If you are going to work and earn money in Mexico then you will need to get an accountant and register with Hacienda, the Mexican IRS. But most people that we see will not have to take this step. If you have retirement income sourced outside Mexico you do not have to pay taxes on it in Mexico.

More good news: the annual municipal taxes on property are very modest here in San Miguel de Allende. For median home values they amount to just a few hundred dollars a year. If you pay before the end of January there is a 15% discount. This tax is called the “predial” and the office that does the assessments is the Predial Office.

But there is another potential tax that you need to be aware of, the capital gains tax or “impuesta sobre la renta.” The translation is a bit of a misnomer as you might have to pay a substantial tax even if you haven’t seen a capital gain. The method of calculation is formidably complex, but the way of handling it is fairly simple. Each person whose name appears on the deed is eligible for an exemption of approximately $200,000 USD. In most cases of a couple purchasing a home, they would be best advised to put both names on the deed as this could render them completely exempt at time of a sale.

In the case of higher value properties, you might consider adding another name on the deed or consulting with a notario for their advice. A note on notarios: in Mexico the notario publico is a high-level lawyer with two more years of legal training who is appointed by the governor of the state. There are just a few in each town. All real estate transfers have to be done in the office of a notario. So the role of the notario is quite different from that of a notary public in the US or Canada.

That should give you a basic understanding of where you will stand in regard to Mexican taxes.

Bryan Townsend
bryan@realtysanmiguel.com