We are coming out of our best year for volume of sales transactions since 2008. The most popular properties are new condo projects throughout the Bay. The location of the majority of these sales has been inside Puerto Vallarta in the Old Town Romantic Zone and the South Shore.
We are seeing buyers also looking for homes in higher price ranges than times past. Up until this point, we had seen increases in luxury rentals in place of large demand for purchase of luxury villas. We continue to have buildings which, because of location and amenities, enjoy their own market prices and perform much better than the averages.
We are optimistic about 2018 and believe this year can be a great one for sales of all properties. We should have more tourists enjoying our towns from Chacala on the north to Boca de Tomatlan on the south. The peso is a great value now for stronger currencies such as the US and Canadian dollar.
As with all good times, we should continue to be careful and thoughtful before making serious decisions and spending a lot of money. Common sense should prevail. There are seriously good reasons to buy property in a foreign country, and for North Americans, investments in any of our three countries have specific benefits.
Mexico has opened its doors to US citizens and Canadian citizens for generations. All three countries have similar rules and regulations for taxes, citizenship, and residency. Anyone who earns money from homes they own in any of the countries or works in these countries owes taxes.
Here in the Bay, there are some attractive incentives when owners report their rental income. A good accountant is critical to registering and reporting. There is an option for a small business to phase in payment of taxes, with the first year none being due, second year 10%, and so on for the first 10 years. Room tax or IVA tax may be due, but income tax can be phased in. Deductions are important to know and use. Registering in the tax authority and with immigration is required in all countries.
Reporting income is required each month even if no income was earned. Some people do this themselves, but most use local accountants. It is always important to know what deductions are allowed for expenses such as travel, utilities, maintenance, and repairs. You may be able to take deductions in two countries for the rental of your property here in Mexico.
In 2013, the international community faced new anti-money laundering laws. This requirement originally came from the US in an effort to find where terrorists put their money to finance acts of violence. It was then that laws such as the FATCO were implemented which require American citizens to report deposits of funds into any foreign bank or investment house. What other countries learned was that these new laws affecting transfer of domestic and international funds could also give them the ability to see if their residents were paying the appropriate taxes. This is why Mexico has followed suit in very strict anti-money laundering laws.
Transparency versus privacy is an issue. The use of internet platforms such as Facebook, Airbnb, VRBO, and any other website advertising products and services sold by individuals has enabled the government to see who is earning money and what taxes are owed.
We were told recently by accountant Pedro Covarrubias that Mexico is negotiating with Airbnb to have the 3% room tax paid. Knowing the percentage of rental income to collect the 3% will also enable the Mexican government to know the amount of taxes to collect. Any country can monitor this activity on public rental websites. You cannot be invisible if you are renting your property to people online.
This article is based upon Flex MLS reporting, legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review. If you have any other questions, contact me through my website.Harriet Murray