Q: Do I have to pay any Mexican taxes when I buy real estate in Mexico?
A: No. The seller is responsible for paying taxes on the transfer of title and on the gain realized on the sale.
Q: Do I have to pay taxes in Mexico when I sell this property?
A: When you sell your property in Mexico, you will pay a transfer tax based on the appraised value of the property and federal income taxes based on the gain realized. Improvements to the property and expenses such as commissions add basis and decrease the gain if you can provide the proper evidence of such expenditures. The notary public ("Notario Publico") shall calculate and pay the tax no later than 15 days after the monies are received. The Notario Publico obtains the original cost information from the original purchase documents.
Q: Do I also have to pay U.S. taxes when I sell this property?
A: U.S. citizens and U.S. resident aliens are required to pay taxes on their worldwide income. Therefore, you will have to report the sale of property even if it is located in Mexico. However, you may receive a credit on your U.S. tax return for income taxes paid in Mexico.
Q: Do I have to pay Mexican income taxes if I rent the property?
A: Under Mexican law, you are required to pay taxes on the income derived from property located in Mexico.
Q: Do I also have to pay U.S. taxes if I rent the property located in Mexico?
A: U.S. citizens and U.S. resident aliens are required to pay taxes on your worldwide income. Therefore, you have to report income from rental activities in Mexico in the U.S. as well. However, you may receive a credit on your U.S. tax return for taxes paid in Mexico.
Q: What are the trust (Fideicomiso) tax reporting requirements in Mexico?
A: Under a Mexican trust (Fideicomiso), the bank is the trustee responsible for filing all Mexican tax returns.
Q: What are the trust (Fideicomiso) tax reporting requirements in the U.S.?
A: In the U.S. there are requirements for reporting the creation and activity of foreign trusts. Such information is reported on Form 3520 ("Annual Return to Report Transactions With Foreign Trust and Receipt of Certain Foreign Gifts") and/or Form 3520-A ("Annual Information Return of Foreign Trust With a U.S. Owner").
Please note that the above information is intended for informational purposes only and should not to be relied upon as tax advice. Please consult your tax advisor when dealing with any of the above transactions.
Copyright 2006 by GainClients, Inc.