The question of weather non-Mexican nationals have to pay a capital gains tax (Sobre de Renta) in Mexico is one that is addressed in Mexico every year. Real Estate law in Mexico states explicitly that a Mexican who owns his own home (This does not apply to commercial property, rentals, or lots) and has occupied it for more than 6 months (It was 2 years, but was changed a year ago) is EXEMPT from capital gains when they sell. The section dealing with non-Mexican nationals does not address capital gains at all. For this reason, the Notarios in Mexico have, traditionally, applied the same rule to non Mexicans, IF; A) They have owned the property more than 6 months. B) It is their primary residence in Mexico. C) They have FM-3, FM-2, or Mexican citizenship. If they meet all three requirements, the Notarios apply the exemption. If they do not meet all three, they must pay the capital gains tax.
I sold a condo for a gentleman here a year ago who met A and B but not C. He had also, with bad advice when he bought the condo, listed a lower sale price than he paid to save a few dollars on the acquisition tax and his yearly property tax. When he sold and we listed the actual selling price, he lost money on the sale. Penny wise, pound foolish. He thought he was saving (In the short run he did) by listing a lower sale price when he bought it and not paying for FM-3 status for several years. It cost him big time in the end. Rule 1, 2, and 3 is DO THINGS RIGHT!
RogerCulbertson March 14, 2005
I would add to Roger's information that not only should you consider what the rules are here in Mexico, but also your own country! Just because the rule for capital gains exclusion here is 6 months, doesn't mean that its the same in, for example, the US. In the US you must have lived in the home for TWO out of the last five years as your primary residence. Otherwise, you must pay capital gains tax in the US.
DavidShafer March 14, 2005