Taxation in Mexico
What taxes am I subject to by investing in Mexico?
Buying
- Acquisitions Tax: Paid on the sale price of a property by the buyer. Normally amounts to about 2% of the sales price.
- VAT: There is no VAT payable on the purchase of residential property in Mexico. Commercial property transactions are subject to VAT.
- Appraisal Tax: The Tax Authority MAY carry out an commercial appraisal of your property after you purchase it. If the appraisal value is more than 10% higher than the price paid for the property a 20% tax will be payable on the difference.
Selling
Income Tax on Property Gains: If you have owned a property as a second home for more than 2 years you will be subject to income tax on the property. You will have two options here: 1) to pay 20% on the gross amount of the transaction or 2) pay 40% on the capital gain.
"Predial"
Much like what we know as "Council Tax" the "Predial" is payable annually and is assessed by the Notary. This tax must be paid in January 1st or soon after and you will not receive a bill. This tax, the Predial is very low (even bordering on insignificant) when compared to property taxes in Europe or the annual rental value of the property. This is one of the reasons why the cost of property ownership in the Mexico is so low.