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Foriegn Ownership 
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TREC LICENSE # 0303291



















Foreign Ownership

Restrictions on foreign ownership
Amendments (1996) to Article 27 of the Mexican constitution (1910) allow foreign ownership of fee simple property. There does remain the requirement of the 1910 constitution that requires that foreigners accept the "Calvo clause" of Article 27. It is simply a requirement that foreign individuals and/or corporations agree before the Ministry of Foreign Affairs to consider themselves as Mexican nationals with regard to their acquisition of land or waters. They must also agree not to invoke the protection of their own government in regards their property. Failure to comply with this clause can result in forfeiture of property to the Mexican nation. It is difficult to see this practice as having much validity under Nafta or other investment protection and arbitration agreements that Mexico has entered into with other nations and international organizations. That said, an exemption from the openness of the new amendments exists in the form of restricted border zones: 100 kilometers (62 miles) from any land border, 50 kilometers (31 miles) from any coastline.

There are two major ways for foreigners to bypass these restrictions: (a) indirect property ownership through a trust with a Mexican bank; and (b) indirect property ownership through foreign ownership of a Mexican corporation which itself can own land in the restricted zones. Mexican corporations with foreign ownership can only acquire direct ownership of property in the restricted zones for non-residential purposes.

Investors should also keep in mind that indirect real estate investment in the restricted zones must be approved by the Secretariat of Foreign Affairs (Secretaria de Relaciones Exteriores, or SRE). Permits from the SRE are legally supposed to be decided upon within 5 days of the filing of applications with the competent central administrative unit or within 30 days of filing with the corresponding local delegation. Special note: Foreign individuals or corporations or foreign-owned Mexican corporations must all create a real estate trust when acquiring property for residential purposes in the restricted zones.13 Current provisions give real estate trusts a lifetime of 50 years, and they can be renewed. All real estate trusts must be registered at the National Registry of Foreign Investment.14

North American dual citizens
A new Mexican dual nationality law in effect since 1998 allows: a) American children of Mexican parents and, b) Mexican natives who became American citizens before March 20, 1998, to apply for and obtain dual citizenship. They can also own property in the "restricted zones." The law does have a time restriction: applications for citizenship can continue until March 20, 2003. No extension is yet under discussion. Those who obtain citizenship before then will automatically retain it. The potential eligible population has been estimated at between 1-5 million people. Before this law, Mexican immigrants living in the United States lost their rights to own property in Mexico if they became U.S. citizens - especially prior to the new legal changes. Some Mexicans living in the United States were thus dissuaded from becoming U.S. citizens because they did not want to lose their right to a dreamed-about future property purchase in the land of their birth. Other Mexican citizens regretted that the loss of property rights was part of the sacrifice necessary in becoming U.S. citizens. This new possibility of dual citizenship is designed and has the potential to direct significant capital flow into Mexican real estate from Mexican-Americans in the United States.15

Ownership and taxation
All foreigners, regardless of their ethnicity or national origin, should be aware of all of the possible tax liabilities arising at during the purchase of real estate in Mexico and possibly afterwards. Some states in Mexico have a transfer of property tax. There is also a value-added tax, known as the Impuesto Sobre Valor Agregado (I.V.A.), at the federal level that is 15% of the transaction price in real estate transactions. There is also a Real Estate Acquisition Tax of 2% of the value of the property. Foreigners will also be taxed on income arising from any property owned in Mexico. This is the Mexican equivalent of our capital gains tax. It is known as the Impuesto Sobre la Renta, and is a 20% tax on the transaction costs on all real estate transactions involving foreigners as the sellers of property, which can alternatively be assessed at 35% of on the profit margin of the sale. A reliable local attorney should be consulted regarding the taxes incurred both at the transaction, from continued ownership, and at the sale or transfer of property to heirs.16

REALTOR® - A registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics. 

The National Association of REALTORS®, 430 N. Michigan Ave., Chicago, IL 60611   Telephone: 1-800-874-6500


DISCLAIMER:  Note:  This is not a legal document.  This write-up may contain errors and omissions and is for informational purposes only.  The above information is deemed correct, but is not guaranteed and is subject to changes and corrections. The property is subject to withdrawal from the market without prior notice.  Seller makes no presentations, warranties or disclosures as to the property except as to title.  The property is sold as is, where is with all faults and without warranty, representation or guaranty as to suitability, express or implied, (as to the condition or fitness of the property) for buyers’ use.

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Copyright © 2008 Jacob R. Casanova
Last modified: November 15, 2011