As a courtesy we provide this information as a "brief overview" in order for the public to better understand Real Estate In Mexico as it relates to foreign ownership.
When considering purchasing Real Estate in Mexico it is important to utilize a Registered Real Estate Professional, someone who is a member of AMPI and licensed (where available). AMPI is the "Asociacion Mexicana de Profesionales Inmobiliarios" - The Mexican Association of Real Estate Professionals. AMPI is affiliated with and the equivalent of NAR-National Association of Realtors in the USA and CREA- Canadian Real Estate Association in Canada, whose members work together under a strict code of ethics.
Real Estate licensing requirements do exist in certain states throughout Mexico. The state of Quintana Roo has enacted a Real Estate Registry and Licensing Law that is set for implementation starting 2016. Any person involved in the selling or offering of a property for sale or rent, is required to be registered and licensed by the State of Quintana Roo.
1. Is a foreigner able to own property in Mexico? The answer is YES! It is a common misconception that foreigners cannot own Real Estate in Mexico; in realty it's possible to do so. For residential purposes inside the Restricted Zone, ownership through a Bank Trust (Fideicomiso in spanish) is required. The "Restricted Zone" is described below.
Properties anywhere outside the restricted zone can be owned on a direct ownership fee-simple basis; foreign (non-Mexican) direct ownership of property is both legal and common.
An alternative form of ownership is to purchase non-residential (in use) property through a Mexican corporation. Corporations can be, under certain conditions, 100% foreign-owned. It is important to consult a Realtor on the main use and purpose of the type of property you are interested in, in order to review the appropriate options to consider in taking title.
2. Where is Mexico's "restricted zone"? The "restricted zone" is defined as any real estate that is within 30.5 miles (50 kilometers) of Mexico's coast, or within 61 miles (100 kilometers) of Mexico's borders with other nations (Guatemala, Belize and the USA). Within this zone non-Mexicans can own real estate, but are required by Mexico's Foreign Investment Law to do so through a bank trust.
**Why did Mexico establish the restricted zone? The restricted zone is enshrined in Article 27 of the Mexican Constitution, and was designed to protect Mexico from possible invasions. While this is certainly a remote possibility today, it is important to remember that Mexico has experienced several invasions, wars, and tremendous losses of territory in its history. The restricted zone is really nothing more than a legacy of that history. From the non-Mexican investor's perspective, the important thing to remember is that Mexico's Foreign Investment Law was designed to facilitate the safe acquisition of coastal and border properties by non-Mexicans, and specifically designed to protect the rights of foreign owners.
3. What is a Bank Trust? Fideicomiso, in Spanish, means Bank Trust. Foreigners can acquire absolute ownership rights to property in Mexico’s formerly restricted zones (borders and beaches) through a Fideicomiso. This trust system of ownership was designed specifically as a way for non-mexican nationals to own property. It is sanctioned by the Mexican government, provided for under the Mexican Constitution, and is secured by the Central Bank of Mexico.
It is irrevocable ownership set in 50-year increments, perpetually renewable, and is transferable. It is NOT a lease. Leases cannot be sold, transferred, inherited, willed, or mortgaged; a Fideicomiso can be all of these. When the Fideicomiso/Bank Trust is formed in an authorized bank, the title to the property is delivered to the bank who then becomes the Trustee. The foreign buyer is designated as the Beneficiary (owner) of the Trust. The bank serves as the owner’s employee, and operates solely under the instructions of the Beneficiary.
The Beneficiary has total control over the Trust, retains the use and control of the property, and makes all the investment decisions. The rights to use, enjoy, sell, transfer, inherit, will, and mortgage the property is the Beneficiary’s right, the same as in fee simple ownership. It is your Trust and is not the property of the government or the bank.
4. Is a Mexico Bank Trust a form of Lease? No. A bank trust is not a lease, and confers on the trust-holder the same rights as "ownership" in the United States or Canada.
5. Are Mexico Bank Trusts safe? Yes! The bank simply holds the deed to the property for you or your assignees and beneficiaries. Your property is not part of the bank's assets, and cannot be subject to bankruptcy, lien, or attached in any way to bank obligations. As the beneficiary to a bank trust, the property owner has the exclusive ability to make all decisions and to direct all actions regarding the property. The property can be bought and sold, bequeathed and inherited, ONLY with the direction of the trust beneficiary.
6. Will I be able to will my property in Mexico to my children and grandchildren? Yes. The most common and longest term for a trust is 50 years, renewable for additional 50 year period. In fact, trusts are renewable at any time by simple application. It was never the intent that trust-held properties pass to the government at the end of the trust period, which has been a common misconception of purchasers from the United States and Canada. What happens after 100 years? A new bank trust will be formed to hold the assets for another 100 years, and same rules will apply.
7. We have been told that a "Notario" will be involved in our purchase and title process. What is a Notario?
The Notario Publico is a government appointed lawyer who processes and certifies all real estate and corporate transactions. The Notario is ultimately responsible to the government for the collection of all taxes involved. It is extremely important to remember that a Notario cannot represent you in your real estate transaction; he may offer advice, but he does not, and can not, "represent" you.
8. Closing Costs. It is common practice that the buyer pays the transfer or acquisition tax as well as all other closing costs, including the Notario fees and expenses, and the seller pay his capital gains tax and the real estate sales person commission. The rest of the closing costs, which exclude the transfer cost mentioned above, may vary from 4-6% of the sale value, or more as the price of the property decreases, and depending on the particular State and cost of the Bank Trust / Fideicomiso. There is a charge by the bank to the person desiring the Fideicomiso for the preparation of the agreement and establishment of the trust. In addition, the bank charges an annual fee to cover its services as a trustee. The applicable taxes and fees applied always depend on the area and type of property you are looking to acquire. Be sure to understand the types closing costs related to the type of property and range of value on the properties you are considering a purchase on.
9. Capital Gains Tax. “In Mexico, the concept of capital gains tax is applied differently than in the United States. The gain from the sale of the property is considered normal income, and is taxed at a rate of up to *28% (as stated in the law).” The Notario will withhold the calculated gain after deductions, and forward it to the Mexican tax authorities. The seller may then deduct this amount against their annual tax return, which becomes an adjustable tax credit in the United States.
We urge you to consider the wonderful lifestyle and economic advantages of Mexican property ownership. Please do not hesitate to contact us so that we can be of service to you during your discovery of Real Estate in Mexico.