Appraisal in Mexico
There are three types of real estate appraisals in Mexico that you should know about before purchasing property in the country:
This had certain consequences. If the value was low the buyer paid less in closing costs and less in property taxes. But with changes in the tax laws in 2010, you could only exempt capital gains once every five years, which has been reduced to once every three years in 2016. The catastral appraisal is based upon tax tables published by the municipality where each city block is assigned a value per square meter for the land. Then there are tables to value the square meters of construction depending on age of the property, style and condition.
One objective of this type of appraisal (Avaluo Comercial I.V.A) is to attack and modify the value of commercial construction on a property to save on the IVA sales tax.
Another objective of this type of appraisal (Avaluo Comercial I.S.R. Adquisicion) is to justify that the property has a lower market value than that obtained in the catastral or tax appraisal. This is usually necessary for properties being sold under value. If you purchase a property for more than 10 percent under its value then you as the purchaser pay the I.S.R. income tax since you are receiving a benefit.
This is the one exception to the rule where the seller always pays income tax in a sales transaction. Typical cases where this may arise are foreclosed properties, fire sales, vandalized properties or properties being constructed and not finished, where some tax offices consider a property with a roof finished while there are no walls or anything else inside.
Here the appraiser tries to justify the lower value showing that the value really is lower due to the aforementioned circumstances thereby reducing or eliminating the I.S.R. income tax that a buyer may have to pay.
The last type of commercial appraisal is the Avaluo Comercial, con Mejoras I.S.R. Enajenacion. This appraisal is underutilized and can be a great way to lower your capital gains liability.
Many expats have done remodels to their properties but do not have official tax facturas to justify the work. This type of appraisal can be used to justify the work done on the property to raise your tax basis and lower or eliminate your I.S.R. tax liabilities. You will only get benefits from remodeling and improvements done to your property, not simple repairs because something broke.
Finally, here are the Items you will need for your appraisal:
- Tax (Catastral)
- Bank (Bancario) and
- Commercial (Comercial).
Tax or Catastral Appraisal
The Tax or Catastral appraisal is used to calculate transfer taxes and fees or purchase tax. In years past this was used to establish the value as the sales price on the deed instead of the real sales price that the buyer paid to the seller.This had certain consequences. If the value was low the buyer paid less in closing costs and less in property taxes. But with changes in the tax laws in 2010, you could only exempt capital gains once every five years, which has been reduced to once every three years in 2016. The catastral appraisal is based upon tax tables published by the municipality where each city block is assigned a value per square meter for the land. Then there are tables to value the square meters of construction depending on age of the property, style and condition.
Bank or Avaluo Bancario Appraisal
The bank appraisal or avaluo bancario is used when you buy a piece of property with a bank loan. It is similar to the U.S., Canada and many other countries with comparable sales as a justification for the sales price.Commercial or Avaluo Comercial Appraisal
The commercial appraisal or avaluo comercial is not widely known but has many tax advantages when used properly.One objective of this type of appraisal (Avaluo Comercial I.V.A) is to attack and modify the value of commercial construction on a property to save on the IVA sales tax.
Another objective of this type of appraisal (Avaluo Comercial I.S.R. Adquisicion) is to justify that the property has a lower market value than that obtained in the catastral or tax appraisal. This is usually necessary for properties being sold under value. If you purchase a property for more than 10 percent under its value then you as the purchaser pay the I.S.R. income tax since you are receiving a benefit.
This is the one exception to the rule where the seller always pays income tax in a sales transaction. Typical cases where this may arise are foreclosed properties, fire sales, vandalized properties or properties being constructed and not finished, where some tax offices consider a property with a roof finished while there are no walls or anything else inside.
Here the appraiser tries to justify the lower value showing that the value really is lower due to the aforementioned circumstances thereby reducing or eliminating the I.S.R. income tax that a buyer may have to pay.
The last type of commercial appraisal is the Avaluo Comercial, con Mejoras I.S.R. Enajenacion. This appraisal is underutilized and can be a great way to lower your capital gains liability.
Many expats have done remodels to their properties but do not have official tax facturas to justify the work. This type of appraisal can be used to justify the work done on the property to raise your tax basis and lower or eliminate your I.S.R. tax liabilities. You will only get benefits from remodeling and improvements done to your property, not simple repairs because something broke.
Finally, here are the Items you will need for your appraisal:
- Copies of your property deed with registration receipt
- Copy of your most recent property tax bill/receipt
- Copy of most recent water bill/receipt
