Chapter 4: In This Chapter Introduction Foreign ownership Financing Commercial real estate...

Chapter 4: In This Chapter

• Introduction• Foreign ownership• Financing• Commercial real

estate• Residential real

estate• Rental property• Licensing and

brokerage

• Government• Legal system• Taxes and fees• Economy and

business• What you need to

know• Beyond the basics• Key contacts

Page 73

Map of Mexico

Source: CIA World Factbook

Page 74

Introduction to Mexico

• Federal republic divided into 31 states and one federal district (Mexico City)– Estados Unidos Mexicanos

• Largest Spanish-speaking country in the world– Indigenous languages spoken in the south

Page 74-76

Mexico—The Rich Tapestry

Source: WikipediaPage 77

Mexico—The Rich Tapestry

Source: Wikipedia

Page 77

Mexico—The Rich Tapestry

Source: Wikipedia

Page 78

Mexico—The Rich Tapestry

Source: Wikipedia

Page 78

Foreign Ownership of Real Estate

• Fideicomisos• Ejidos• Co-propiedad ownership• Timeshares• Fractional ownership

Page 79-83

Financing

• Mortgages by Mexican banks have increased since 1997 bank reforms

• Cash transactions still common• Cross-border mortgages

Source: Asociación de Bancos de México, with data from Banco de México

Page 83-84

Commercial Real Estate

• Maquiladoras• Resorts and hotels• Medical facilities

– Access to health care for second-home buyers, retirees, and medical tourists

– Other developments and housing

Page 84-87

Residential Real Estate

• Second-home market– Cancún– Los Cabos– Puerto Vallarta– Ixtapa– Acapulco– Manzanillo– Mazatlan

• Non-resident Mexicans• Residential trends

Page 87-89

Space Measurement

Balconies and patios included

Page 90

Rental Property

• Pro-tenant• Provisions differ by civil law in each

Mexican state• Leases

– Mexico City example

Page 90-91

Licensing and Brokerage

• No registration required– Sonora, Sinaloa, and Guanajuato require

registration– Nonresidents must obtain immigration status

permitting them to work

• Listings• Transaction process• Appraisals• Responsibilities of notario

Page 91-92

Realtor.com/international

Page 92-95

What You Should Know About Government

• Check-and-balance system with executive, legislative, and judicial branches

• Pro-market policies to seek investment• Government struggles to balance pro-

market policies with corrections to economic inequity

Page 95

Legal System

• Civil law system• Notarios and attorneys can quickly access

written codes to offer opinions and guide transactions

• Litigation infrequent due to costs, lack of punitive awards, and length of proceedings

• Legal system highly evolved, but always engage a competent local attorney

Page 96

Real Estate Taxes and Fees

Real Estate Taxes and FeesTax or Fee Amount Paid by

Acquisition Tax 0.18-4.57% BuyerNotario Fee 0.08-3.6% Buyer

Registration Fee 0.02-1.82% Buyer

Certificate of No Liens/No Tax Debt US $50-100 Buyer

Bank Trust Initiation Fee US $450-1000 Buyer

Bank Trust Annual Fee US $400-800 Owner (Buyer)

Foreign Affairs Permit $1500 Buyer

Title Insurance 0.5-0.7% Buyer

Land or Building Survey Fee* Varies Buyer

Appraisal Permit Fee 0.3% Buyer

Escrow Fee 0.1-0.8% Buyer

Agent Commission 3-6% Seller

Property Tax (annual payable to state) 0.05-1.2% of value Owner (Buyer)

Source: Global Property GuidePage 97

Business and Income Taxes

• Individual income tax– Progressive up to 30%– Nonresidents taxed on Mexico-sourced income

• Business income tax– Generally 30%– Nonresident corporations taxed on Mexico-sourced income

• Withholding tax– Interest paid to non-residents: 4.9-40%– Royalties paid to non-residents: 25-30%

• Capital gains– Generally 30%

• Value-added tax– Generally 16%

• Other taxesPage 98

Economy and Business

• Exports to USA– 25% of GDP– 80% of total exports

• Oil and gas– Largest source of foreign currency

• Remittances– Second largest source of foreign currency

• Transportation and communication

Page 99-101

What You Need to Know• Opportunities• Foreign ownership restrictions• Transactions with fideicomiso system

– Roles of other professionals• Availability of mortgages

– Cash transactions common• Mexican economy

– Trade with USA– Oil and gas– Remittances– Transportation and communication

• Pro-market policies to facilitate trade

Page 101-102

Beyond the Basics

• Greetings• Physical contact• Business cards• Business style• Company

hierarchy

• The softened “no”• Punctuality• Business dining• Tipping • Gifts

Page 102-105

Key Contacts

• AMPI• US-Mexico Chamber of Commerce• USA Embassy in Mexico City• USA Consulate in Monterrey• Mexico Tourism Board• FONATUR

Page 106-107