Cabo Real Estate Facts about buying and selling real estate in Mexico
Primary Residence Tax Exclusion
Mexico, along with the United States, provides residents with Capital Gains tax incentives for a primary residence. In Mexico, the tax incentive states that if you sell your “primary residence” you pay no capital gains tax. (In Mexico’s case this means income tax). This exclusion law is only in place for “residents” which include Mexican nationals or foreigners of Mexico.
Claiming Mexico as your primary residence
Laws change frequently however as a general rule, you must be able to prove that your home in Mexico has been your primary residence for at least 5 years. At closing, you are required to provide the Notary with a copy of your Trust, which is in your name, a residence visa or working permit (FM2), as well as a bank account, water , phone, and electric bills, and paid tax receipts all in the same name as the Trust and including the address of the home. All of these documents must be in place for more than 5 years. In some cases a tax ID number is necessary.
Claiming Residency Status
Only a Notary can approve or grand residency status. It is important that your status is reviewed by a Notary prior to the sale of your home. Never assume you will automatically be approved. Unless you are actually going to live and work in Los Cabos for 5 years or more, don’t even consider trying to get the Primary Residence Tax Exclusion.
Does the Trust have to be in my name to claim this Tax Exclusion?
Yes, even if you live in Mexico for 5 years, have all or your utility bills in your name and satisfy all other criteria under Mexican Law, if the Trust is in the name of an LLC, a Living Will, etc. then you cannot apply for this tax exclusion.
The Capital Gains Tax Exclusion is intended for residents of Mexico, not for persons owning a second home or a vacation home.
**Info from this article provided by Snell Real Estate