When wishing to sell a property, it is recommended that you collect information allowing you to know in advance what the financial obligations will be at the time of conveying the property, such as: income tax, commissions to real estate agents, documents proving that the property is current in payment of services and taxes, and legal advice.
Income tax was once exemptible by proving that the property was the seller’s primary residence during the last five years. The tax laws have changed so that there are no exemptions, but if certain deductions are applied, this will allow you to reduce the tax payment.
One of the deductions that can be applied is by using the 700 thousand UDIS (Investment Units) allowed by law; however, to obtain this benefit, you must prove yourself to be a resident and taxpayer in Mexico. It is important to note that the benefit can only be used every three years.
Therefore, to formalize the sale, the notary must deliver:
- CURP (Registry of Population ID).
- Federal taxpayer registration.
- Proofs of address in the name of the seller and taxpayer, which can be telephone bills, electricity bills, and bank account statements.
However, in cases where tax cannot be deducted for having used UDIS, here are some deductions that the notary will take into consideration to calculate the corresponding tax:
- Proven cost of acquisition. You can deduct what the seller paid to acquire the property. It is accredited for properties acquired before April 2014 with the corresponding title deed, after that date, with a supplement to the invoice issued by the notary (CFDI).
- Investments in buildings, improvements, and extensions. They are accredited with the corresponding invoices. It is vital to request tax invoices, not just receipts, on these investments.
- Commissions to real estate agents. This refers to the amount paid to real estate brokers. As explained above, to deduct these expenses a tax invoice must be provided at the time of the property sale.
For these reasons, it is advised that you consult with a legal advisor to calculate income taxation well in advance. Furthermore, you should make estimates before listing the property with a real estate broker, since the listing price could change depending on the amounts to be paid.