Capital Gains Tax
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.
When you sign a listing agreement with us, we will work with our trusted notario to provide you with your own Capital Gains Tax estimate. It will include all of the possible deductions and give you a clear idea of how much if any, tax you will owe.
A few points to consider regarding capital gains tax
Sales commissions and other expenses related to the sale of the property are 100% deductible against this tax!
Home improvements, such as additions, a new roof, or amenities, are deductible but only if you provide proper facturas (official receipts) for all expenses.
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.
What percent is the capital gains tax?
This amount varies greatly and must be reviewed by a notario 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.