Does anybody know how Capital Gains Tax is calculated by Mexico for real estate profit made by us - expats - when selling our retirement home in Mexico?
Good question. Mind if I move it over to the Life in Cancun forum? ex-pats there and other locals may have a good idea...
There was a law change a while back. Prior, the buyer and seller used to do a fiddle, to keep the reported value low, to allow the seller to reduce the CGT payment. The buyer was all for it, because they expected to do the same when they re-sold. Notaries were complicit. Now, IIRC, the Notary is jointly liable with the seller to ensure the correct tax is paid (the Notary actually makes the payment), and Notaries must file a monthly report to Hacienda. So if you bought a property under the old "fiddle the value" regime where the declared value was a lot less that what the property was really worth, and you're selling now, you're in for a whallop. Best thing to do is find a reliable, trustworth notary (and good luck in that dept!), and get the good oil from them. Property used by the owner as their primary residence for 2 years are excluded from CGT. This can't apply to non-Mexicans, as coastline property must be owned by a bank trust. Foreigners resident in Mexico in inland areas where trusts aren't required are exempt the CGT if they're considered resident by the Hacienda (more than 183 days per year inside Mexico)
If you do have a coastal property and then apply for the FM3 which you then hold for 5 years is the CGT then waived?
You can have an FM3 and not be considered a resident by Hacienda, I know several people in that situation. They don't live here but need permission to work here (or they own companies here). If you get your FM3 as a rentista then after 5 years you can apply for citizenship, and once you are a citizen you won't need the Fideocomiso any longer, you will be able to own coastal property outright. If your FM3 is based on marriage to a Mexican or on having a Mexican child you can become a citizen after 3 years. I checked with an experienced local real estate agent about this whole cap gains issue and he said that even now most people do not put the actual value of the property on the papers when they close on a sale. In 5 years he's only had 1 client put the actual value of the property and pay the proper taxes. He also said that all of the notaries he's ever dealt with in QR are happy to put a lower value on the papers. So if there are new rules they don't seem to be having a lot of effect on what people are actually doing.
I was going to do the retirement FM3 but after reading the fun people having been having recently trying to get them registered I may wait awhile since I'm not down there full time yet. I would be registering mine in PDC so I don't know if the Migracion office there is any easier than the one in Cancun. I was hoping to get this whole thing taken care of this summer. Thanks for your answer.
