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 Moderated by: bartmanaz
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capital gains  Rate Topic 
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 Posted: Thu Oct 31st, 2019 05:32 pm
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long time resident
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Mana: 
I would like to know when capital gains is required to be paid in Mexico when you sell your property. I do not understand why a friend of mine has to pay capital gains when his papers state that he invested  a certain amount of money when he purchased and built his home, and is now selling it for $200,000 less. ISR is exactly that.  You gain, but if you lost, why are you being asked to pay a capital gain, when you had a major capital loss, and your documents reflect that?  Some brokers say that it isn't required to pay capital gains when you lost.  And then I find out that some brokers say, "it doesn't matter that you loss all of that money, it is the law, and you have to pay thousands of dollars even tho you lost money."  Something isn't right here......As a former broker in Mexico and a Realtor now in the states, capital gains is still a gain financially.  A loss you can write off.....why is this becoming an issue in San Carlos?

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 Posted: Thu Oct 31st, 2019 06:19 pm
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Ian948
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Could not figure that out - we lost a good 33% of total actually invested in our property ,but still had capital gain tax liability that required accountant to fix ..... ( at a cost ) ( we purchased at 12:1 , sold at 20:1  pesos ) .  Still had to do the "shuffle" and spend couple thousand for fixing the capital gains when we actually lost big time - of course transactions are in US dollars but legal contract always specifies the pesos equivalent.   In Mexico they have a very clever system - you can loose 100% and I bet you will still find a capital gain to be taxed ......


It is the cost of the experience , I gave up trying to apply logic and factored it in to the cost of the wonderful 10 years !





However you can always have even more fun - try Spain !!!  They have automatic access to your bank so if you transfer a large sum ( say to buy a house ) they will "try" to charge you income tax on it - :(    ( most negative bureaucratic habits in Mexico were learned from Spain in my opinion ! , trouble is here a 500 pesos note will take you to jail not fix the problem ! )











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 Posted: Thu Oct 31st, 2019 07:09 pm
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Chet
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Ian is correct. While the property transaction may be in dollars, the capital gains tax is based on pesos. Thus the peso exchange rate change (inflation in Mexico) impacts the gain as well as the need for a factura to support construction or capital improvements.

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 Posted: Thu Oct 31st, 2019 08:46 pm
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long time resident
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Friend had everything in a row. The notary in Mexico has a program that calculates the change in the exchange rate. And the appreciation.... My friend had everything brought up to date on his trust documents as soon as he finished construction, so that they would reflect his investment. Some brokers in San Carlos understand this, some don't.

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 Posted: Thu Oct 31st, 2019 10:14 pm
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will rogers
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So find a broker that understands it?

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 Posted: Fri Nov 1st, 2019 04:17 am
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Bullshipper
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The rules are different for foriegners than Mexican nationals or corporations and the notary's are pretty much obligated to withold the tax at the time of purchase, or they become responsible for it. You can apply for a refund or provide proof prior to witholding, but proper accounting records are hard to come up with in most cases unless you have an accountant helping you.

Most of the time, the seller wants to under report when you buy which makes you pay more when you sell and report true value, and lots of times, furnishings are included in the sales price that could have been handled in a separate under the table sale to avoid recording extra amounts and costs to both at the time of sale.

The tax code does has an inflation table that reflects the historical indice factors and these can be used to soften the tax cause by devaluations. But if the property was flipped in a short time period, a major devaluation in that short term period can still hurt you more.

Mexicans get about 20% of the interest earned witheld by US Banks as the thinking follows simular lines for those who do not file taxes in foreign nations.

But as pricing and transactions in Dlls are actually discouraged in Mexico, locals getting more and more for their homes in pesos are usually happier than us figuring that sure, more pesos, but less dlls, and tax on top of it to leave another bad taste in your mouth because you did not have an accountant to protecting you by reporting costs when remodleling. But then again, try to find a painter or concete guy that is will to give you a valid factura in the first place.

Last edited on Fri Nov 1st, 2019 04:20 am by Bullshipper

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