No more LLC's to avoid bank trusts and 2 % transfer tax?
- Thread starter joanC
- Start date
mondone
Whitecaps
No news I am aware of at this point.
... Mexican corporation buyers also avoid the 2% transfer tax, so it's not just LLC's... I'm sure there are many more properties owned by Mx. Corps than there are owned by LLC's.. I deleted the first part of this post, because I was able to answer my own question, relating to yearly filing a tax return in the U.S. for a LLC that owns property here in Mexico.... https://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29675.html
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According to my MXCN legal friends, Mxcn corporations owned by foreigners are rare...the vast majority of corporations that own property are gringo.
It's been almost a year since Mexico made some noises about making LLC's pay taxes and fees commensurate with those paid by an individual. Does anyone know the present status of the changes?
It's been almost a year since Mexico made some noises about making LLC's pay taxes and fees commensurate with those paid by an individual. Does anyone know the present status of the changes?
Sorry for the misunderstanding, but I was actually referring to Mexican corporations owned by Mexicans..
mondone
Whitecaps
I haven't heard of any changes to existing LLC's as of now, but I'm also not sure that they are issuing any more bank trust's in the name of an LLC either. Supposedly that was going to end last year.
The problem with buying a property owned by an existing LLC... you could be the bag holder.. Even though the sale is done without a notary and no taxes paid in Mexico, the sale is still taxable here and is looked at as tax avoidance.. in other words taxes are still due in Mexico.. http://www.penascoliving.com/mexican-capital-gains.html Buyers unless they have purchased real estate in Mexico before have no idea the problems they could be buying and realtors should probably warn them about being a potential bag holder for previous sales of the LLC.. What if it changes from tax avoidance to tax evaision, then what?
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Here is just a simplified example ( but a true example) of how foreign buyers can get creamed..An American family bought a condo here in 1996, the year it was built or being built (Pinacate) for 140 k the peso was 7.5 to the dollar. They sold the condo in April 2016 for the same 140 k.. it was never renovated and needed work The peso was 18.57 when they sold it,, when the notary told them they owed 29,000.00 dollars in capital gains taxes, they couldn't beleive it. Pay 140 and sell for 140. it doesen't work that way.. it was recorded in peso;s 1,050,000 at 7.5 to 1 it sold for 140 at 18.57 to 1 or 2,599,800 pesos a profit of 1,549,800.. times 35 % foreign buyers tax 542,430 peso,s $29,410.00 tax .. That could be a huge problem for a LLC bag holder way down the line.
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The property was purchased by a Mexican family, who did make money on the sale and paid no tax because of the 3 year exemption.. Read about the exemption here. ..... https://www.theyucatantimes.com/2018/12/quick-facts-about-capital-gains-tax-in-mexico/
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CheddarBob
Guest
It would also have to be their principal residence.
Convincing the Notary the joint has been one's principal residence can pose a challenge. The Notary is often audited on a regular basis if he has deemed too many sales to be that of a principal residence. He needs to have a file full of indicia that it was the primary home. One thing that trips up many people is the CFE bills: often a new owner leaves the account in the name of the previous owner for convenience, and to avoid CFE's fee to start a new account, presenting CFE with Trust documents, yada, yada. Obviously, having legal residency is important, and it's not clear if continuous monthly tourist visas bought at the border are sufficient. The test is simple, and identical to that used by taxing authorities worldwide: if a stranger looked down on your entire living situation ( utility bills, supermarket receipts, car and house insurance, etc, etc) would he find the trappings sufficient to say yes, I believe this dude calls Mexico home. Side note: if the Notary actually gets you through the sale free of capital gains tax , you won't ever know for sure. The Notary will invariably tell you he got your tax reduced to a small amount....$1500 to $3500 is common, payable to his account!
Joan. no disrepect to you...You are talking about foreign buyers here and bank trusts and I'm not. There are also a group of people here called Mexican Citizens that take full advantage of the law and are organized with their paperwork. The family i mentioned Mexican citizens and were never charged a fee for eliminating their tax.. Why would anybody that knows their legal right to not pay capital gains, pay a notary for a favor thats not really a favor.. (I'm not questioning you, I know everything you say happens, including leaving the CFE acount in the sellers name) We don't have and have never had a bank trust and also have taken advantage of the 3 year exemption without any problems..Tourist visa's won't get the tax break.. temporary or pemanent resident visa and citizen..
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It was..
From the Baja side of Mexico..
The Problem with some Notaries.
(Choose the right one way ahead of time!)
Capital Gains Tax Exemption for the Homeowner.
Article 93, fraccion XIX Ley Impuesto sobre la Renta.
Not every notary will recognize the right of a homeowner to obtain an exemption on the Capital Gains Tax resulting from a sale.
Some notaries are young and their inexperience on certain topics shows when they refuse to grant a CGT exemption, others simply are trying to protect themselves from becoming solidarity responsible for not withholding the right amount of CGT from the seller or not withholding any at all, others are simply fed up with the topic and flat our refuse to acknowledge the exemption, etc.
Make sure to contact a reliable notary, or several, before you enter a purchase agreement to make sure you don't have any late-minute drama. Notaries change their minds at the worst possible time, some, in my opinion, have no right whatsoever to demand any additional conditions, regarding the capital gains tax exemption, beyond that which is required by the law and regulations.
If you are the seller or the seller's agent, do your homework well ahead of time by approaching the right notary who must honor the right of a qualifying seller to obtain the CGT exemption contained under article 93, section XIX of the Income Tax Law of Mexico.
By the way, The worth of the UDI as of April 04, 2022, is $7.249199 pesos, which multiplied by 700,000 UDI, results in $5.074,439 pesos, divide that sum by the exchange rate of the day ($19.843200) results in a savings of $255,726 dollars on the profit.
Regards,
Rafael Solorzano
[email protected]
Phones 619 409 2610 or 619 636 3089.
Mx cell 664 188 7001
The Problem with some Notaries.
(Choose the right one way ahead of time!)
Capital Gains Tax Exemption for the Homeowner.
Article 93, fraccion XIX Ley Impuesto sobre la Renta.
Not every notary will recognize the right of a homeowner to obtain an exemption on the Capital Gains Tax resulting from a sale.
Some notaries are young and their inexperience on certain topics shows when they refuse to grant a CGT exemption, others simply are trying to protect themselves from becoming solidarity responsible for not withholding the right amount of CGT from the seller or not withholding any at all, others are simply fed up with the topic and flat our refuse to acknowledge the exemption, etc.
Make sure to contact a reliable notary, or several, before you enter a purchase agreement to make sure you don't have any late-minute drama. Notaries change their minds at the worst possible time, some, in my opinion, have no right whatsoever to demand any additional conditions, regarding the capital gains tax exemption, beyond that which is required by the law and regulations.
If you are the seller or the seller's agent, do your homework well ahead of time by approaching the right notary who must honor the right of a qualifying seller to obtain the CGT exemption contained under article 93, section XIX of the Income Tax Law of Mexico.
By the way, The worth of the UDI as of April 04, 2022, is $7.249199 pesos, which multiplied by 700,000 UDI, results in $5.074,439 pesos, divide that sum by the exchange rate of the day ($19.843200) results in a savings of $255,726 dollars on the profit.
Regards,
Rafael Solorzano
[email protected]
Phones 619 409 2610 or 619 636 3089.
Mx cell 664 188 7001
CheddarBob
Guest
when a American or Canadian sells property in Mexico and attempt to get citizenship here for the purpose of reducing capital gains when this wasn’t their primary residence. (Bending the truth as we all do when it comes to taxes) This automatically triggers a capital gains assessment on your current primary residence In the United States or Canada. You can only have one primary residence.
Bending the truth here would be looked at as fraud, when a notary is involved, that can lead to a 5 year jail sentence.. I wont say which notary.but there is a legal notice pasted on the wall at the entry that is a reminder..
If a notary doesn't allow the exemption, the smartest thing to do would be, don't sign the papers.. nobody can force you to sign.. Just walk out until the notary either clears it with SAT or confers with the the Notary College (Colegio De Notarios).. Or find a notary that will aliow it.
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Lic Solorzano: what is your latest understanding of how Mxcn authorities are treating: a. new US LLC's buying properties in the zones where trusts are required; b. US LLC's selling properties in those 2 zones
Look him up on Facebook and ask him there. He does offer free advice to a certain point