Selling Your Home in Mexico as a Foreigner: Why the RFC Comes First
Under article 93, section XIX, paragraph a) of Mexico's Income Tax Law, an individual pays no ISR on the sale of their own home (casa habitación) up to 700,000 UDIS per seller, if they have not used the exemption in the previous three years and the sale is formalized before a notario público.
What a foreign seller needs
Mexican tax residency, an RFC recorded in the deed with proof of tax residency, and proof the property is their home under article 155 of the Income Tax Regulations: utility bills or bank statements at the property's address in the name of the seller, spouse, or direct ascendants or descendants. Notaries commonly ask for the electricity bill as a CFDI in the seller's name with their RFC.
Without the exemption
Non-residents pay 25% of the total sale price with no deductions (article 160) or, with a qualifying representative in Mexico, 35% of the gain. Tax residents who do not qualify pay on the gain at progressive rates of up to 35%.
The low-purchase-price trap
The gain is the sale price minus the acquisition cost recorded in the deed or fideicomiso, adjusted for inflation. With a very low recorded cost nearly the whole price is taxable; the law only guarantees a deemed cost of 10% of the sale price. Improvements are deductible only with CFDI invoices issued to the seller's RFC.
Full guide from our Rosarito office: Selling Your Home in Mexico as a Foreigner. Fideicomiso service: Mexico Trust Services.
Galarza Legal — Playas de Rosarito · San Felipe · info@galarza.mx · +1 619-568-2424