Selling Your House and Having Correct Sq Meters of Construction

You may be surprised to hear this. We were informed that to advertise our house and close on it, that we had to have a Certified Engineer come out and measure the "correct" sq meters. Often times the Manifest of Construction will be less in sq meters than the actual construction size because Builders do this for tax purposes. A new law says that included in the construction size, the pool must now be included.

Our house went from what we thought was correct 316 m2 (3,405 sq ft) to 434 m2 (4,670 sq ft).

We had to pay the Engineer $ 1,000 pesos for measuring, drawing a simple outline of the house and reporting it to the Town of Chapala. On top of that we must pay a fine to the Town of approx $ 5,000. pesos which the Builder should pay, but I'm sure will never happen.

So where did they find the additional 1200 sq. ft.? I find the calculations in Mexico to be very confusing. Having seen your house they would call it about 2000 sq. ft. in Canada, as you cannot include the garage, covered patios, etc. Is the casita is included in that total?

Ihis is not Canada.

n Mexico everything underroof is included. I measure my house and went to city hall to tell them their calculations were wrong, they sent back someone to remeasure and they lowered the square footage but still included anything that had a roof such as carport, bodega and even included the pool which I am not sure is correct, they lowered the sf by 200 m2and should lower it by another 150 to 200 m2 but they would not budge.

Here casita, garage, carport and covered patios are included.

Inspection/calculations may be required if John was 1st owner? What new law?

The funniest new law is the 30% capital gains......a friend purchased his home in USD, and this was converted to pesos on the deed, at the exchange rate of 10.1 to the USD. He sold in USD @ @ a loss, however the exchange rate was 12.2, therefore paid 30% capital gain based on peso.
Toooo friggen complicated for me LMAO

Anything under a roof...even the overhang of the eaves is included in square footage/metres. There doesn't even have to be walls...if it's covered it counts. That is how the calculation for the building permit is calculated and that's why I don't get why the pool was included because it usually isn't.
I don't think that The Manifestation de Construccion has anything to do with the tax department. It is issued by IMSS and is done to make sure that payments made to IMSS during construction correlate with the actual construction built.
The building permit is what the tax (predial) is based on.
It is wise to have that tax base updated before you sell your house because it will be included in the calculation for Capital Gains if you need to pay them. The taxes are so cheap here that it is foolish not to do so.
Those are MHO and I'm sure that Seisdedos would have better and more up to date information.

Edited to add: Jim, the 30% Capital Gains tax is not new...it is just now being implemented properly in the lakeside area. It's a complicated calculation and is not the simple one that we are used to NOB.

CanuckBob wrote:So where did they find the additional 1200 sq. ft.? I find the calculations in Mexico to be very confusing. Having seen your house they would call it about 2000 sq. ft. in Canada, as you cannot include the garage, covered patios, etc. Is the casita is included in that total?

Bob, everything under roof is considered "construction", now including pool, a new law 2 years ago. Yes, casita is construction, living area.

I'm sure it was measured incorrectly and they probably didn't include terrace and pool.

I too think that this house in the US would be about 2,500 + sq feet.

I am happy that it brought up the sq footage as now I'm lower priced than my competition by $ 20 - $ 30 K and those others have no garages OR pools OR no garages AND no pools and most have no casitas. And their neighborhoods cannot compete with LAS. My cost per sq ft is lower than the others. The competition is $ 429 K to $ 496,900.

And we have lots of time to wait.

So if they up your square footage does that mean you would have to pay recalculated fees to IMSS?

Hi all - There is no Capital Gains if you have an FM 2 and are selling a residence that is your primary residence. I believe if you sell a second home that there is Capital Gains.

CanuckBob wrote:So if they up your square footage does that mean you would have to pay recalculated fees to IMSS?

No, a fine to Town of Chapala. Many people add a room or a pool and never notify the town so they don't have to pay more taxes. It doesn't seem fair because taxes are so cheap here. Our taxes are 2,280 pesos based on 311 sq meters.

CanuckBob wrote:So if they up your square footage does that mean you would have to pay recalculated fees to IMSS?

NO. Once IMSS issues the Manifestation de Construccion they cannot come back and tag you for more. It is a very important piece of paper and should be kept with your deed in a safe place.
Edited to add: John is correct about the fine...it is safer to do things properly (building permit) and follow the rules when the taxes are so cheap.

John, you need to have an FM2 and have lived full time in the residence for FIVE years and not have sold any other property that you didn't pay capital gains on in those five years...and a few more hoops but those are the biggees.

johninajijic wrote:

CanuckBob wrote:So if they up your square footage does that mean you would have to pay recalculated fees to IMSS?

No, a fine to Town of Chapala. Many people add a room or a pool and never notify the town so they don't have to pay more taxes. It doesn't seem fair because taxes are so cheap here. Our taxes are 2,280 pesos based on 311 sq meters.

John, most of us fall into the El Stupido category, or at least speaking for myself......I hired a contractor @ closing, to install a pool. He notified frac, all done ....LMAO ya think.....NADA. I assumed everything was simple in Mexico......OSHA would have a field day here.......not to mention the tax man.

johninajijic wrote:

CanuckBob wrote:So if they up your square footage does that mean you would have to pay recalculated fees to IMSS?

No, a fine to Town of Chapala. Many people add a room or a pool and never notify the town so they don't have to pay more taxes. It doesn't seem fair because taxes are so cheap here. Our taxes are 2,280 pesos based on 311 sq meters.

That's a relief. I thought maybe they were trying to sting you for additional fees.

johninajijic wrote: It doesn't seem fair because taxes are so cheap here. Our taxes are 2,280 pesos based on 311 sq meters.

Do you get the 50% discount for seniors on your predial tax in Ajijic?

viajero wrote:

johninajijic wrote: It doesn't seem fair because taxes are so cheap here. Our taxes are 2,280 pesos based on 311 sq meters.

Do you get the 50% discount for seniors on your predial tax in Ajijic?

No, should I have? I get a 15% discount for paying before February 28.

johninajijic wrote:

viajero wrote:

johninajijic wrote: It doesn't seem fair because taxes are so cheap here. Our taxes are 2,280 pesos based on 311 sq meters.

Do you get the 50% discount for seniors on your predial tax in Ajijic?

No, should I have? I get a 15% discount for paying before February 28.

In Guadalalara you would,maybe it's a municipality thing.
Funny thing is when I paid my first predial I was 48 and they gave me the 50% seniors discount,I didn't argue with them.

viajero wrote:

johninajijic wrote:

viajero wrote:

johninajijic wrote: It doesn't seem fair because taxes are so cheap here. Our taxes are 2,280 pesos based on 311 sq meters.

Do you get the 50% discount for seniors on your predial tax in Ajijic?

No, should I have? I get a 15% discount for paying before February 28.

In Guadalalara you would,maybe it's a municipality thing.
Funny thing is when I paid my first predial I was 48 and they gave me the 50% seniors discount,I didn't argue with them.

In Mexico do we qualify for senior discount @ 60 or 65?

WE can help with the measuring, have a building expert in my office and we have a laser measuring device, works up to 600 feet so calculations are verty exact.

ferret wrote:

CanuckBob wrote:So if they up your square footage does that mean you would have to pay recalculated fees to IMSS?

NO. Once IMSS issues the Manifestation de Construccion they cannot come back and tag you for more. It is a very important piece of paper and should be kept with your deed in a safe place.
Edited to add: John is correct about the fine...it is safer to do things properly (building permit) and follow the rules when the taxes are so cheap.

John, you need to have an FM2 and have lived full time in the residence for FIVE years and not have sold any other property that you didn't pay capital gains on in those five years...and a few more hoops but those are the biggees.

I've been told that you need not have lived in the house for 5 years; you could have lived in it for less than 5 years, as long as it's been 5 years since you sold any other property in MX. I.e., if you lived in the house full-time for the previous 4 years, but never sold a house in MX in the previous 5 years.

Maybe Spencer can weigh in on this aspect as well.

ferret - I get your point. We have been living in this house for 10 years, never owned or sold another property here. No one I know pays capital gains on any recent sales.

Jim,

You can get a DIF or INAPAM card at age 60 and you need that to get the discount on taxes. I had my DIF card this year and got the discount.

Binky,
I would think that it comes down to how they are interpreting a Federal Law here, in this area. They've been doing a pretty good job of not implementing it at all for quite a while. Personally, I would get an opinion from a real estate lawyer here before even thinking about putting a house on the market.
Our experiences have been in San Miguel de Allende where we had to pay Capital Gains on a house that we had lived in full time for nine years but only had FM3's. The other experience was selling our home in San Pancho in Nayarit where they strictly adhere to the law. FM2's AND full time residency in the house for five years (in our case six years) AND not having sold another property in those five years on which we had been exempt from Capital Gains.
It had been our intention to sell at the two year mark but they changed the law to five years and we decided to wait it out...and that cost us big time because then the a$$ fell out of the real estate market in the States.
The laws are not consistently applied and they keep changing which is why we will never own real estate in Mexico again. The other aspect is what do your heirs do when they inherit your Mexican property? They're probably gonna get stuck with paying the capital gains because they're unlikely to want to live in the house for five years nor will they be likely to have an FM2 (or whatever it's going to become).
It is worth the money to check with a good real estate lawyer and confirm for yourself the facts as they are being applied here...at least confirm what is happening in this year...until they change it again.

For people with extra undeclared square footage there is a sort of amnesty if you delcare it in many muncipalities and if you don't declare it then there are fines, this has nothing to do with capital gains.

Intercasa wrote:For people with extra undeclared square footage there is a sort of amnesty if you delcare it in many muncipalities and if you don't declare it then there are fines, this has nothing to do with capital gains.

Spencer,

What about the 5 year ownership issue? If it's less than 5, but you've never sold a house in MX before, do you pay Capital Gains on it with an FM2?

Gracias!

Here in Lakeside the Notarios have interpreted federal law regarding the ISR tax (not really a capital gain tax but for all intents and purposes that is how us NOBers classify it) to basically mean that if you, as a foreigner, possess an FM2 (could have been issued to you yesterday), can prove residency (ie Electric, phone, bank statements in your and your partner's name), and have not received a capital gains exemption anytime in the last 5 years in Mexico, then you can request and receive an exemption for selling a home in Mexico. This could change at any time, but this is the case currently. To get the best information, you should contact a local Notary directly.

Simpca you live in the Jocotepec Municipality ? I have heard that people there can get discount on their property taxes if over 60, it is not so in Chapala. You should be getting 50 % Do you get the full 50%?