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Understanding Mexican Immigration and Tax Requirements  

Homes in Puerto Vallarta
Credit: Proyector | Deviantart

A recent discussion with a seller made me realize understanding Mexican immigration and tax requirements is very important for all buyers and sellers of real estate in Mexico.

In this local real estate market, both Mexican and foreign realtors should be registered to do business and pay taxes to the Mexican IRS, Hacienda.  However, there are people who choose not to be registered and illegally earn income they do not report.

It’s very important that the real estate agent who lists your property be legal and professional. You need to know if he/she has the knowledge and experience to assist you. The only way you will know is to ask questions and do your own investigation.

Selling real estate is a job that all Mexican nationals can do, whether or not they have the education or training. An expat agent should have written permission from Immigration (INM) to sell real estate in Mexico. His/her visa should verify he/she is legally able to work in this business activity.

If a Mexican national or expat is not registered with a Mexican ID or immigration visa, there is a good chance they are not registered in the tax system.  If their income is not reported, you, as a seller, cannot use the expense of a commission as a deduction against your capital gains tax. These unregistered agents are called “coyotes.”

A coyote may be your neighbor who lives here part-time or is retired. He/she may expect a commission if he/she sends you or your agent a buyer. When an agent from the U.S. or Canada sends us a referral, we explain that we can pay a certain percentage and must withhold tax. (It is rare but possible that a referring real estate agent outside of Mexico is able to provide a Mexican tax receipt.) The professional referring agent usually understands and accepts a deduction for tax before receiving his/her net amount. These professional agents are aware of real estate rules and ethics. We are very appreciative of their referrals and professional understanding of the cost of doing business.

So, why should the person who can’t get a referral fee in the U.S. or Canada because he/she is not a real estate agent there, charge a fee in Mexico and pocket it without paying any tax? He/she is working illegally and can be deported.

When you are looking for someone to help you buy or sell a home in Mexico, do your due diligence. There are many professional realtors in the Bay of Banderas area and the rest of Mexico who know the laws and are very experienced in the buying and selling of property. Don’t risk your money on illegal coyotes.

This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas.  I recommend that each potential buyer or seller of Mexican real estate conduct his/her own due diligence and review.