Buyer Capital Gain Tax
After finding your prized property of choice the next point of purchasing Real Estate is the negotiation between a buyer and seller. The real and fair value of the property is what a buyer is willing to pay and what a seller is willing to accept. In some cases the seller is in need of cash or the buyer negotiates a great deal or maybe the market dictates a lower price.
In Mexican Real Estate each transaction has a government appointed appraisal that is part of the closing process. This is not a mortgage related appraisal as most transactions in our vacation oriented Real Estate market in Los Cabos are cash sales. Most often the appraisal comes in lower than the negotiated purchase price. However in the case of the "quick sale cash selling price" or the "great deal" the appraisal comes in higher than the purchase price. This triggers what is called reverse capital gains that is calculated as a buyer expense.
Really...The buyer pays capital gains? When the appraisal is 10% above the agreed purchase price the buyer is responsible to pay 20% Capital Gains Tax on the difference calculated in pesos between the purchase and the appraised value.
In all real estate closings there is a 2% acquisition tax that is calculated on the purchase price as part of the buyer closing costs. There are actually 3 values that are used, which are :
1. The purchase price
2. The catastral value
3. The appraised value.
The buyer will pay the 2% acquisition tax on the highest of the 3 values. This is standard to every real estate purchase.
Example Buyer Capital Gain:
Sale Price in US Dollars $150,000 USD
Today's exchange rate (Feb 2021) $20.93 Pesos
Sale Price in Pesos $3,139,500 Pesos
Appraisal cannot be lower than the current recorded $3,845,360 Pesos
value at todays peso exchange rate which is:
If the appraised value is more than 10% higher than the
sale price in pesos then there is a buyers capital gains
tax at rate of 20% of the difference between those 2
values, which would be: $141,172 Pesos
Which would be: $6,744 USD
*Note that Real Estate laws may be subject to change. If you are making a low offer on a property and it gets accepted be aware this can trigger buyer capital gains tax paid at closing on the property. Ask your closing attorney about possible solutions based on what the current law will allow.
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