Everything you need to know about buying and selling real estate in Mexico, Puerto Vallarta, and the Banderas Bay region

Real Estate in Mexico

US Dollars and Mexican Pesos in Property Purchases

Wealthy nationals and foreigners like the idea of buying and selling real estate here in US dollars. They see a US dollar price for real estate as a way to park their money in an asset instead of a bank or investment fund. The US dollar is more stable than the peso at the moment. Two basic facts you need to think about when buying in US dollars, is to understand the tax structure in Mexico for capital gains and to not overpay.

As in the majority of foreign countries, property purchases and sale prices are recorded in the currency of the country where the property resides.

For example, in tourist areas of Mexico, if a purchase price of $100,000 usd is recorded at 20 pesos and the pesos continues to be weaker when the owner sells, say 25 pesos to the dollar, he has a gain because the value of his property is in more pesos, not less. If he sells when the peso is 25 to the US dollar, this is a gain. The ISR or capital gains tax will be computed with these numbers even though the purchase price can be sold and paid for in US dollars.

If the peso becomes stronger against the US dollar and the exchange is 15 pesos to the US dollar, the property purchased for 20 pesos a US dollar will have a loss when the property is sold. This will lessen the ISR or Mexican capital gains tax. The sales price again may be paid in US dollars, but it will be recorded in pesos.

 

Taxes Owed

It should be obvious to all of us by now, that rental income and equity in sales transactions are affected by the tax income structure for the country where the property exists. In the US tax code currently, an American citizen can take advantage of receiving a credit of some type for the taxes paid to Mexico. Check with your American accountant. You need to pay taxes in the country where the money is earned. If you are renting your condo here in Puerto Vallarta, you owe money to the Mexican tax authority.

 

The Mexican Peso Mirroring US Actions

The Mexican currency has become a gauge of US policies on immigration, trade, and illicit drugs. Nationalism or protectionism policies affect all economies who deal in trade with the US. Mexico and Canada, as the other two countries in North America are certainly impacted.
A weaker peso might not be good for US companies who export their goods to Mexico. Their dollar prices into pesos will require more pesos for the consumer to pay for their product. In short, a stronger dollar is not necessarily great news for American firms with international exposure.

 

Making the Currency Exchange

Making a currency exchange in Mexican banks has become more difficult. Some banks require you to have an account to change money.

Point of Purchase Exchange: Be aware of the exchange when you want to pay for goods and services with US dollars. The exchange rate may be against you compared to a bank or commercial exchange rate. Buying pesos when you receive more is a good way to have a reserve to pay in pesos for more goods and services until your pesos run out.

 

 

VIEWPOINT®
Puerto Vallarta Real Estate Blog published every week –
read it here: http://casasandvillas.com/blog/

and in the PV Mirror:
http://pvmcitypaper.com and at newsstands throughout Puerto Vallarta

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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

harriet@casasandvillas.com

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