Estate costs: Property taxes in Mexico and property purchase costs

When you buy a property in Mexico you will have to pay additional agent fees and taxes on your purchase. Although these associated estate costs are a lot lower in Mexico than in many other countries, you should still take them into account when evaluating your total property cost.

Estate costs

Property tax in Mexico

Local property taxes in Mexico are called predial and are paid annually. The predial depends on the catastro value of your property, which is used by the public notary to access the value of a property for property tax. The catastro values are set by the municipality without any inspection of the property, and are usually only a fraction of the commercial property value. This is one of the reasons why the local property tax in Mexico is extremely low compared to other countries.

Costs of buying property in Mexico

When buying a property in Mexico you will be faced with additional one-off fees and taxes that go together with an estate purchase. These include the following:

Acquisition tax: The acquisition tax is paid on the sales value of a property and is about 2% of the sales value depending on the state in which you buy. This tax is paid whenever a property is sold, transferred, donated, placed into trust, split off or merged.

VAT (Value added tax): VAT does not apply to residential property sales in Mexico. Commercial property sales are subject to VAT in Mexico (in addition to the acquisition tax).

Appraisal Tax: In some cases the tax authorities might decide to appraise your property after the purchase. If the appraisal value exceeds the price you paid for the property, you will have to pay 20% on the difference between the two amounts.

Registration fee: Registering your property and updating public records costs the buyer a public registry fee of 1.3% of the transaction value.

Public notary fees: Notary fees amount to 1.5% of the total property value in Mexico. This does not yet include the cost of any official property valuations.

Bank Trust (fideocomiso): Foreigners buying a property within the restricted zones (50km from the coast or 100km from the border) need to set up a bank trust in order to do so. Prices vary from bank to bank, so comparing is worthwhile. Besides the set-up fee for the trust you will also have to pay annual service fees of around US$1000-2000, which include the filing of annual documents by the bank.

Attorney Fees: If you hire a lawyer for your property purchase you will need to calculate the fees for his services as well. Try to negotiate these fees in advance to avoid unpleasant surprises.

Property surveys: In some cases you might want to undertake a land and/or building survey of the property you intend to buy. The cost will depend on the size and type of property and the complexity of the survey.

Foreign Office Permit: As a foreign buyer you need to seek permission from the foreign secretary’s office to buy real estate in Mexico. This permit will cost you around US$150.

Service Fees: If you are buying a property within a gated community you also need to calculate the communal service fees. These depend on the size of your property and the services provided.

Title Insurance: When buying property in Mexico it is often recommended to take out a title insurance which provides protection in the event of unforeseen claims on your property. Title insurance rates vary but are usually around 5% of the property value.

Costs of selling property in Mexico

When selling a residential property in Mexico you will have to pay a heavy income tax on property gains if you have not lived in the property for at least the last 2 years. In this case you can choose to pay either 20% of the total sales prices or 40% of the net profit obtained from the property. The idea of these tax rates is to limit short-term speculation on the property market. Commercial property sales are always taxed at these rates.

If the sale is handled by an estate agent you will have to pay the agent fees as well. Estate agents in Mexico usually charge 4-8% of the sales value – you should clarify this beforehand. You will also have to pay IVA (VAT) on the agent fees.

Work permits

How to get a Mexican work permit

In order to work in Mexico you need a Mexican work permit from the Institute of Immigration (Instituto Nacional de Migración – INM). With the work permit you can apply for a residence visa.

Work permits

Since a change in legislation in 2012, you need to have a job offer or work contract from a company registered in Mexico to apply for a work permit. The company has to apply for the work permit with the INM and you can stay in Mexico on a tourist visa until you are cited to collect your visa in the Mexican consulate of your home country. You then have to leave Mexico and pass an interview at the consulate abroad, after which you get your work permit.

For the application, the company has to submit various documents, e.g. a proof of tax payments, a list of employees and their nationalities, the personal identification of a designated representative. Furthermore, a copy of your passport or other ID has to be submitted.

Once the application is accepted, the INM will process the case and make a decision within 20 days. If the application is approved by the INM you will have to go to your Mexican consulate and pass an interview to collect your work permit.

After your arrival in Mexico you and your family members must register at the INM within 30 days. Your spouse and children will normally get dependant visas but they are not automatically granted a work permit. If your spouse wants to work in Mexico he or she will have to apply for their own work permit separately.

Can you convert your visitor status to a work status in Mexico?

Technically, no. Foreigners with a visitor status can have a company they want to work for apply for a Mexican work permit with the National Institute of Migration (Instituto Nacional de Migración). While the application is processed, visitors can stay in Mexico until they are cited by said Institute to collect the permit at the consulate of their home country. They have to leave Mexico and collect the permit. Only after that can you apply for a residence visa.

Citizenship

How to obtain Mexican nationality

Before you can apply for Mexican citizenship you need to be able to prove that you have legally resided in Mexico for one, two or five years (depending on your situation) prior to application.

Citizenship

With the growth of Mexico as an expat retirement destination, many people may choose to take their long-term residency to the next level: naturalisation. Acquiring Mexican citizenship is a long process, and nobody can apply if they have not yet been granted the permanent resident status. Exceptions apply to this, like marriage to a Mexican national, which may allow you to apply for citizenship throughout a shorter period (this is subject to your marriage being registered in Mexico).

Note that citizenship applications are not handled by the Immigration Office, but by the Secretaria de Relaciones Exteriores (SRE) . The naturalisation process is quite simple in Mexico if you have already been granted your permanent residency.

According to Mexican law every citizen must be able to speak Spanish and have a basic knowledge of Mexican history and culture. You will therefore be asked to undertake an exam in order to acquire Mexican citizenship.

Although almost every country today allows dual or multiple citizenships, make sure you double check with both your country of origin and the Mexican law to make sure you will not have to surrender your previous citizenship.

Rights of a naturalised citizen

Full naturalisation entitles you to most rights and benefits of a Mexican national (i.e. the right to live, work, claim state benefits, pay taxes and vote or be elected in all elections). However, as a naturalized citizen, you are not allowed to serve in certain positions (mostly in the government) such as policeman, crew-member of Mexican vessels or aircrafts, President of the Republic, Member of Congress, enroll in the military, amongst many others.

It’s important to also keep in mind that once you obtain Mexican citizenship, your consulate can no longer provide protection. Should you find yourself involved in any problems with authorities, you will be dealt with as a Mexican citizen and your consulate cannot step in to help.

Lastly, keep in mind that the process, documentation and requirements will be defined by different factors: your links to the country, marriage, son of a Mexican citizen born abroad, whether you have given birth to a child on Mexican soil, if you are of Latin American descent, or how long you have resided in the country.

Although the process is quite simple and straightforward, we recommend you find a good immigration lawyer to help you through the process.

How long does it take?

The naturalisation process takes about one year, or even longer (there have been cases of up to five years). Once the application has been reviewed, you will be asked to take a multiple choice exam for which you need to demonstrate a basic knowledge of Spanish knowledge.

Once you have received your Mexican citizenship, it is important that you apply for your Mexican passport and more importantly your INE card (Instituto Nacional Electoral or Electoral National Institute), formerly called IFE, but still colloquially referred to as it.


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