info on capital gains tax
Posted by eileen zack on August 7, 2010, 10:41 am
I just read this on the SMA board and thought people might be interested. I guess I should learn how to do links so the whole article wouldn't be taking up so much room. I will learn, but in the meantime... |
Story by Carole Sinclair of Walfre Real Estate
With the recent world financial crisis, México, just as other
countries, is looking for ways to collect more taxes so there have been
many changes and a lot of confusion recently so I am attempting to give
the best information possible.
To begin with, the Notary Public in México has the legal obligation
and responsibility to pay the taxes on a real estate transaction on
behalf of both the buyer and seller. That is: the acquisition tax for
the buyer and the capital gains tax for the seller. Until recently, on
the sale of a home which was your residence, the seller has been exempt
from paying the capital gain if he or she could provide utility bills in
their name dating back six months from the date of the sale. With
non-Mexican sellers the law was not very clear as to the definition of a
resident so most notaries in Mazatlán accepted the Fm3 document which
was available from the local immigration office.
In 2010 there were a number of changes in the laws about capital gains
tax and on May 4, 2010 a letter was sent to the President of the Mexican
Notaries Association from the SAT (which is the Mexican IRS) to clarify
many issues to do with the capital gain. One of these issues was the
definition of residency of a non-Mexican citizen.
On April 30, 2010 the Mexican Immigration Institution launched a series
of changes in an effort to modernize systems. So now the Fm3 will be
referred to as a non–immigrant or "no-inmigrante" status. An
Fm2 will be referred to as an immigrant permit or "inmigrante"
and the landed immigrant status will be referred to as
"inmigrado." To make a long story short, non–Mexican
citizens will be exempt from the tax only if they have the
"inmigrante" or "inmigrado" status.
From what I have been told at the local immigration office you need to
have had the non-immigrant status for a year before you can apply for
the immigrant status. This one year period would be waived if you have
family ties with a Mexican citizen. One issue that is not clear at this
time is how long you must have the Fm2 to qualify for the exemption.
This may depend on your notary. All of the new information and
applications can be found on line at www.inami.gob. mx
So if you don't have an "inmigrante" or "inmigrado"
status in México you will need to know the tax implications. The
Capital Gain is 30% of the gain. To get this information the notary will
send the necessary information to a tax accountant to calculate the
amount. This information will include the date of your purchase and the
value which was declared on your deed when you purchased the property.
It will mention deductions such as the acquisitions tax you paid when
you bought and the public registry fee and the notary's fee if you
have the proper fiscal receipt for this expense. The realtor's
commission is also deductible but again, you will also need to provide
an official receipt. Another suggestion if you are selling a furnished
property is to allocate a separate value to the furnishings and
accessories so they will not be considered part of the Real Property.
If you are buying a home which you are planning to remodel, it is very
important to find out exactly what will be deductible when you sell and
how to get the proper receipts to prove these expenses. Also many
expenses may be considered general maintenance and will not be
If you sell a home that is in the price range of $500,000US or more,
there is an added requirement to getting the full exemption. If you have
lived in the property for 5 years and can prove it with utility bills
etc, and have the residency requirement, you get the full exemption. If
you have lived in the property less than 5 years, you get an exemption
on the amount of 1,500,000 UDIs* which is roughly $6,500,000 pesos. Over
that amount you will be taxed on the difference.
So for now, the best advice is to plan ahead so you won't have any
surprises when you sell.
*The UDI "Unidad de Inversion" is a unit of value which is
linked to inflation and can be converted to pesos. The value of the UDI
is posted daily on the Mexican Bank Web Pages.
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