Understanding Taxes in Mexico: A Simple Guide for Canadian Real Estate Buyers

When buying real estate in Mexico, it’s important to understand the taxes that might apply to your property and other transactions.
However, don’t worry—Mexico has tax treaties with countries like Canada, which can prevent double taxation and make things simpler. Here’s a breakdown of the main taxes to be aware of:

Federal Taxes

These apply across the entire country, but only come into play if you’re earning income or making profits.

• Income Tax (ISR): This is only charged when you make a profit, such as when selling a property.
• Value-Added Tax (IVA): Usually included in services and some property-related costs.
• Other Federal Taxes: Most foreign property buyers don’t have to worry about taxes like the Special Production Tax (IEPS) or the New Car Tax (ISAN).

State Taxes

These vary depending on which state your property is in.

• Vehicle Tax (Tenencia): Applies to car ownership, amounts can differ by state.
• Utilities: Fees for water and other utilities include a tax.
• Other Services: Licensing fees (for driving or business purposes) include a tax.

Municipal Taxes

These are local taxes and usually very straightforward.

• Property Tax (Impuesto Predial): This is the main municipal tax you’ll encounter as a property owner. It’s similar to property taxes in Canada and is paid annually. It is very low compared to Canadian standards.

In Mexico, one of the advantages is that taxes like the Value-Added Tax (IVA) are typically included in the purchase price of services or goods, including real estate transactions. This means that when you’re buying property, the price you see usually already reflects any applicable taxes—making it easier to budget without worrying about unexpected costs down the line.

How Canada-Mexico Tax Treaties Help You

Canada and Mexico have tax treaties that help you avoid paying taxes twice on the same income or property gain. If you’re a Canadian resident, this can make owning and selling real estate in Mexico even more attractive. Your accountant can help ensure you benefit from these treaties.

Final Thoughts

Owning property in Mexico involves some additional costs, but the taxes are manageable and often similar to what you’d find in Canada. Always consult with a tax professional to ensure you’re making the most of tax treaties and staying compliant.

Feel free to reach out with any questions or concerns!