Correct Paperwork When You Decide to Sell
The system we usually follow before we decide to sell doesn’t have the checks and balances it should.
Your paperwork trail needs to satisfy the notary. He has to have everything he needs to establish a clear picture of you as the owner.
What to do when you buy so you have the paperwork to sell:
- Follow up to receive your original escritura deed from the notary or the closing coordinator.
- It is a good idea to request additionally a certified copy of the trust before you pick up the recorded deed. Put the recorded deed in a safe place and use the certified copy to open accounts or conduct business where proof of ownership is required.
- Ask for your factura (official receipt) from the notary or make arrangements to receive it when the deed is picked up. This receipt shows all the expenses you paid the notary as part of your closing costs. Some of these expenses can be deductible when you sell. Keep it with the escritura in a safe place.
- Beginning in 2014 and within 30 days of closing, you will receive the electronic encrypted file which shows the purchase price you paid for the property. There will be a .pdf with this encrypted file, so you can read what the .xmls file says. This file will be used by the government when you sell to enable you to claim this price as your basis before capital gains is computed. Without this file, you will not be able to claim your entire purchase price.
- You also need the original or a copy of your predial (property tax).
You need to have an estimate of your capital gains before you list the property.
- ISR is capital gains. There is a lot of confusion on this topic. Your gain or loss will be the Mexico peso value when you purchase and when you sell. If the pesos are stronger when you sell, your tax will be less than if they peso is weaker against the US dollar. Your deductions can include those applicable from the notary expenses when you bought (#3 above), real estate commission, less IVA, a % of value of permanent improvements or reappraisal by the notary (he will charge extra for this service). If you have a constancia of fiscal value, you may have an additional deduction against your gain.
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta / Nayarit (Bahia de Banderas) areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review. If you have any other questions, contact me through my website.