Footnotes to Cost & Fees
Putting words to numbers
Nothing is quite so permanent as a temporary government fee.
The complete cost of buying and selling property in addition to the cost of the property itself via fideicomiso includes lawyers’, notaries’ and registration agents’ fees and taxes. These fees will vary of course relative to the location of the property within the state and the particular type of acquisition vehicle (individual fideicomiso, corporation, etc.) and this discussion is provided as an informative overview of what the investor can expect when acquiring property in Mexico. And, as always, the numbers are accurate relative to the date of this document (JAN/2021).
-Taxes & Fees
Acquisition tax or “Impuesto Sobre Adquisiciones o Transmision de Domino” is a state tax and levied at progressive rates set in the tax code of the federal district. The buyer is liable to pay the acquisition tax and it should be noted here that it is based on the highest value of the previously authorized appraisal and that there is a special procedure for its calculation that the Notario will apply to arrive at an equitable number. Many people have tried to decrease this cost by any means possible but each sale is reviewed by governmental officials after the sale is completed and if it is suspected that an error was made, the penalties, which can be as high as the difference plus 25% of the corrected value, can be charged to the buyer.
|VALUE OF THE PROPERTY (MXN)||TAX (MXN)|
|Up to 87,159.70 (US$4,587)||MXN152.31 (US$8.70)|
|87,159.70 – 139,455.47 (US$7,340)||0.03163%|
|139,455.47 – 209,183.01 (US$11,010)||0.03261%|
|209,183.01 – 418,366.13 (US$22,019)||0.03261%|
|418,366.13 – 1,045,915.32 (US$55,048)||0.03696%|
|1,045,915.32 – 2,091,830.65 (US$110,096)||0.04565%|
|Over 2,091,830.65 (US$110,096)||0.04565%|
As mentioned before, a US escrow account for the depositing of good faith and other purchase monies in American dollars should be established by the closing agent in order to manage the funds for the purchase of a property until the closing at which time they are disbursed accordingly. The fees, typically from $500-$700 depending on the sales price and title company that is used, are different at each company and should be requested in advance. There are also certain fees that are paid prior to closing; fees for services provided by 3rd parties such as the appraisal, Notario deposit, trust permit, trust set up fee.
It should be noted that that some of the aforementioned expenses are mandatory and they must be deposited into, made from and accounted for in escrow and it is important to request and be provided a Good Faith Estimate, as is mandated in US law, up front from your closing company to review with your counsel.
The services of a Notario or are required by Mexican law for real estate transactions to be valid. Well-trained and educated, unlike notary publics in the Unites States, these individuals are appointed by the Governor of the individual Mexican state after law school and a lengthy time in private practice. They are responsible for ensuring that all documents are in order and that all legal procedures have been followed. Their fees are set by the federal district and both buyers’ and sellers’ agents work with the Notario to ensure that their individual interests are protected and, as evidenced by the fee schedule, the buyer’s agent is never charged for their agent’s services. They are however, responsible for the Notarios’ fees. It should be noted that the State sets the fees articulated herein below and while they may be less, they can never exceed the stated numbers.
-Bank Trust Fees
Fideicomiso trust fees are charged on a yearly basis and are paid upfront. They may vary according to the transaction, the property and the trustee bank however most of them charge +-$600 for properties priced under $700,000. For properties priced over that, the fees will increase accordingly. In addition to this, all the trustee banks collect the following:
Trust Acceptance Fee – a one-time initial fee to set up your Trust. This is a one-time charge and the fee varies by banks however the sum is typically +-$500 USD + 16% IVA (value added) tax equaling $580.
Trust First Year Fee – an annual fee charged by the bank to maintain the Fideicomiso. This is paid in advance, so you have to pay for your first year at closing.
Registration fees are paid to local public registration offices or “LPROs” by the buyer, the cost of which varies by state and can be a fixed fee, a progressive rate or a combination of the two. These fees are based on the property value range from 0.02% in Michoacan to 1.82% in Durango.
Since there is no state guarantee of title, title insurance is highly recommended. Several US companies offer insurance for Mexican real estate at costs that range from 0.5% to 0.7% of the property’s value. It should be well-noted that although the property seller may attempt to dissuade the buyer from acquiring title insurance by stating that the Notario’s job is to secure clear title, THE NOTARIO IS NOT RESPONSIBLE TO THE INVESTOR and therefore can not be held to account for any errors made. Only valid, United States title insurance can protect the investor.
To obtain prior permission from the Mexican SRE – Secretaría de Relaciones Exteriores for the purchase of property, applicants must appear in person at the Legal AffairsDirectorate of the Ministry of Foreign Affairs in Mexico or send a legal representative authorized through a Power of Attorney to complete the application on behalf of the investor which includes;
a) the applicant’s full name, nationality, migratory status, migratory document number, address for receiving legal service, individuals authorized to receive the certificate and the permit of acquisition, as well as the description and location of the property. The application must contain the applicant’s signature.
b) specifying the form of acquisition and the percentage regarding the acquisition.
c) proof of the the migratory status of the interested party.
The application must include a document stating the property’s surface area, measurements, boundaries and adjoining lands with the signature of the applicant or his/her legal representative.
If the application is represented through a legal representative, a Special Power of Attorney must be appended to the application giving the bearer the power to sign the waiver agreement referred to in paragraph I of Constitutional Article 27 or a general Power of Attorney for acts of ownership that meets the requirements set forth in the third paragraph of Article 2554 of the Federal Civil Code or its correlative articles in the states of the Republic.
In the case of foreign legal entities, their legal status must be proven by the presentation of the appropriate documentation in accordance with the legislation of the country of origin, duly legalized or apostilled and translated into Spanish by an Official Translator or “perito traductor”
The application with its enclosures must be presented in the original and two copies and foreign investors should allow an additional $1,100.00 for the Foreign Affairs Permit.
Foreign Inversion Registration
The Trustee Bank has the obligation to register the Deed with the RNIE or Registro Nacional de Inversiones Extranjeras within 30-days of the granting. From $350 – $800, the costs will vary depending on the bank.
The Notario has the obligation to ensure that the subject property has no tax, water or maintenance fee liens and he or she will gather the necessary certificates from the corresponding government offices and from the condominium administration if necessary.
Only by demanding that funds in US dollars be held in a Bona Fife escrow account and employing generally accepted accounting and escrow practices can the prudent investor be assured of seamless acquisition and one that will stand the test of time.