Capital Gains Tax on
By: Ramón Macías
“2nd. Annual Puerto Vallarta
Real Estate Conference”
Presented by: Producciones VIVA, S.A. de C.V.
Puerto Vallarta, Jalisco, Mexico. February 2007
Capital Gains Tax on Real Estate.
Mexican Income Tax Law (MITL) assesses income
taxes on (i) residents in Mexico and (ii) Non-
residents on income attributable to “Mexican-
Mexican source income: when the real estate is
located in Mexico.
Income received by the seller from the “alienation”
of real estate is subject to income tax in one of two
1) By applying a 25% tax rate to the total
contractual purchase price without any deductions.
a) By purchaser’s withholding of the applicable
tax (If purchaser is either a Mexican resident or
a foreign entity or individual with a permanent
establishment in Mexico): or
b) Paid directly by seller, by filing a tax return in
Mexico within 15 days following payment of the
2) By applying a 28% rate on the taxable gain or
profit resulting from the sale, instead of calculating
the tax based on the total purchase price.
Notary Public shall pay the income tax directly to
the tax authority.
How the Tax gain is determined?
In general terms, based on the selling price less
Deductions include the following:
i) Original cost of acquisition of land and
constructions (determined separately) and revalued
from the date of acquisition to the date of sale
based on the National Consumer Price Index.
Land value considered to be at least 20% of the
original purchase price.
Buildings and improvements decreased 3% per
annum between the date of acquisition and date of
sale, but not more than 20% of the original amount.
ii) Investments in constructions, improvements and
expansions (preservation costs excepted),
iii) Notarial expenses, local transfer taxes, fees and
other costs of sale, including appraisal costs and
(Taxed on all income from whatever source)
Foreign individuals that establish a home in Mexico
or if they also have a home in another country,
when they have in Mexico their Centre of Vital
- When more than 50% of the total income of the
individual during the year is derived from a Mexican
source of income.
- When individuals have their main place of
professional activities in Mexico
New Exemption rules on capital gain taxes:
If you live in the property as your principal
residence for 5 years looking back from the date
of sale (Irrespective of the sales price).
Electric, telephone bill, or bank account statement
verifying the address.
Issued at seller’s name or spouses, direct
descendants or relatives in ascending line, for each
of the 5 years.
One transaction per calendar year.
Declare under oath to the Notary Public.
Notary Public notifies SAT.
Up to the amount equal to 1,500,000 UDIs
(Investment Units) 1 UDI = 3.819805 Pesos
The tax is payable only in the amount exceeding
such excluding amount (US$520,000 approx.)
Payable and calculated by the Notary Public.
Infringe Constitutional Rights (equity and
In case of further questions or comments,
do not hesitate to contact us.
Contact: Ramón Macías