Capital Gains Tax applies to all property transactions in Mexico. See, we're not that different than the U.S. and Canada. Knowing the law and your responsibilities regarding property rights or the transfer of the rights is crucial so that you understand what exemptions and deductions allowed under the law.
The Capital Gains tax is calculated by the Notary handling the transfer and is a complicated subject when deductions or exemptions are considered. No one else is qualified by the law to do these calculations. Estimates can be made by others, but it is the Notary whose who is ultimately responsible for the correct calculations. For an accurate calculation, ask your agent to submit all of your documentation to the Notary. ** To simplify: capital gains are calculated basically by taking the difference between what you paid for the property (recorded price) versus what you sold it for minus any allowable deductions. Currently Capital Gains tax through 2013 is 30% of the calculated difference on residential property.
** In the past buyers were sometimes advised to record a lower price for their home to lower the 2% acquisition tax. I ask you: would you rather pay the 2% tax up front or 30% of the gain? NEVER record a lower value than what you actually paid. It will increase your capital gains tax, I promise! Don't let anyone tell you that this is the way it is done in Mexico. It is not correct...a seller might suggest it as a way to lower his own capital gains but in the end someone has to pay up...don't let it be you!
My notes: Very important!!! Your property was listed in dollars. When it closed and was recorded it was recorded in pesos. This can also affect your capital gains. Speak with your agent about this! The laws in Mexico change frequently. I would refer you to either a notary or real estate attorney for the most current information.
Allowable Deductions and Facturas: This is so VERY important there is an additional page on Facturas on the drop down menu.
A factura is a legal official receipt for tax purposes in Mexico. It is different from a cash register receipt. It is presently printed by registered printers, has a cedula a tax insignia or symbol in a corner, is numbered sequentially and those numbers are monitored by the Mexican IRS (SAT) or “Hacienda” as it is commonly called; it shows the name of the person or entity issuing the official receipt, all of their data and their tax ID number. It also has a space for a description of the goods and services provided. For the purposes of a tax deduction on your property, also make sure they include the address of your property is on the factura, so it can be clearly identified with the property. Keep originals of all documentation...copies will not be accepted.