Costs and Taxes When Buying Property in Mexico

When you purchase your property in Mexico, you will need to account for a range of fees and taxes in addition to the agreed purchase price.

These vary depending on the type of property and what state it’s situated in, and the Notary Public processing the legal transfer will advise you on which costs and taxes are applicable as part of your transaction.

Closing costs you need to budget for when you buy a house in Mexico

Here is a list of the principal closing costs you’ll need to take into account.  There might be other fees, but these are the main ones most buyers face when they purchase a residential home in Mexico.

Property acquisition tax

This tax is paid on the sale value of the property and is typically equivalent to about 2-4% of the sales value, depending on the Mexican state in which you buy. (Some states are raising this rate that can be as much as 6.5%.) This tax is paid whether the property is sold, transferred, donated, placed into trust, split-off, or merged.

Sales tax (IVA) on residential property

Mexico’s sales tax us known as IVA that stands for Impuesto al Valor Añadido (Value Added Tax).  No IVA is payable on residential property.  Commercial property transactions are liable to IVA at the current rate in addition to the acquisitions tax.

Property appraisal tax

The tax authority might choose to perform a commercial appraisal (audit) of the property after you purchase it. If the appraisal value is greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts.

Federal Register registration fee

When purchasing a home, the buyer pays a fee (based on the value of the transaction) to have the public records updated and the legal Title Deed (re)issued. The rates vary depending on what Mexican state you buy in, and you should budget for about 2-4% of the sales value.

If you purchase property on agrarian terms you don’t need to pay this, but you might have to pay a similar fee to the local comuneros as part of the paperwork involved in that transaction.

Fees for Public Notary services

Buyers are required to pay fees to the Notary Public for services provided to transact the legal matters related to the sale. Notary fees are based on the transaction value and vary by state.

The buyer gets to choose which Notary Public to use, so it makes sense to check several Notaries locally for their current rates —and if you are working with a realty agent ask for their recommendation too. Typically, Notary Public fees work out to between 4%-7% of the sales value.

Fees for the property trust, fideicomiso, if relevant

If you purchase property within the 50km/100km ‘restricted’ zones (near coasts and land borders), you will need to pay a local bank to set up and manage a property trust for you, and there are government fees to pay as well.

  • Banks charge around US$1,000 equivalent in Mexican pesos to set-up and manage the trust through the bank.
  • In addition to the bank fee, there is a one-time government fee to pay to set-up the property trust permit in Mexico, amounting to about an additional US$1,000.
  • The bank makes an annual service charge amounting to between US$1,000-$2,000 equivalent in Mexican pesos. The annual service fee covers trust administration and certain legal obligations (e.g., the filing of necessary documents annually) by the bank on your behalf.
  • If you want to expand or alter the trust, e.g., add or remove beneficiaries, there are additional bank administration fees and government fees to do this.
  • When you sell the property, you will need to cancel the trust, and the bank charges around US$1,000 fee to do this.

Some people choose to place their property into a trust even if it’s not situated in the restricted zone as part of their estate planning preparations. You should seek professional financial planning advice about whether this is appropriate in your circumstances.

Foreign national acquisition permit

If you are not a Mexican national (natural or naturalized) and depending on which Mexican state the property or land is situated in, the transaction may require a special permit that grants a foreign national the right to hold title deed of a property logged in their name on the Federal Register.

Check with your Notary Public, who advise you if this is necessary in your case and will usually manage the filing on your behalf if it is.

If you need this permit, its cost will add around US$300 government administration fee to your closing costs. If you hire a Notary Public or attorney to file this on your behalf, you will have those costs to pay in addition to the government fee.

Other attorney fees

If you hire a lawyer in addition to the Notary Public (the legal process must be filed through a Notary Public), you will also need to pay they lawyer additional fees for services they undertake on your behalf. These should be negotiated in advance.

Buyers may need to hire a lawyer in addition to the Notary Public if there are complications with the purchase and they need specialist advice on the matter.

Land and/or building surveys

Unlike some states in the US, sellers are not legally liable for any deficiencies that might be found on a property after its sale.  For this reason, it’s prudent to hire a professional land and building surveyor to assess the property before you sign a contract.

Pre-purchase surveys are optional and their cost falls entirely on the buyer. The fee for the survey/study will depend on type, extent, and complexity of surveys undertaken, and the size and type of property being surveyed.  Ask your realty agent, architect, or building project manager for advice and details about this. Some local architect firms might offer survey work as part of their services.

Gated community and condo service fees

If you are buying a house in a gated community, or a condominium, be sure to check on the annual service fees, and have these put in writing.

Service fees can range from a few hundred to a few thousand dollars a year, depending on location, number of houses or apartments in the enclosure, and the scope of the amenities present.

Keep in mind that service fees tend to rise year-on-year, especially as developments get older and more maintenance or structural repair is needed, e.g. to water cisterns and swimming pools.

Property title insurance

When you buy property in Mexico, you might consider purchasing title insurance. You must purchase this at the point of purchase, before you close on the property.  Rates are based on the sale value of the property. Learn more on this article.

Costs and taxes when selling a Mexican Property

When you eventually sell a residential property in Mexico you will need to budget for a range of additional fees and taxes as part of the sales transaction.  You can learn about these on this sister article: Costs and Taxes of Selling a Property in Mexico.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

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