# Capital gains tax laws



## Theresa in san miguel (May 30, 2012)

can anyone please advise me if it is necessary to have an FM3 if you are selling a house where there is no capital gains?


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## AlanMexicali (Jun 1, 2011)

Theresa in san miguel said:


> can anyone please advise me if it is necessary to have an FM3 if you are selling a house where there is no capital gains?


That question has many answers depending on what has been set up in the area where the house is and the notario involved. It appears in tourist areas where condominiums are sold to foreigners they have different rules and no an FM3 is not always needed. It also appears in other areas outside the zones were a fideicomiso, beach type areas, are not needed they need an FM3 to buy or sell a house. Capital gains is usually not charged if you meet certain stipulations. I don't remember what they are exactly but seem to remember you have to own it for about 3 years and not collect rent and have all the proof to support this. If it was used as a rental you will probably have to pay some capital gains. If you have a fideicomiso then used it as a rental and did not pay income taxes that will complicate the sale, if the notario doesn't fix up the sales some how. If you built the house in an area without a fideicomiso and no FM3 you technically did something wrong and selling it will most likely cost you taxes and possibly a headache for the buyers and notario as all contracts will be in question. A person with no legal residence in Mexico is not "supposed" to sign binding contracts of this sort. Even to rent it a contract, lease, is then not binding. All this really depends on enforcement and the area. In tourist beach areas this might not be a problem and more the norm to just sell it and transfer it over and pay what taxes are due, if any.


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## conklinwh (Dec 19, 2009)

We have bought property using FMM & San Miguel notario. We know of people that have sold using FMM but they had the place less than the present 5 year minimum so had to pay capital gain.
Not surprisingly, I would suggest discussing with notario before you sign the contract to see what necessary. We want to sell our place but only there 4+ years. Had understood that new regulations were to drop time from 5 to 4 years but they never came out and with expected change of party in the upcoming election, I expect back to square one.


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## AlanMexicali (Jun 1, 2011)

conklinwh said:


> We have bought property using FMM & San Miguel notario. We know of people that have sold using FMM but they had the place less than the present 5 year minimum so had to pay capital gain.
> Not surprisingly, I would suggest discussing with notario before you sign the contract to see what necessary. We want to sell our place but only there 4+ years. Had understood that new regulations were to drop time from 5 to 4 years but they never came out and with expected change of party in the upcoming election, I expect back to square one.


Conklin.

My one Americano friend in SLP for 14 years was an architect/ contractor in SMA and recently moved to SLP to be with his wife full time, 3 years now, and told me how gov't regulations are gradually being followed more and more and his construction projects were all custom built houses in SMA. The overburden of regulations and his age had him back out of it. To build on the sly now, at least in that minucipio is not as easy as before and who knows how political these new hassles are and who they actually apply to ALL the time and who's house is being built. Possible a foreigner's house now has more rules and a local's house does not and who is building the house etc.. It is hard to say what is going on there.


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## RVGRINGO (May 16, 2007)

Theresa in san miguel said:


> can anyone please advise me if it is necessary to have an FM3 if you are selling a house where there is no capital gains?


If there is no profit, there is no capital gain. Therefore, the type of visa is of no concern.


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## Theresa in san miguel (May 30, 2012)

*thank you!*



Theresa in san miguel said:


> can anyone please advise me if it is necessary to have an FM3 if you are selling a house where there is no capital gains?


thank you, I know that makes sense, just wanted to be sure!


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## circle110 (Jul 20, 2009)

I just met with my notario to ask this very question and he told me that the law states that, as a foreigner, no matter how long you owned the property you still must may 25% OF THE SALE PRICE!!! He told me that many notarios play games with the law and use capital gains to calculate the tax or use the 5 years exemption but he told me that that is incorrect.

Fortunately for us, I can put the property in my wife's name (she's a Mexican citizen) before selling and avoid any taxes at all. That is what he advised us to do.

What the notario told me contradicts what I have read elsewhere but if I choose to use him as the notario in a sale, that's how he'd handle it. Like AlanMexicali said, it appears to depend on the notario and the location.


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## conklinwh (Dec 19, 2009)

circle110 said:


> I just met with my notario to ask this very question and he told me that the law states that, as a foreigner, no matter how long you owned the property you still must may 25% OF THE SALE PRICE!!! He told me that many notarios play games with the law and use capital gains to calculate the tax or use the 5 years exemption but he told me that that is incorrect.
> 
> Fortunately for us, I can put the property in my wife's name (she's a Mexican citizen) before selling and avoid any taxes at all. That is what he advised us to do.
> 
> What the notario told me contradicts what I have read elsewhere but if I choose to use him as the notario in a sale, that's how he'd handle it. Like AlanMexicali said, it appears to depend on the notario and the location.


We have many expat friends that have successfully used the 5 year exemption with multiple notarios.
RV ******, reason I said to verify with notario as no gain can get contentious depending on what costs used, especially if you built the house.
Alan, not sure of your point. Each municipality has a register of approved architects that have responsibility to understand all the regulations. We have only used such architects in both San Miguel and where we live now without an issue. They have too much to lose to try to beat the system as do we.


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## AlanMexicali (Jun 1, 2011)

conklinwh said:


> We have many expat friends that have successfully used the 5 year exemption with multiple notarios.
> RV ******, reason I said to verify with notario as no gain can get contentious depending on what costs used, especially if you built the house.
> Alan, not sure of your point. Each municipality has a register of approved architects that have responsibility to understand all the regulations. We have only used such architects in both San Miguel and where we live now without an issue. They have too much to lose to try to beat the system as do we.


I understand he had applied by all the rules except they were not helping to build cost efficiently anymore. He graduated Architecture from Syracuse U. NY. and was concentrating on energy efficient houses and these features were expensive to use more and more. The economics changed a few years ago in SMA.


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## conklinwh (Dec 19, 2009)

The economics certainly had gotten out of whack in San Miguel with all the Texas sunbirds building and remodeling hugh houses. By the way, this also caused a lot of friction within the expat community. Since the 2008 "crash", things have settled back to more of a reality.
It is now possible to build/remodel/buy at much more reasonable set of costs. The discussion of energy efficient, both passive and active, is another subject with a lot of debate. We went the passive route building with hand made adobe that holds the heat as well as the cool to make a much more comfortable environment. No AC and minimal use of gas logs. We also used glass blocks in a number of places to let in light but also give protection. I'm still tracking active solar PV but can't come close to cost equation. Easier to justify solar thermal.


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## AlanMexicali (Jun 1, 2011)

*Sma*



conklinwh said:


> The economics certainly had gotten out of whack in San Miguel with all the Texas sunbirds building and remodeling hugh houses. By the way, this also caused a lot of friction within the expat community. Since the 2008 "crash", things have settled back to more of a reality.
> It is now possible to build/remodel/buy at much more reasonable set of costs. The discussion of energy efficient, both passive and active, is another subject with a lot of debate. We went the passive route building with hand made adobe that holds the heat as well as the cool to make a much more comfortable environment. No AC and minimal use of gas logs. We also used glass blocks in a number of places to let in light but also give protection. I'm still tracking active solar PV but can't come close to cost equation. Easier to justify solar thermal.


My friend had built many houses in the years there [14 years] but competition and stricter zoning [possibly stricter enforcement] and a more affluent influx of home buyers and people building homes from the US/Can. had an effect. He says things like this article in the NY times brought in many buyers who wanted a good deal on land and construction that caused a backlash he previously did not expect to happen. 

http://www.nytimes.com/2008/11/21/greathomesanddestinations/21expat.html?pagewanted=all

The atmosphere changed from retired expats to snowbirds with money to spend and artists from the northeast finding a party place to entertain. More in line with what we noticed is Puerto Vallarta the 2X were spent New Years there recently.

When we go to SMA on weekends [Sundays] the last 4 years I noticed an overall influx of tourists, mostly Mexicans from Central Mexico and the many tour buses lined up on the blvd.s close to El Centro, and seem to be homogenized in with them to become what I feel [vibes] from some expats there as a nuisance to be tolerated. Not all of course but some.

My friend says many of the expat friends, like himself, he made over the years have moved on to more traditional settings, sort of like what you did, I would presume. 

The solar we installed was a large solar water system on the roof, but SLP does not have extreme weather so we have brick and plaster with very large tinted windows everywhere and seem to be comfortable except when it gets below 4 grados in Dec. Jan. and early Feb. at night.


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