I’m going back to basics again with facts to know as a buyer or seller of Mexican real estate since so many of our readers are aspiring expats who may want to purchase a home in Mexico when they move here or want a second home to spend part of the year in Mexico.
No matter what your situation is, here are the facts to know as a buyer or seller of Mexican real estate.
1. First, KYC (Know Your Customer) original forms are required from buyers and sellers by the escrow company and the notary for further reporting to the government.
2. If you are a buyer, the notary has to send you by email an xml, and a pdf of that xml, any property purchased over US$38,500. You must keep the xml file to use when the property is sold in order to prove what you paid for the property. SAT, or the Mexican IRS, can identify your transaction with the xml file to prove what you declare. The pdf is a copy of what the code says so you can know if the true price has been declared. You must keep both of these records in a safe place, and you should keep backups on other devices. If you do not have the xml file or it becomes corrupted, you will not be able to claim the entire price you paid for the home for future tax consequences upon resale.
3. If you are a seller, the notary has to send to you by email an electronic factura that shows the amount of ISR or capital gains tax paid. You should be able to deduct this expense on your U.S. return to offset U.S. taxes. Check with your accountant. The notary should also send a receipt if he/she charged (or a third-party hired by the notary) you for a strategy to lower the ISR. This receipt should be turned in by Americans to your U.S. accountant to show as an expense. Currently Mexicans cannot use the receipt for strategy since it is not a factura or formal receipt.
4. You, as a foreign buyer of real estate in Mexico, should have competent legal counsel and agent. Be sure there is no conflict of interest to your detriment. The notario does not represent an individual to the transaction in which he/she represents the state and federal government of Mexico. He/she does not represent you at your closing.
5. Notaries and real estate agents must report both parties to the sale (buyer and seller) to SAT for any closed transaction of a property over US$38,500 by the 17th of the month following the occurrence. Reports include what is noted in the escritura: seller and buyer identification, details of the closing price, identification of the new escritura and filing information in the public registry.
As an owner or buyer, you should be familiar with this information and understand well the terms factura, escritura and fideicomiso trust.
This article is based on the legal opinions of Benjamin Rosen, Rubio Villegas Associates and Jose Maria Gallardo, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller conduct his/her own due diligence and review.