Orlando Santamaria, attorney presented a program to the Ampi Vallarta agents, explaining the revised tax appraisal we are operating on in 2020 to the present.  We want to share with you this information. 

On January 31 2019 our local congress in Vallarta approved a change in our “Ley de Ingresos de Puerto Vallarta” (income law of Puerto Vallarta) where they eliminated the last paragraph of article 41 (the portion of the law specifically pertaining to transmission tax charges).

Current legal wording of last paragraph of article 41: 

In the case of the transmission, whatever the way it is done, of real estate destined exclusively for residential purposes, or lots of land that will be dedicated to this purpose, 

Changed approved in the municipality of Puerto Vallarta for article 41: 

For the calculation of the Tax on Patrimonial Transmissions, the following formula must be applied: ((BI-LI) * T) + CF = Tax on Patrimonial Transmissions to be paid Where:

BI = Tax Base

LI = corresponding Lower Limit 

T = Marginal rate on surplus of the corresponding Lower Limit CF = corresponding Fixed Fee 

In reality, the above wording has always been there. That last paragraph is very specific about using the appraisal as the base for transmission tax when selling a residency, but with the change proposed, they just eliminated that last paragraph so the transmission tax is calculated using as base the highest value of either the appraisal value or the purchase price value. We all know the appraisal value is most of the time significantly lower than the purchase price value, which will be the base for that tax now. 

Here is an example on how this will affect your buyer using a price of a property valued in $400,000 USD ($8,400,000 pesos) (using an exchange rate of 21 peso to 1 USD) vs. using the property appraisal value of $6,000,000 pesos (285,714 USD). 

Using the appraisal value for this calculation, the way the law indicates in the index also given by the law, we have the following: Current transfer tax to be paid is: $159,849 pesos (7,611.85 USD) (based on the appraisal value of $6,000,000 pesos (285,714 USD). 

Once the law is approved, the transfer tax to be paid will be: $234,249 pesos (11, 154.71 USD) (based on the highest value, which is the purchase price of $400,000 USD ($8,400,000 pesos). 

The tax base will be the appraisal value authorized by the Cadastral Office of the Municipality of Puerto Vallarta.

The base to calculate the tax on Patrimonial Transmissions, will be the highest value between: 

a) The appraisal value practiced by an expert authorized and approved by the Cadastral Office of the Municipality of Puerto Vallarta. 

b) The value or price of operation agreed and indicated in the notice of Transfer of Assets, contract or the deed

Please bear in mind that this will not affect your client’s property taxes that they pay every year, as they will still be paying the property tax based on their appraisal value. The proposed change only applies to transmission tax for the property. 

So it best when asking for an estimate of closing costs to use the purchase price; if the appraisal value is indeed the amount still being charged for transmission tax purposes when you close, your clients will be happy letting them know they saved money. 

Orlando Santamaría, Abogado

This article is based upon legal opinions, current practices, and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas.  I recommend that each potential buyer or seller conduct his own due diligence and review.     

harriet@casasandvillas.com

HARRIET COCHRAN MURRAY