Selling property in Mexico as a foreigner: 25% of the price, or tax on the gain.

By Stan Brinkman · independent property analyst

How much tax does a non-resident pay when selling property in Mexico?

25% of the total sale proceeds, without any deduction, under LISR Article 160. The tax is on the gross price, not the gain, so the purchase cost and expenses do not reduce it. A non-resident who sells by public deed can have the tax worked out on the gain instead.

Run both methods before you set a price. On a sale with a small gain, the gross method can take more than the gain itself.

Can a non-resident be taxed on the gain instead?

Yes. In a sale made in a public deed, the seller may apply the top rate of the Article 152 individual tariff, 35%, to the gain instead of 25% of the price, and no representative in Mexico is needed for that option (LISR Article 160).

An heir who sells keeps the deceased's purchase cost and acquisition date when the gain is worked out (Article 124). Run both methods with the notary before you set a price.

Who collects the tax on a Mexican property sale?

The notary. For a non-resident seller, the notary calculates the income tax, records it in the escritura and pays it within 15 days (LISR Article 160). If the buyer is a Mexican resident and no notary is involved, the buyer withholds the tax. For resident sellers the notary pays the provisional tax within 15 days (Article 126).

So the tax is settled at signing, not at a filing months later. Ask the notary for the calculation before the deed date. The purchase side of the same process: buying property in Mexico as a foreigner.

What happens if the appraisal is higher than the sale price?

If the official appraisal (avalúo) exceeds the agreed price by more than 10%, the whole difference is taxed at 25% without deduction on the non-resident seller, under LISR Article 160. An agreed price well below the appraised value therefore adds tax on top of the tax on the sale itself.

Get the appraisal before you agree a price, not after.

Can a foreigner use Mexico's home-sale exemption?

Only as a Mexican tax resident. For residents, the gain on selling their own home is exempt if the price does not exceed 700,000 UDIS and the sale is formalised before a notary (LISR Article 93, fraction XIX). The exemption sits in the residents' part of the law, and the non-resident sale rule in Article 160 has no equivalent in the text read.

That reading comes from the structure of the law, not from a published tax authority statement, so confirm your position with an adviser. According to Tirant Prime, the exemption can be used once every three years, and the seller proves residence with documents in their name, such as the voter card (INE), utility bills or bank statements.

Do resident sellers pay tax to the Mexican state as well?

Yes. Besides the federal provisional payment, a resident seller pays 5% of the gain to the state where the property is located. That state payment is creditable against the federal provisional payment (LISR Article 127). It applies to foreigners who are Mexican tax residents, not to non-resident sellers under Article 160.

All the taxes on owning and letting, in one place: Mexico property tax for foreigners.

Header photo: Alejandro Islas Photograph AC, CC BY 2.0, via Wikimedia Commons. All credits: image credits.