Understanding Capital Gains Tax on Puerto Vallarta Properties

Written by Tropicasa Realty
May 8th, 2024

Questions about capital gains tax in Mexico is something that our Puerto Vallarta real estate agents frequently encounter. With a new fiscal budget soon going into effect in Canada, which will see some sellers paying capital gains rates as high as 66% on the sale of investment properties, we’re being asked about capital gains on second properties in Mexico even more often.

We have put together a quick guide to understanding how capital gains work on properties in Mexico, but please remember, this is a general review only and we recommend seeking the advice of a tax professional prior to making any decisions.

  • Capital gains tax on real estate in Mexico is levied on the profit gained from the sale of a property, be it a home, condo, or piece of land.
  • The Mexican capital gains tax rate will vary depending on the type of property, length of ownership and sales price. For Mexican nationals, the tax rate can range from 10% to 35%, but for non-residents, the rate is 35%, not taking into consideration any adjustments allowed.
  • Capital gains tax on real estate in Mexico is calculated by subtracting the original purchase price in pesos from the selling price in pesos.  However, capital improvements made to your Puerto Vallarta property as well as certain costs, such as brokerage fees, can be deducted as long as you have facturas.
  • The longer you have owned your property in PV, the lower the capital gains tax can be due to certain allowances. This is to encourage long-term investment in real estate and discourage short-term speculation. That said, fluctuating peso rates can negatively or positively affect the taxes as well.
  • There are also certain exemptions and deductions available for individuals selling their primary residence or properties used for business purposes. These exemptions can help reduce the amount of capital gains tax owed and are best reviewed by an attorney or tax accountant experienced in real estate transactions in Puerto Vallarta.

Capital gains taxation on real estate in Mexico is an important aspect to consider when buying or selling property. However, in comparison to other countries, particularly when taking into account very low annual property taxes and no governmental limitations on short-term rentals in Puerto Vallarta, purchasing an investment property in Vallarta or the surrounding region can be a very attractive proposition for many buyers.

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