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Tax Manifestation - Building a house in Mexico
An important detail if you are building a house
By Alicia Parra
For those brave souls who are building their home in Mexico, an important part of the process is the Manifestation. This is a notification made before the local property tax department. It signals the termination of the construction and tells the world that the house is ready to be occupied.
All too often, this notification is not made in a timely manner and can cause problems and additional expense, especially when the house is being sold. The Manifestation must be prepared on a printed format supplied by the property tax office and will require detailed information about the lot: measurements, total surface area, etc. and detailed information about the house or other construction being manifested.
Copies of the property tax payments, construction license, plans and the deed to the property must be presented. This same form will request information about the types of materials used in each room and the utility distribution. The value of the construction must be stated in the manifestation. This can either be in the form of a contract with the builder in which the total amount paid for the construction is shown, or through official invoices showing the cost of materials and social security (IMSS) statements on amounts paid for the workers.
This value is highly important since it will establish the basis for tax calculations when the property is sold.
The cost of manifestation is minimal if done in a timely manner. Not only does it establish a date for calculation of capital gain taxes (ISR) upon sale, but also it lowers the property tax rate from that of a vacant lot to that of a residential dwelling which can result in lower property taxes even though the overall value of the property is higher.
ABOUT THE AUTHOR
Ms. Parra is Chief Closing Officer for The Settlement Company. It is the first escrow company in Mexico, and is dedicated to processing the trusts and title transfers of Mexican real estate for foreign buyers and sellers for properties located ANYWHERE in Mexico. The company frequently sponsors seminars on the various aspects of real estate ownership in Mexico and holds membership in AMPI, NAR and FIABCI and PROFECO Certificate 00063/96 E-Mail:
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Web Site: http://www.settlement-co.com
Buying and selling property can be stressful. Here in Mexico it can be both stressful and challenging, As in any country, if you do your homework and use the service of a professional title service company, life will be easier for you. Unfortunately some sellers don’t have all their title documents in order.
In Mexico, the ONLY authority permitted to draft a deed transferring real property or an interest in real property (such as the fideicomiso) is the Mexican Notary Public. This person is different from a Notary Public in the United States where a simple exam, bond, and a rubber stamp can make a Notary Public out of most people.
The cottage on a tiny individual lot or the mansion built on a grand expanse of land. This type of home ownership has been the dream of many in the Western world where land has been plentiful and where the family lived in ONE home and did not have other properties for vacations, recreation and retirement.
EJIDAL (EEEE-heee-doll) properties were established in Article 27 of the Mexican Constitution of 1917 as an outcome of the revolution and represent probably 50% of all the land in Mexico.
Everyday more and more foreigners, people from the U.S., Canada, Asia and Europe, have found Mexico to be an ideal location for healthy retirement. Others have come to Mexico as a result of job transfers. Others still, taking advantage of electronic and wireless communications, seek out delightful areas in which to live and work from their in-home offices and studios.
There is a lot of misinformation on this subject, such as: "Ïf you become a Mexican citizen you have no tax to pay when you sell real estate"....................... or "With a FM-3 and some receipts, you will be exempt from paying capital gains on the sale of your vacation house in Mexico"
