Capital Gains Tax

Property Taxes

If you are selling your property it is important to know and understand how much you are paying for capital gains tax before you agree to an offer. You need to get a written document from a notary that tells you exactly how much you are paying in capital gains. Remember, capital gains tax is applied in every country not only in Mexico.

You can go directly to the notary where your deed was created or you can go to any notary in Mexico to get a capital gains calculation. If you are working with a real estate agency ask for this calculation to be done prior to you signing a listing contract. Do not wait for the last few days before closing to try to figure this out as it is very important to your bottom line.

Most of the time these figures are high but, most of the time you can work with the attorneys at the notary or with the same real estate agency to reduce capital gains to the very minimum.

The government has a set format: Earning – Cost – Reductions = Capital Gains

Earning is the value of the property.

Cost is the purchase of the property.

Reductions are items you pay for like notary fees and commission fees.

Capital Gains are applied by the notary only and it is usually from 1% to 35% of a value that is more than $250,000 pesos. In most cases, 35% is applied so be ready for that.

Of course, there is such a thing as an exemption to paying capital gains so long as you meet certain criteria. For example, you must be a permanent resident and have a power bill with the address of the property being sold in your name and in that power bill, your tax id number must be included. You must plan for this from the moment you buy a property in Mexico. Buying do not understand just how much their property could be worth 5 years from the time of purchase. You will be surprised.

Who pays capital gains taxes?

The seller pays this tax. It is the same in every country. You must pay a tax for the amount you are gaining extra to the amount you bought your property. It is usually a 35% tax.

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