you and your family.