title for property

[Carole]

I don't know if anyone would know any info on this subject....but I'll give it a shot. We purchased a condo...we have the key to it, but the papers are now ready to get the title. I just got an e-mail from the builder informing us that there is a new tax that started January 1st and he says he will put a lower amount on the paperwork. . Does this sound correct to you? Should we allow him to do this
I would appreciate any input on this.
Thanks
Carole

[Anna]

I'm guessing he would state that the purchasing amount was lower than it really was, in order to lower the taxes, and that it doesn't really have anything to do with the market value of your condo. I believe this is done quite frequently. It may backfire on you later when you want to sell the place and you have to pay taxes on the profit, which then will look bigger than it really is. But I'm guessing here...

[StephenB]

Anna is right...it's done all the time. Just be aware that you will be responsible for capital gains tax if you ever sell, and that tax is substantial in Mexico.

[Big Fish]

Originally Posted by StephenB

Anna is right...it's done all the time. Just be aware that you will be responsible for capital gains tax if you ever sell, and that tax is substantial in Mexico.

And to avoid the capital gains situation is why as a purchaser it is adviseable to get your FM3 to show you had residency for x many years previous to selling your property, otherwise you get dinged about 30% I think it is - not so nice!

[StephenB]

Originally Posted by Big Fish

And to avoid the capital gains situation is why as a purchaser it is adviseable to get your FM3 to show you had residency for x many years previous to selling your property, otherwise you get dinged about 30% I think it is - not so nice!

Yes...that will do it. I think you'll also have to prove that you stay(or live) in Mexico X number of months per year etc. I don't think you can do it with just utility bills, etc. I do know the capital gains tax is hefty if you can't prove a certain amount of residency over the years.

[calgaryguy]

To avoid capital gains tax you will have to prove that it has been your primary residence for the past 5 years. The requirements to do this will be very similar to Canada and the US. There is more to it than an fm3. The small savings on notary fees up front (by declaring a lower purchase price) is not worth the tax that you will very likely have to pay when you sell. It is common practice and a common sticking point on re-sales, when people realize they are getting hit with a significant tax deduction from the sale proceeds made by the Notario at closing.

The time to get the value right is now while you are getting title. Another issue is none of the builder/developers are offering people a discounted purchase price for assisting them in avoiding their taxes. (Is it just the season or did I just go off on taxation again...lol)

[gottago]

Originally Posted by calgaryguy

The time to get the value right is now while you are getting title.

i agree. i've bought and sold and bought again. don't let anyone pressure you into a lower declared value by saying, "everyone does it" because the truth is that a lot of people do it but by no means does everyone do it. as others have advised, it will only increase the amount of capital gains that you'll have to pay when you or your heirs eventually sell.

i've heard some rumours that the capital gains exemption currently in place for certain resident foreigners will not exist in the future, so it's extra super duper important to get the true amount listed when you receive your title. even if that's a false rumour, it doesn't mean it won't eventually happen.

[twitchie]

Originally Posted by calgaryguy

To avoid capital gains tax you will have to prove that it has been your primary residence for the past 5 years. The requirements to do this will be very similar to Canada and the US. There is more to it than an fm3. The small savings on notary fees up front (by declaring a lower purchase price) is not worth the tax that you will very likely have to pay when you sell. It is common practice and a common sticking point on re-sales, when people realize they are getting hit with a significant tax deduction from the sale proceeds made by the Notario at closing.

The time to get the value right is now while you are getting title. Another issue is none of the builder/developers are offering people a discounted purchase price for assisting them in avoiding their taxes. (Is it just the season or did I just go off on taxation again...lol)

Hmmm... I bought and sold in Huatulco prior to moving here. At the time that I purshased in Huatulco (about 5 years ago - or so) I still lived and worked in Canada. I actually applied for, and received, and FM3 visa (non-immigrant "rentista", or "snowbird" status) after purchasing my condo.
Just over 2 years later, I sold my Huatulco condo and moved to Playa. At that time, the capital gains rule was that, if you held your title for more than 2 years, you were exempt from the capital gains tax.
I understand that now, the rule says that you will be exempt from the capital gains tax if the property is your 'primary residency' here in Mexico. i.e. all investment only property will be taxed when sold.
A women downstairs from me owned her condo for less than 3 years ( a little more than 2, I believe) and sold last summer. She had actually moved back to Europe about 8 months earlier and was renting her place out. When the realtor informed her that they had a buyer, she flew over to do the sale. A snag... she had not re-newed her FM3 (as she had returned to work in Europe) and as such was no longer a 'resident' of Mexico. How can you claim that a place is your 'primary residence if, in fact, you are not a resident. She was facing a capital gains tax on about US$85,000. Not good. So...
Off she went to re-new her FM3. They accepted her application, the FM3 was re-newed, and she avoided the capital gains tax.

[Pour Favor]

A friend just sold a her condo last month and according to the lawyers and notaries the law has changed again as of Jan. 2008. No foreign property is exempt from capital gains now! You have to be a resident which means you need an FM3 for 5 years and then an FM2 for another 5 years and then apply for Mexican citizenship.
Only Mexicans are now exempt from Capital gains. A lower price on the sales contract means you don't pay now but you will pay later.

[Lillibet]

After a quick trip on Google I found this:
Cabo Real Estate-Snell Real Estate-Cabo San Lucas Mexico
It seems on par with other websites I found too. I hope you find this useful.

[Carole]

I want to thank everyone for taking the time to respond to my question. I have looked at some of the sites you sent and have decided to make the builder put the full amount of the condo on the closing papers.
Thanks
Carole

[twitchie]

Originally Posted by Pour Favor

... a resident [which] means you need an FM3 for 5 years and then an FM2 for another 5 years and then apply for Mexican citizenship.

Sorry, but I don't believe that this is completely accurate. An FM3 is a non-immigrant resident visa, while an FM2 is an immigrant resident visa. You are not allowed to hold an FM3 for more that 5 years. i.e. You cannot claim that you are a non-imigrant resident in perpetuity. After 5 years you are deemed to have immigrated and you must carry an FM2 visa.
If you did all what is quoted here, you would be a Mexican citizen (if, of course, your application was accepted).
I cannot comment right now on the statement that, as of January 2008, all foreigners will be obliged to pay capital gains regardless of whether their property is their primary residence here in Mexico. I will look into this.
Saying all that, the downside of an FM2 is that it becomes hard for you to explain to your own government that you are actually a resident of your own country (for medicare and tax issues, etc.) when, in fact, you hold an immigrant resident (FM2) visa here in Mexico.
So... something to consider.

[Michele]

There are currently NO capital gains tax exemptions for foreigners selling real property in Mexico regardless of your immigration/visa status or whether it is or is not your primary residence. Unless you have become a Mexican citizen, you must pay the full tax on the full amount of the gain "recorded" on any real estate sale.

[spoonie2]

Having read this thread I checked with the lawyer we used when we purchased our property. I quoted some of the comments in this thread and his response was:

No, that is not correct.
At all times the sole exemption regarding Capital Gains Tax (Impuesto Sobre la Renta) ("CGT") has been proving primary residence.
Pursuant to the last amendments to the law there are two ways to be excempted:
1. Proving primary residence for 6 months (with all documentation: FM3, receipts of services, Mexican bank account), the exemption will apply in a 100% under a limit of $500,000.00 Uscy, above will be applicable the CGT.
2. Proving a 5 year primary residence is a 100% deduction of CGT.
So I am confused
Susan

[maya]

Originally Posted by twitchie

Sorry, but I don't believe that this is completely accurate. An FM3 is a non-immigrant resident visa, while an FM2 is an immigrant resident visa. You are not allowed to hold an FM3 for more that 5 years. i.e. You cannot claim that you are a non-imigrant resident in perpetuity. After 5 years you are deemed to have immigrated and you must carry an FM2 visa.
If you did all what is quoted here, you would be a Mexican citizen (if, of course, your application was accepted).
I cannot comment right now on the statement that, as of January 2008, all foreigners will be obliged to pay capital gains regardless of whether their property is their primary residence here in Mexico. I will look into this.
Saying all that, the downside of an FM2 is that it becomes hard for you to explain to your own government that you are actually a resident of your own country (for medicare and tax issues, etc.) when, in fact, you hold an immigrant resident (FM2) visa here in Mexico.
So... something to consider.

Need some clarifaction on some of the comments above. I know several people that are living in Playa that has had an fm3 for more than five years and were not required to get an fm2. Maybe only those owning property are required too. Why would your own goverment need to know you have an fm2? An fm2 does not make say you are now a mexican and no longer a citizen of the United States. I know I do not plan on getting an fm2-have no desire too.