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Closing Costs

Closing Costs in Yucatan
When the time comes to sell your house or real estate property in Mexico, as in all things, it is best to be prepared. While it is nearly impossible to know every contingency that can come up during the process of selling the property, the following information can help you estimate how much money the seller and the buyer will need to pay in closing costs of a Mexican property.

Buyers of the property will usually have the lion’s share of the closing costs in a transaction.  A foreigner buying property within 50 kilometers of the coast or 100 kilometers of a border will have to either purchase within a fideicomiso (bank trust) or move the property into a fideicomiso.  Setting up a fideicomiso costs about the same as assuming the ownership within an existing one. The setup fees for a fideicomiso will be approximately $1750 USD, with about $650 USD going to the bank, and the remainder going to the Mexican government. In addition, the fideicomiso costs for yearly maintenance is about $650 USD per year (paid to the bank).

In addition, the buyer of the property pays the attorney who oversees the sale. In Merida, Yucatan, this fee runs about $1800 USD.

The buyer is responsible for the Purchase Tax or impuesto de adquisicion.  This cost is from 2.5% to 6.5% of the purchase price in most of Merida, but at the Yucatan Gulf Coast, the tax rises from 3.5% for places like Progreso and Chelem, up to 4% for Telchac Puerto.

Lastly, the buyer will also be responsible for various fees related to recording the sales and appraising the property. These fees are approximately $600 USD.

An Important Issue
The Purchase Tax and other taxes discussed below are based on the value of the property. Other fees, such as lawyer’s fees and bank fees, may also be based on the purchase price. Therefore, the stated “purchase price” is an important factor. As you can imagine, the seller is best served by keeping the stated purchase price as low as possible. You might imagine that the buyer would be served by that as well. However, the buyer must keep in mind the eventual sale of that same property. If the buyer’s purchase price is very low when they buy the property, they may find themselves paying a higher amount of capital gains tax when they go to sell the property. Your attorney and notario will work with the seller and the buyer to establish the correct price to be stated in all paperwork.

As a seller of real estate property, it is important to establish the correct sort of residency visa in Mexico in order to avoid Capital gains taxes on the sale of your property. If you do not already have a residency visa, you can apply for a Temporary Residency Visa, which will require you to stay in Mexico for at least a month while the paperwork is processed. You can find a list of the required paperwork to apply for this visa on the Mexican Embassy’s websites for Canada or the United States, or for your country.

After you have obtained an active visa, you must then obtain and RFC (Registro Federal de Contribuyentes), which is basically your Tax ID in Mexico.  You must then obtain a factura of your electricity bill (not just a bill, but one labeled specifically as a factura) from CFE. You will need to have them insert your legal name and your RFC number on the electricity factura at least 2 months prior to your agreed upon closing date.  By getting your temporary residence visa, you are exempt from both ISR (Impuesto Sobre la Renta) and Capital Gains tax on this sale. Keep in mind that you are only exempt in this way for ONE property sale during the period of THREE years.

The other tax that a seller must pay is the Impuesto Cedular. This tax will be 5% of the value shown on the new deed as the sales price. This tax is collected by your attorney/Notario at closing. 

Commercial Property
If the property involved is neither land nor a personal residence, it is considered commercial property and is usually owned by a corporation. As such, the buyer is subject to an additional tax, called a Impuesto de Valor Adicional  or IVA (Value Added Tax).  This tax is 16% of the appraised value of any construction on the land and is due regardless of your visa.

Not a Resident?
If you are not a resident and cannot get a temporary visa, you will be required to pay Capital Gains tax on the difference between your original “purchase price” (current assessed value) of your property as stated in your fideicomiso and the stated sales price (new assessed value) as recorded at the transfer.

Owning Through a Corporation
If you own the property through a corporation, you will already undoubtedly have both a notario (lawyer) and an accountant who are involved.  They will help you determine the best way to sell the property. As the buyer of this property, it would be wise to employ your own lawyer and accountant to advise you of your best strategy as well. The process will involve either transferring shares of the corporation or closing the corporation, both process which cost money and will have to be calculated by the professionals involved.


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