Capital Gains questions

I've read Spencer post re: Capital Gains law changes. I would like to see an example of what the tax would be (how it is computed) if you do not qualify for the 5 year exemption. Does the five years start when you purchased or when the sale is recorded? I know of one purchase that was not recorded until 2 years later.

Is it selling price, minus actual cost plus improvements plus commissions and fees = gain.

Or is the gain computed on what the government tax people said the property was worth (on tax roll) when you purchased it, minus what the tax people say it's worth when you sell. Is that assessed amount stated on the municipal tax bills? Is every property reassessed at the time of sale? ...how about at any other time?

Do you (the seller) have a choice as to which method to use?

If you have made substantial improvements, will simple receipts be adequate to support the cost or must you have a fractura? (sp.)

Is it then a flat 30% rate or a graduated rate on the gain up to the 30% that I hear of. I was told yesterday that all Notario's offices use the same formula for the gain computation. Is that true? I have some difficulty believing this is so complicated that someone can't do an example, I've never seen one. I've often seen 'It's complicated. It's confusing'.

Why would a buyer agree to have the purchase recorded at the assessed valuation (much lower than the actual cost) just to save a few bucks in property taxes then get hit by Capital Gains later? If it is written up in the purchase agreement, the buyer has agreed to doing that or has he? What if it was not written in the purchase agreement or ever even discussed but was infact recorded at assessed valuation rather than actual cost.

Thanks in advance ;-).

Solutions Abroad

Taxes in Mexico: Individual Income Tax

Resident individuals are subject to Mexican income tax on their worldwide income, regardless of their nationality. Non-residents, including Mexican citizens who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican source income.

The Federal Tax Code provides that a foreign individual will be considered a resident of Mexico for tax purposes when he has established his home in Mexico, unless he has been physically present in a foreign country for more than 183 days, consecutive or not, in one calendar year, and is able to prove residence for tax purposes in that other country.

Individuals holding immigration papers as temporary or permanent immigrants are usually considered residents, unless the foreigner enters Mexico during the last half of the calendar year, in which case he would have been outside the country for more than 183 days and should probably be taxed only on this Mexican source income during that first calendar year.

Foreigners working in Mexico under a visitor's permit should probably not be considered as residents until they have established some type of physical home in Mexico and have remained in the country for at least 183 days in a calendar year.

Employment income
Income from personal services (earned income) includes salaries, commissions and allowances of all types, including those for housing, living expenses, education, foreign-service, tax reimbursements, and amounts received as employee profit sharing.



Certain benefits may be considered as taxable income of the individual even if they are not a deductible expense for the employer.



Living expenses can be absorbed free of tax to the employee only in the case of short-term visits and if supported by receipts from third parties. A per diem rate is treated as a taxable allowance. Reimbursements of expenses of a spouse or dependants usually represent taxable income to the employee.



Business travel expenses, other than those supported by receipts from third parties and limited to maximum deductible amounts, must, in general, be added to salaries for income tax purposes

Investment income

Residents are required to include investment income in their annual returns, except for: (a) interest from the Mexican banking system and government obligations, which is either subject to a final withholding tax of 20% on gross interest (or a portion thereof) or is exempt; (b) dividend income from Mexican corporations or investment funds; and (c) capital gains on transactions carried out through the Mexican stock exchange, which are exempt.
Capital gains

Gains on the disposition of real property or shares of capital stock receive favorable income tax treatment in that historical costs may be increased by factors (based on the number of years the asset had been held) to adjust them for inflation, and in the case of shares of capital stock also by amounts intended to partially cover net retained earnings, whether capitalized or not. The resulting net gain for tax purposes is taxed under a formula favorable to the taxpayer, again depending on the number of years the asset was held before sale. Gains on sales of securities through the Mexican stock exchange, when the securities are classified as available to the general public, are exempt from tax.

Gains from the sale of the taxpayer's principal residence are exempt, provided the taxpayer occupied it as such during the two years before the sale.



Residents of Mexico are taxed on their worldwide capital gains, whereas non-residents are only subject to Mexican tax on gains arising from sales of real property located in Mexico or non-exempt sales of shares of Mehttp://www.solutionsabroad.com/en/business-in-mexico/business-category/taxes-in-mexico-individual-income-tax.htmlxican companies, regardless of where the sale takes place.

Common Creative License
Source:

There is a computer program the notarios use to calculate the gain. Many sellers place a lowball value on the deed and unsuspecting buyers don't catch it and the sellers eliminate their capital gains tax but also pass on a potential liability to the buyer.

More notarios are refusing to place a lowball value on the deed, to be honest but also to charge more as their fees are determined by the value on the deed.

There still are some tricks to lessen taxes and policies may vary slightly per notario so shop around before you have a buyer.

Spence, any more info you find out, can you break it down and maybe Bob can make a sticky like the Jalisco driving laws ?????

We all realise you are a very busy man, but just in case you have a couple of sleepless nites. I am sure everyone would be highly appreciative.

We have no Jalisco driving guide here. I have it book marked I'll try and post it, if not well we will wait for your schedule to ease up!

Driving guide has been on site, it is here: https://lakechapalainfo.forumotion.net/got-questions-about-legal-or-law-f3/mexico-jalisco-driving-guide-t25.htm

Re: Are you planning to sell a property and want to avoid paying Capital Gains???.

If you want to sell your property what you have to do first of all is to make an appointment with your Notary Public, take with you the deed of the property you are planning to sell, as well as the tax receipt. He will let you know if you will have to pay taxes.

As you know, you pay Capital Gains taxes of the difference in the purchase price of the house, (The amount that appear in the deed) and the sale price.
If by any chance you have to pay it and want to avoid paying , you need to have the next documents.
-Passport.
-FM (Temporal or Permanente)
-Curp
-Tax number
-Original Electric bills (4 at least)
-Original Phone bills (5 at least)

If you sold a property in the last 5 years, mention it to the Notary, he will make a couple of question and will explain you what is gonna happen.

If you made some renovation in the house and has the invoice, (the original one), it could help to reduce the tax payment.


Cheers!!!