Four different taxes might apply in a real estate transaction in Mexico:
ISAI, IVA, Acquisition ISR and ISR
a) Acquisition tax.- Also known as ISAI.
b) Value added tax. – Also known as IVA.
c) Acquisition ISR tax.- This is a tax on the profits for acquisition
d) ISR tax. – Also known as I.S.R. (Impuesto Sobre la Renta).
The first three taxes, if apply, must be paid by buyer. The last one must be paid by seller.
a) Acquisition tax.- ISAI (impuesto sobre adquisición de inmueble) is a state tax, due at closing by the person who acquires property. It applies also to donations, inheritances and any other transfers of property. Every state in Mexico will determine the percentage to be paid. It goes from .02% in Yucatan to 4.5% in CDMX (Mexico City). It is based in the catastro price.
b) Value added tax.- IVA (impuesto al valor agregado) or value added tax, will be paid for the buyer when the acquired property is commercial.
c) Acquisition ISR tax.- Acquisition ISR (impuesto sobre la renta por adquisición) is a tax due when the appraisal of the property is 10% or higher than the price agreed by buyer and seller (the purchase price). The rate is 20% applied directly to the difference between the purchase price and the appraisal price with no deductions. This has to be paid at closing by the buyer. The reason for this tax is that the law assumes that buyer is already making a profit.
d) ISR tax.- ISR (impuesto sobre la renta). This is the seller tax. It has to be paid at closing. The seller could apply for an exemption in certain cases. We will talk more about it in the article “Seller Taxes in a Real Estate transaction in Mexico”.
The previous information comes from one of the chapters of my online course “How to Buy Real Estate in Mexico“. If you would like to know more about purchasing property in this country, I reccomend that you check it out. You can find it on udemy here. You can also find my courses on Skillshare by clicking here.
