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Fideicomiso: The Key to Home Ownership in the Mexican Caribbean
Real Estate in the Riviera Maya
Playa del Carmen and the Riviera Maya, represent one of the fastest growing tourist destinations in the Caribbean.
The enticingly close proximity to the white sand beaches and jewel-colored waters of the Riviera Maya also means that the properties you are wanting to invest in here are situated in a zone where Mexican law designates special requirements for foreign buyers.
There are two criteria for determining real estate that requires a special purchasing structure for foreign investment:
The property is located within 50 km (31 miles) from a Mexican coast and/or
The property is located within 100 km (62 miles) from Mexico’s international borders
Mexico’s foreign investment law mandates the legal process required for Non-Mexicans obtaining rights to real estate that meets this criteria, stating that Non-Mexicans can acquire rights to such property under one of two legal distinctions:
For use as a residential property
For use as a commercial property (for business use)
Acquiring Rights to Residential Property in the Riviera Maya as a Foreigner
In order for Non-Mexicans to acquire rights for real estate designated for “residential use” in this special zone, the foreign buyer must obtain a Mexican Bank Trust, called a “Fideicomiso.”
This requirement is common practice and has aided foreign investors in successfully acquiring legal rights to real estate in Mexico for decades.
A Non-Mexican citizen can obtain a Mexican Fideicomiso from a large number of established banking institutions in Mexico. The Fideicomiso (trust) serves to protect the Non-Mexican Purchaser, designating specific rights of property ownership for the Non-Mexican Purchaser who possesses the Mexican Fideicomiso that is used to hold the property in question.
Once the Non-Mexican Purchaser has acquired rights to the property through the Mexican Fideicomiso, the Purchaser can legally use and benefit from the property for personal residential use.
In Layman’s terms: A foreign buyer must establish and obtain a Mexican Fideicomiso in order to legally purchase any residential property located in specified zones near Mexico’s borders and coasts. The Mexican Fideicomiso is the officially sanctioned tool that enables foreign buyers to legally acquire rights of ownership to such a property.
The Pre-Sale Factor
As development throughout the Riviera Maya is currently experiencing a second boom within a decade, there are a large number of residences that are currently available in Pre-Sale, or Pre-Construction. This means investors have a great opportunity for acquiring highly-desired property at an extremely enticing price point. This also means, however, that a Mexican Fideicomiso designated to hold the property cannot yet be established. A property must already exist in order for the Fideicomiso holding that particular property can be created.
Once the selected property is constructed, Non-Mexican Purchasers can then begin establishing their Mexican Fideicomiso, so that every legal requirement can be in place in time for the delivery date of the property.
Acquiring Rights to Commercial Property in the Riviera Maya as a Foreigner
Foreign investors may create and use a Mexican company to acquire real estate designated for “commercial use” in the Riviera Maya. The Mexican company must be a functioning business that registers sound operations, financial transactions and fiscal reports.
Keep in mind, that choosing this option for acquiring real estate, will most likely produce greater responsibilities and expenses. As a business in Mexico, you must report monthly (not yearly) administrative costs and you will accrue monthly (again not yearly) accounting costs.
There is an incentive for starting in a business in 2017, however. For the first year of operation, the business will not be required to pay any Income Tax (ISR in Spanish). The only tax the business will be required to pay during the first year is the Value Added Tax, aka VAT (IVA in Spanish). Subsequent years, the business will be subject to pay both income and sales taxes. Please note: tax laws can change year by year. This incentive is for starting a business in 2017 and may or may not be an incentive that exists in years thereafter.
Final Food for Thought
A property owned under the legal figure of a Mexican business (an S.A. de C.V. for example) is an asset which can be targeted and seized should a suite ever be filed against the registered company legally holding the property.
A property owned under the legal figure of a Fideicomiso however, is an asset that becomes extremely difficult (nearly impossible) to target for seizure. The very reason being that the property is filed and held, financially, under the Fideicomiso from a Mexican Bank and not under the name of the legal owner. Should any entity try to come after the property, they would essentially be trying to take on a large banking institution along with all the support and resources such an institution possesses.
Some Mexican residents even choose to purchase land under the legal figure of a Fideicomiso although they are not required due to the protection such a strategy provides.
Disclosure: This material has been prepared for informational purposes only. Our guides and briefings are not intended to provide and should not be relied upon, in any manner, for legal advice. Figures and statements may change without notice. This material does not constitute financial or investment advice to readers. You should seek professional advice and consult your own legal advisors before engaging in any transaction, agreement or contract.
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