La Paz, Baja California Sur, is a very special place.    First, it is important to understand that the words, La Paz mean City of Peace.   And it is!   Residents live full and happy lives and are not interested in conflict or unhappiness.   We help one another!   Over the next few weeks I will share some of the places and activities that make my La Paz real estate region so special for quality living.

Let’s start with RANCHO EL CAMINO

Peter and Cher Gatto, from the United States have an oasis on 40 acres of Mexico real estate located against the rugged coast mountains that  hug the Sea of Cortez just south of La Paz.    When they arrived at the ranch some years ago it had a dilapidated dwelling, beautiful springs, lots of rattlesnakes and scorpions and not much else.  This has become a training camp and learning place for hundreds of children from La Paz who have not had this type of opportunity in the past.  It also attracts  young people from all over the United States who spend their summers at Rancho El Camino helping building, working with children, tending the animals.

This summer, 2011, 100 students will come from the US as interns, learning to work and play together, sharing their experiences which range from KP duty, to building dormitories, caring for the animals (goats, cows, horses, a rabbit, chickens, etc) and having a healthy spiritual experience.

Peter and Cher consider this a ministry and are thankful to have the opportunity to share beauty, nature and goodness with others.

They are especially proud of the horse ministry in which young ones learn to love and care for horses.   This is good for the horses but seems to be even better for the children, many of whom have never been close to a large animal before.

They have also established a camping ministry which makes the ranch available for weekend camping to young people from churches of all denominations and sizes from La Paz and the surrounding communities.

Located on a dirt road at the edge of the mountains after passing through the Marquez de Leon neighborhood of La Paz, Rancho El Camino is a paradise in the desert.

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96.  Founding  member of AMPI Los Cabos and two time member of the national advisory board she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

The La Paz  Hotel and Tourism Association (Emprhotur) met recently to review and approve its marketing and promotional budget for 2011.  The La Paz real estate market benefits from such programs as the regional attractions are promoted to tourists and second home buyers.   The budget had been approved by the Association’s technical committee in December. At the General Assembly presided over by Pedro Aguilar from Hotel Cantamar, the budget and marketing plan was approved in detail.

Funds generated by the 3% hospitality tax, plus money coming from a coalition of businesses are in a fideicomiso. (Trust Fund) and are used to promote La Paz as a tourist destination.

The trust fund for 2011 totals $ 1,638,814. Of this amount, $ 207,725 will be used for direct promotion in the Mexican market and $ 136,266 in the international market. EMPRHOTUR will participate jointly with the State Secretary of tourism in tourism fairs and conferences, both in Mexico and abroad.

In addition to this advertising and promotional literature an ongoing campaign will be aimed at social networks and the maintenance of the web site VIVALAPAZ.net.

Last year the Secretary of tourism was in La Paz to discuss the construction of a convention center. Technical experts have concluded such a project is viable. Funds have been designated to be used for the planning of a new center.  The promotion of Mexico as a world wide tourist destination helps not only the tourism industry but a wide variety of related sectors such as the Mexico real estate industries.

Author John Glaab CIPS is a founding member of AMPI Los Cabos. A Certified International Property Specialist he is active in the National Association of Realtors® Global Business Alliances Group. John was recently appointed as a member of Amp’s International Relations Committee. for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

The Mexican Association of Mexican Real Estate Professionals (AMPI) has a new President. Adan Larracilla of Puebla, Puebla, has been sworn in, replacing outgoing President Hector Obregon of Leon, Guanajuato Also at the ceremony, Sergio Gomez became AMPI’s new Vice President and ten members representing a broad cross section of the Republic, joined the National Advisory Board. Jose Oscar Vega from the Secretary of the federal Government, representing President Felipe Calderon, presided at the ceremony.

Outgoing President Obregon reported on AMPI’s activities last year, its 55th year of operation. Several new Sections throughout the Mexico real estate market have been established with AMPI now having Sections in 64 cities. A major accomplishment was the establishment of AMPI’s new Training and Statistics Institute. He also reported he had breakfast earlier in the day with fifteen AMPI Past Presidents New President Larracilla outlined his goals and aspirations for 2011.

Jose Oscar Vegas had three messages for AMPI. First, he reported that the current Government is in full support of AMPI and its contribution to the housing industry.  There are too many. “ coyotes” and too much fraud in the real estate industry. . Second he spoke about the need to “regularize” the real estate industry. Here he referred to the need for licensing and mentioned the handful of states that have a law governing real estate. The third theme was “trato directo” which basically is the For Sale by Owner market. He said, “This is a risky proposition.”

Also speaking at the TOMA was Adrian Arriaga, CIPS, CCIM.  Adrian, a past Ambassador from the National Association of Realtors® (NAR) to AMPI and a member of the Texas Real Estate Commission,  is the currently  Chair of NAR’s Global Business Alliances Group. He brought greetings from NAR President. Ron Phipps. NOTE: AMPI and NAR signed a joint venture agreement in 2006. Under the agreement, AMPI members can legally use the word REALTOR®

The event was held at the Hacienda de Los Morales, in Mexico, D.F.

A cocktail-reception followed the inauguration. It was attended by over 300 people including political and real estate industry dignitaries.

Immediately before the TOMA the Mexican Section of The International Real Estate Federation (FIABCI) gathered for a short meeting. During our FIABCI meeting Adolfo Kunz made a review of all his years in FIABCI.. He fondly remembered the World Congresses held in Mexico in the 60’s and 80’s, and his wonderful experiences meeting dignitaries from all over the world in Europe, South America, Canada, and the U.S.A., and different business opportunities he encountered through his FIABCI Membership. Adolfo, an attorney, is a Past President of FIABCI Mexico and was a Deputy in Mexico’s Congress.

Author John Glaab CIPS is a founding member of AMPI Los Cabos. A Certified International Property Specialist he is active in the National Association of Realtors® Global Business Alliances Group.  John was recently appointed as a member of Amp’s International Relations Committee. for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

Every transfer of Mexico real estate property MUST, by law, be made before a Mexican notary public.

The Mexican notary public is required to have a degree in law.  He must have a minimum of five years of legal practice, pass a rigorous examination and then be appointed by the governor of the state in which he/she resides.   The notary is legally responsible for the review of the prior deed and the tax and lien certificates.  The notary must draft the new deed, calculate the Mexico property taxes due and pay them.  Also very important, the notary is accountable for his/her actions through the state and national notary associations.

It is commonly believed that an attorney, in addition to the notary public, is required when buying property in Mexico.   This is not necessarily the case.  In fact it may make more sense to seek out a CLOSING AGENT to handle the many details of the transfer, such as ordering and reviewing the title investigation; obtaining the certificates and trust permits, interfacing with the buyer and seller, answering their questions and concerns in their native language, explaining the nuances of the transfer process; overseeing the payment of funds for these services and expenses; reviewing the deed to be sure names and addresses are correct; being sure it is registered in the public registry of property; making sure it is delivered to the buyer; providing tax receipts to the seller………….and more!

When these matters are left with the Notary Public to handle, they may not all get done, or get done slowly due to the work load of most Notaries.   When these matters are handed to another attorney to perform, they may be sandwiched in between criminal complaints, court appearances and other more remunerative activities.

A good Closing Agent can be an attorney with expertise in title transfers, or it can be a company with experienced closing officers and attorneys on its staff for consultations in the event there are title issues.   More and more there are closing agents throughout Mexico.   They are specialists in titles and transfers.

The role of the Mexico closing agent

An experienced Closing Agent is a key person in the real estate purchasing process. Hiring a good Closing Agent who understands the ins and outs of the Mexican legal system and the requirements of the law as it relates to foreign investment will make the real estate transaction go much smoother.

The closing agent should be involved in drawing up a promise contract and reviewing all documents including title, certificate of no encumbrances, and  permits. A closing agent can also order a complete title search before the transaction reaches the notary public, which will save the buyer valuable time and money should there be a problem with the title.

The prudent buyer will always insist upon using a neutral third party closing agent to protect his or her interests.

Professional Closing Agents will have bi-lingual and experienced closing officers on staff to review the legalities of the transaction and to ensure that all the documents received are in order. Prudent buyers also enlist the help of the Closing Agent, who can oversee the permit process, review the draft of the deed being used in the transfer of title and order the title investigation, identifying any problems before the title has been transferred and money exchanged.

Finding a Trustworthy Closing agent

Clients should never hesitate to ask for details of the professional experience and references.  This is even more important when the real estate agent in the transaction is representing BOTH buyer and seller.  This is dual agency which is still common in Mexico.   In this case the buyer should definitely seek out his/her closing agent.

Questions to Ask a CLOSING AGENT: What exact services will you provide? What areas of law or real estate are your specialties? Can you provide an estimate of taxes and closing cost expenses? Will you order or conduct a title search? Can you provide at least three references?   Do you have experience with transfers to foreigners, Mexican bank trusts and foreign investment? How long have you been offering Closing Services to the public? How do you handle the funds you receive for closing expenses? Do you prepare specific instructions for the disbursement of funds?

Closing Agents do not have to be specifically licensed in Mexico to be able to supervise the transfer process of Mexican property. It is important to be cautious and do the same homework as when researching a real estate agent. Ask for credentials and references. The more experienced the staff and in-house counsel the company has in handling foreign investment transactions, the more protection and safety the buyer should have in a Mexican property purchase.

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

Mexico Resort Real Estate Update ………….

From The Settlement Company®

Welcome to our 4th Quarter newsletter. It is the final edition for this decade.  TOP Mexico Real Estate will divide this newsletter into several posts which will be aired over the next several days.  The decade started out with a strong world-wide economy and few if any signs as to how it would close. It has been a rather rocky road.  The words, “bail out” are heard almost daily. The latest of course is the bail out of the Irish banks by the European Community.  Economists are sending mixed signals. The stock issuance by General Motors was a bright spot, but followed too quickly by events on the Korean peninsula which set back the market. A new book, “All the Devils are Here; the Hidden History of the Financial Crisis, is co-authored by Barbara McLean. While it does not place blame, it is a rather accurate chronicle of what has caused the crisis. “Black Friday” was hopefully a good omen for retailers in the U.S. Shoppers came to buy in droves. Macy’s Inc C.E.O. said the retailer had 7,000 shoppers outside its flagship Herald Square store in Manhattan at 4.am. on Black Friday. That is 2,000 more than last year.

La Paz Real Estate region Makes Record Book: Those who habitually walk and exercise on the Malecon had a surprise on day, last month. Lining the route were tables with a white paper covering. We left the house early for our normal trip to the gym, but the road was closed.  So we walked to the start of the Malecon. On the way we saw a large unit making dough. We continued to the end where we met Ralph Hannah who had been sent from Uruaguay by the Guinness Book of Records group. He had been sent to La Paz to act as Adjudicator. Employees from 54 restaurants, along with 3000 volunteers were busy creating the world’s largest burrito. A pickup truck had been modified so that a conveyor coming out of the back would spew out a seamless tortilla. As the truck moved ever so slowly down the Malecon, and workers lifted the tortilla on to the line of tables.

The tortilla would be filled to create the burrito. Ingredients used were, two tons of flour,250 liters of milk, 400 kilos of tomatoes, 40 large onions. 300 chiles 200 kilos of salt 3 tons of minced fish.  When finished, the burrito weighed 5.7 tons. I walked down to the Malecon a couple of times to watch the work in progress. On one trip, I was treated to a famous La Paz real estate sunset.

After 15 hours of work (and two years of planning) Adjudicator Hannah proclaimed the record was official. The burrito was then cut into 27,000 pieces to be shared by the spectators. Mr. Hannah mentioned there were several Mexican groups seeking a record this year. These included Guadalajara (largest Mariachi Group) and Mexico City a large enchilada which he told me was smaller than the burrito. Mr.  Hannah accredited the activity to Mexico’s celebration of Independence and the end of the revolution.

John Glaab

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

About 22.6 million tourists, 80% of them from the United States and Canada, are expected to have visited our Mexico real estate region by the end of 2010.

As of September, inbound tourism was up 18.8% compared with 2009 (the worst year on record) and 6% better than 2008.

Arrivals from Canada are up almost 22% over 2009 and 32% over 2008, with 1 million air arrivals this year.

And, despite the much-publicized bankruptcy of Mexicana Airlines earlier this year, air arrivals from the U.S. were up 15% compared with 2009.

The growth in visitors from other countries is even greater. Italy is up 22%; Germany, 18%; and Brazil, 94%.

John Glaab
(512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

If the US taxpayer has deposits in foreign banks, stock brokerage accounts or other foreign financial accounts and when the highest balance in those combined accounts equals or exceeds $10,000 USD, during a calendar year, form TDF 90-22.1 must be filed by June 30^th following the end of each calendar year. This form is not filed with taxpayer’s personal tax return and cannot be extended beyond that due date.

1. The IRS has never issued any written ruling or opinion whether or not  a fideicomiso is a foreign trust and IRS sources state it  has no intention of doing so in the near future.

1. Under US tax law, an oral decision made in an individual’s tax matter CANNOT be cited as authority by another taxpayer in a similar factual situation.

1. No one has received a private letter ruling that the Mexican fideicomiso is not a foreign trust nor have any court cases so decided.

1. A representative of the IRS General Counsels Office has said that since the IRS has not yet (nor may ever) issued a ruling that a Fideicomiso is not a foreign trust, it is not advisable to rely on an opinion on that requirement that does not come in writing from the IRS.

1. The fact the IRS will not issue a written opinion on fideicomiso filing requirements should be cause to worry. It would be easy for them to issue written guidance if they really were certain that the beneficiaries of fideicomisos did not have to file the foreign trust forms.

1. Currently in almost all situations, anyone who has filed these forms late and included a late filing excuse, has not been assessed penalties. Those who have filed the forms late and did not include a late filing explanation have been assessed penalties, but have subsequently  been able to get the penalty abated after appealing.  This could change in the future.

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

Linda Neil is one of our Top Brokers who has just written another informative piece regarding Mexico Real Estate issues such as taxes as seen below in her article called “Tax Obligations for foreigners in Mexico Death and Taxes…both are inevitable”.  Linda has been working in the La Paz real estate industry for over 30 years and has tremendous experience in the issues that most effect new non-Mexican property buyers. 

Whether a property owner or just the occasional visitor to the La Paz real estate region on the beautiful beaches of Mexico, everyone pays taxes, natives and foreigners.   Some of the taxes are hidden and others are not.   The purpose of this article is to touch on some of the important taxes levied and paid in Mexico.

            WHO COLLECTS TAXES:   The SAT (Servicio de Administracion Tributaria), also known as Hacienda, is the federal tax collector.   It collects all federal taxes such as the ISR (Income or Capital Gains) tax, the IVA (Added Value) tax, the IDE (Tax on Cash Deposits) and the IEPS (Special Tax on Production and Services).  Each state government has its own taxes such as the 2 to 3 percent tax on lodgings and tourism.   The municipal governments assess and levy taxes on real and personal properties.

            IVA TAX:   This is the Value Added Tax which is charged on goods and services.   The only exemptions are medicines and food.   Often this tax is INCLUDED in the price of food served in a restaurant, legal services, and the items purchased in a department or clothing store.   The business owner and tax resident is obligated to file a monthly declaration with Hacienda and pay the tax on earnings.   Credited against this tax are IVA taxes paid on goods and services acquired.  

            There is no IVA tax on the sale of vacant Mexico land or on the sale of residential dwellings.   The tax is levied on all commercial construction when it is sold or transferred, at the rate of 16% of the value of construction, regardless of where the property is located.  

            IVA tax is charged on lodgings, hotel rooms and furnished homes which are rented.

            As of January 1, 2010, this tax has been increased from 15% to 16% in the interior of the country and from 10% to 11% in the border zones.

            IEPS TAX:  This is the Special Tax on Products and Services which is a new tax for 2010.  It will cover certain internet and cable TV services, alcohol, cigarettes, and gaming.

            PROPERTY TAX;   This is a municipal tax with assessments on properties generally being made annually.   The tax can be paid in six installments (every two months) but probably should be paid in full within the first two months of the calendar year to obtain a discount.   Rates vary from area to area but are often far lower than U.S. or Canadian property taxes.

            ISR TAX;   Literally the Tax on Rents has been described as both an income tax and a capital gains tax.   It is complex and a subject of confusion.

            ON INCOME.   Any income generated from sources within Mexico, is taxable.   From business or salary, the rates are variable depending upon the amount of income received.

This is the end of Part I, and you will be able to see the finishing paragraphs in a separate article by the end of the week.

Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

 

ERLINDA WEYER
who passed from this life
on December 7th, 2009

Author John Glaab and Linda Neil have over 35 years of hands on experience in all aspects of Mexican real estate. Linda holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

Is the Mexico Retirement industry a niche market that can help the Mexico real estate market come back?

 With millions of baby boomers reaching retirement age every day, the market for a lovely place to live with the security and services required is growing exponentially.  

Many baby boomers no longer want the five bedroom home and quarter to half acre home in the suburbs.   Nor does the luxurious and prestigious home on the beach seem as attractive as it once was.  Too much work!   Too much upkeep! And too much money!  Today’s couple reaching retirement age is looking for an interesting and inviting place to live that promises outstanding value and something different!

All this and more was covered recently in a conference in Mexico City.   The Mexican Association for Assistance to Retirees.   Over 400 industry leaders, developers and those looking for some answers met at this conference in Mexico City to discuss parameters and new strategies for the Mexico retirement industry.

Many are coming to recognize that Mexico retirement options are very feasible with its lower cost of living, culture and tradition for caring, with outstanding medical services, may be the new place for Americans and Canadians looking for retirement.   Perhaps Mexico homes and this country will no longer be viewed just as a vacation in an exotic place!

When the crisis really hit the U.S., many buyers of Mexico property left the market.   Their investment funds came from the stock market, 401 Ks and home equity.   These sources obviously dried up and the resort and vacation market hit bottom.    Prices in the Mexico real estate market, however, have not necessarily come down in the resort areas since many sellers do not have bank loans on their properties and are in a position to hold on to their properties until that market returns.

These properties may not sell soon, however.   There seems to be a feeling among those who suffered reverses in their portfolios that this time they will look for quality, value and security rather than plunk down money on an emotional and perhaps exotic purchase.

There is a delayed demand – many of those who left the property market in 2007 and 2008 did so because they were suffering devastating losses in U.S. investments.  Now that those markets are beginning to recuperate, it seems that the home or condominium for vacations, rentals, active retirement will be more attractive if of high quality, easily accessible and not exceed 200,000. to 300,000. USD in price. Also very desirable is the development that integrates the Mexican culture into its overall concept such as those found in the La Paz Real Estate area. The home away from home of yesteryear, insulated from the Mexican culture, may not be quite as attractive as it used to be.

What may be sought after in this new Mexico retirement market is the development that offers Active Living and Aging in Place.   In other words, independent living modules, either separate homes or condominiums within a secure community with many activities available either on site or in the community: such as biking, hiking, fitness, swimming, crafts classes, music activities.  These activities are geared to the mature active adult who has always wanted time to do these things and can live independently.   Within the same community, however, are medical facilities, and increased services available such as the preparation of meals, home visits and so forth.   Different packages of services are available to fit the variouef levels and requirements and can be purchased from a hospitality company operating the development.  

These independent living units can either be purchased or leased.   The move to assisted living will focus on  a more institutional environment which features everything from meal preparation to intensive care. 

Under consideration at present in the U.S. government, is an initiative to permit Medicare benefits to extend to care received in Mexico.   Since health care costs are substantially less in Mexico for the same level of care, both the U.S. government and the patients will benefit.

In all cases, the successful Active Living to Assisted Care development will require excellent access to health facilities, airports for quick access by loved ones, and outstanding communications systems in the community.   There are perhaps a dozen cities in interior Mexico which may fit the bill for this new focus on sales to the foreign market.

 
Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

The Sociedad Anonima de Capital Variable, translated literally is an anonymous society of variable capital.  This is equivalent to the U.S. corporation in which there are stockholders.  In Mexico it is governed by the Law of Mercantile Societies.  More and more, foreigners are forming Mexican mercantile corporations which end with the initials, “S.A. de C.V.”, to do business, to achieve their financial goals and to purchase Real Estate in Mexico.  The SA de CV is similar to the “Inc.” of the United States and Canada.

Another version of a corporate entity is the Limited Liability Company which has become more common in recent years.  The Mexican counterpart is the SRL de CV, the Limited Responsibility company with variable capital.  While there are differences between the S. A. de C. V. and the S.R.L. de C.V., for our purposes here, both are included under the term “corporation” in this article.

As of December1993, the corporation formed in Mexico is considered as “Mexican” even though all shareholders may be foreign persons.

When should a corporation be formed?  It will make sense if the shareholders wish to perform services or sell goods for profit, build a hotel, or if they wish to develop a property for resale in lots or condominiums.  These are all common options seen in my region, the La Paz real estate market.  The corporate entity permits the principals to obtain working papers and to obtain working papers for other foreigners who provide services not easily obtained in the local job market.  Care must be taken, however to set up the financial reporting system, to obtain invoices for all pre-operating expenses and to have an accountant who is knowledgeable to make the required declarations in Hacienda, Mexico’s version of Uncle Sam or Revenue Canada. 

The minimum capital investment in a Mexican corporation is $50,000.00 Mexican pesos.  Evidence of this capital contribution must be in cash or in assets which equal the total amount of the start up capital.  It is important to make the declaration of all assets which are to be included from the start up of the corporation.  Do not select the minimum amount just because it is the minimum.  If you do it may later be difficult to establish the true amount of initial capital invested.  Once the initial capital is established, additional investment may be added by making a declaration before a Notary Public, without requesting permission to do so from the government.  This is the Variable Capital portion of the equation. 

A minimum of two shareholders is required to form a corporation.  These shareholders will be required to sign the corporate charter before a Mexican Notary Public.  If they come into Mexico as tourists to sign the documents they should obtain an FM-3 or FMN document at their local Mexican Consulate prior to coming so they may perform a business activity (signing the document) in a legal manner.  Once the corporation has been formed it is necessary to obtain a federal tax registration number for the corporation and the administrator or board of directors must obtain the FM-3 permit to work in the activities of the corporation.

If the corporation includes or is composed of foreign stockholders it will include a clause in which the foreigners promise to be considered as Mexicans in the eyes of the law and not to invoke the aid of their government in the event of a dispute. 

Administration of matters of the corporation may be either through a sole administrator (administrador unico) or through a board of directors. A Comisario must be appointed.  This is the person responsible for the accounts and tax payments and should be a Mexican accountant.  The comisario does not need to be a shareholder.  The duties of the administrators, whether sole administrator or board of directors need to be clearly defined.  Will they be able to enter into lawsuits? Obligate the corporation for loans? Hire and fire personnel?

Generally it is wise to provide a list of five names, in order of preference, for the corporation for submission for the permit for incorporation.  The first name which has not been used previously by another company will be designated.  Upon confirmation of the name, the corporate documents must be prepared and signed before a Notary Public within ninety days or the authorized name will become invalid and the process must be begun again.  Together with the name request, permission to incorporate, where foreigners are involved, must be obtained from SECOFI, the Secretary of Industry and Commerce. 

Upon completion of the corporate document, it must be recorded in the local registry of Business and Commerce, the National Foreign Investment Registry and the business enrolled in the local Chamber of Commerce or Industry Chamber.  Monthly declarations must be filed with tax authorities.  Additionally, the corporate account must file an annual statement with the National Foreign Investment Registry regarding the business activity for the previous year.  If the corporation is used for property development or is not active, the Mexican accountant will probably charge about $600 Dlls. per year to do the required filings.  If the corporation is active the accounting charge may be $300. to $500 Dlls. per month, or more.

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

In the Mexico real estate purchase process, the ONLY authority permitted to draft a deed transferring real property or an interest in real property (such as the Mexico Bank Trust) is the Mexican Notary Public This person is different from a Notary Public in the United States where a simple exam, bond, and a rubber stamp can make a Notary Public out of most people Nor it is similar to Canada's Notary Public who must meet a few more stringent requirements to qualify Not so many, however as the Mexican Notary

The Notary Public in Mexico must be an attorney, must have a minimum of five years of practical experience in the profession, must pass a highly technical examination AND then be appointed as a Notary Public by the Governor of the state in which he or she is working The number of Notaries Public depends upon the number of people in the state A new Notary is appointed only as the population grows above a certain size the Mexican Notary Public has many duties, but one of the most important is the drafting of deeds for transfer of real property Anytime a signature is required on a deed of transfer it must be made before the Mexican Notary Public

As of now, foreigners buying and selling their rights in the La Paz real estate market, in the Cancun market, or any property within the “restricted” zone, through fideicomiso rights, do not always have to appear before the Mexican Notary Public in order to transfer their interest in the real estate These transfers in many cases may be made by having instructions signed in the buyer or seller's place of residence and “legalized” or “authenticated” for use in Mexico This same process can be used for a power of attorney document in the event buyer's or seller's signature is required And what is a “legalized” or “authenticated” document

No matter what the document, it must be signed before a Notary Public in the place of residence; California, Arizona, Calgary, Vancouver…..or wherever Once signed before the Notary Public in the place of residence it must be “legalized” or “authenticated” in order to be considered as valid in Mexico This means that a designated public official performs a government act and certifies to the genuineness of the signature and the seal, and the position of the official who has executed, issued or certified a copy of a document

In 1981 the Convention abolishing the Requirement of Legalization for Foreign Public Documents entered into force in the United States Under the Convention, (signed in the Hague, Holland), signatory countries, including both the United States and Mexico, but not Canada, agreed to mutually recognize each other's “public documents” so long as such documents are authenticated by an apostille, a form of internationally recognized notarization The apostille ensures that public documents issued in one signatory country will be recognized as valid in another signatory country

Thus, if the document required for a Mexican transaction has been notarized in the United States it must then be sent to the nearest office of the Secretary of State and an “Apostille” obtained A search under state government in the yellow pages should reveal the telephone and location of the closest office of the Secretary of State The document to be authenticated through an Apostille can probably be sent through the mail and should not cost more than $25.00 U.S. dlls.

It is important to allow for extra time to accomplish this step Other countries that are signatories to the Hague Convention are, to name a few; Germany, Argentina, Australia, Australia, Austria, Bahamas, Spain, Israel, France, Greece and Norway.

All countries which are not signatories to the Hague Convention, such as Canada, must authenticate documents to be used in Mexico by obtaining a “legalization” or ratification of their document from the nearest Mexican Consulate It maintains a list of authorized Notaries with samples of their signatures and is able to ratify the authenticity of the Notary's signature

Many people object to the time involved and the additional step required to “authenticate” a signature for legal use in Mexico It is less expensive and less time consuming, however, than making a special trip to Mexico in order to sign a document before a Mexican Notary

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!

U.S. taxpayers are required to file certain reports with the U.S. government if they own property in Mexico, have a business in the country, or are shareholders in Mexican corporations Uncle Sam, U.S. tax watchdog, has instituted a voluntary disclosure program for those people who may have omitted reporting in the past. This program is designed to limit penalties that may be imposed on those U.S. taxpayers who have failed to make the required declarations previously.

A tax specialist, familiar with the law and reporting requirements in both the U.S. and Mexico can provide details. However, the most common issues that need to be addressed are the following:

Property owned in a Mexico Bank trust (fideicomiso): Under Mexican law, any residential property located in therestricted zone when foreigners are involved, must be placed in a Mexican bank trust, fideicomiso. Therestricted zone is an area 50 kilometers (approximately 30 miles) wide along all the Mexico real estate coastlines and 100 kilometers (approximately 60 miles) from the Mexico U.S. and Mexico-Belize borders

Under the U.S. regulation section 6048 (b) Taxpayers must report ownership interest on Form 3520-A yearly and on form 3520 initially and if there are any changes The penalty for failing to file these information returns is five percent of the gross value of trust assets determined to be owned by the U.S. taxpayer.

Bank and Financial Accounts: U.S. taxpayers must annually report direct or indirect financial interest in a financial account that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000.00 USD at any time during the year. This report of Foreign Bank and Financial Accounts is commonly known as an FBAR, and the penalty can be as high as the greater of $100,000. USD or 50% of the total balance of the foreign account if the failure is deliberate omission (Sec.31 U.S.C. 5321(a)(5) Nonwillful violations are subject to a civil penalty of not more than $10,000.00 USD.

Shares of Stock or Interests in Mexican Corporations and/or partnerships: Generally shareholders or partners with a 10% or greater interest in the partnership or corporation must inform the IRS of same through Forms 5471 or 8865 Failure to file can be quite costly.

As in most countries the U.S. tax regulations are complicated, especially when dealing with properties or assets located outside the United States. Accountants, tax advisors and tax preparers do not always know the rules regarding filings for international assets nor the ramifications of failure to file. For this reason it is highly important that the US taxpayer consult with experts in these bi-national transactions.

TAX OBLIGATIONS IN MEXICO:

Any foreigner with real property or business income in Mexico must also plan to pay taxes in Mexico. The good news! When paid with the proper receipts, certain of these taxes can become a CREDIT or a DEDUCTION in the country of tax residence!

For example:

Mexico Property Taxes: Whether in the La Paz real estate market, in Cancun, or in Huatulco, taxes are due and payable every two months, or can be paid in one annual payment, usually with a substantial discount, during the first two months of each calendar year Property taxes are based upon the value declared by the property tax office where the property is located and are generally relatively low in comparison with rates in the U.S. and Canada.

On-going taxes on business income: If you have a Mexican corporation or partnership, no matter what the activity, a monthly declaration must be filed for IVA taxes (Added Value Taxes) and for Impuesto Sobre La Renta which, in this case, is more like an income tax. A local Mexican accountant should be hired to review the accounting procedures and to prepare and file the monthly declarations. The monthly tax payments are generally considered as provisional and an annual declaration will show either a refund or a payment due These taxes can also be a credit or a deductible expense in a home country, depending upon how the companies are established. An attorney-accountant with international expertise in this will be an important advisor to help avoid double taxation on profits.

Impuesto Sobre La Renta when a property is sold: is a capital gains type of tax. For foreigners who are tax residents of another country, the tax is calculated in two ways:

1. It is a flat amount of the total selling price; without deductions, or

2. It is a percentage of the difference between selling price and the tax basis shown in the seller s deed, less allowable deductions.

The Notary Public should also provide the seller with a copy of the tax payment for use with the tax authorities in seller s tax residence country.

Impuesto Sobre La Renta when income is received from a rental of Mexican property:

All income received from Mexican property is taxable in Mexico, regardless of the nationality of the owner Thus, the US or Canadian citizen who rents a condominium or home regularly, or occasionally, through a property manager or via internet, is obligated to file declarations MONTHLY. Failure to declare income can cause very high penalties. The good news taxes paid are credits or deductions in taxpayer s home country.

LINDA NEIL is the founder of The Settlement Company, which specializes in real estate transfers, escrows,and consultations Just added as a new service, Settlement will now prepare monthly tax declarations, file them and perform additional essential landlord accounting services

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK

“Mexico s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!

If the Mexico real estateproperty you are purchasing is already in a trust (fedeicomiso) you may either: request assignment of the rights to you, or may request a new trust for fifty years If a new trust, a permit from the Secretary of Foreign Relations is required Whether a new trust or an assignment of rights, the deed in the new buyer's name must be registered in the National Foreign Investment Registry

When considering a new trust or an assignment of rights here in the La Paz real estate market, the factors we consider are: 1. Remaining term of the existing trust – when will it need to be renewed ; and 2. – What are the annual fees under the existing Mexico bank trust If the permit has an unexpired term of less than fifteen or twenty years and/or the annual bank administration fees are more than $500.00 U. S. Dollars, it probably makes sense to obtain the permit for a new fifty year trust with a bank offering more attractive fees

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THEwww.TOPmexicorealestate.com NETWORK

“Mexico s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!

Mexican law says that Mexico real estate taxes must be paid on the higher of the following: purchase price OR appraised value Since many appraisals in the La Paz real estate market are lower than the actual selling price your taxes will be condisderably lower if the appraisal value is declared Payment on this basis has taken place for many years in many parts of the country It is, however, illegal

Should you choose to pay your Mexico real estate taxes based upon this basis, please be aware that: 1. it is violation of the law and 2. your tax base will be low for declaration of value in the property when you sell it Furthermore, if you are financing your property through an institutional lender, full value must be declared

Mexico Official Appraisal:Most appraisals in the La Paz real estate region are made by an appraiser who is usually an architect and who is recognized as a Perito Valuador, Official Appraiser, by the property tax authorities in the municipality where the property is located This is required prior to completing any transfer of title If an institutional lender is involved, a commercial appraisal may also be required You can follow more of these tips at TOP Mexico real estate blog

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 www.TOPmexicorealestate.com

“Where 11 TOP real estate experts from ALL regions of Mexico come together to share their Tips & Knowledge to help you buy safely !”

Mexico Condominium Regime; Investigate the Status

A word of caution for those who are considering the purchase of a Mexico condominium or a lot in a subdivision Just as in other countries, the unit, or lot must be legally described and an individual property tax number issued This individual property must be registered in both the Property Tax Office and in the Mexico Public Registry of Property

Often, a developer will spend time and energy on promoting the sales of Mexico real estate properties prior to completing the establishment of the Condominium Regime Until this is completed, legal title to an individual unit or lot cannot be granted since there is nothing to describe! Whether in the La Paz Real Estate market or any other region of Mexico, be sure to investigate the status of the condominium regime prior to completing the offer to purchase!

Mexico Registered Title; Insist Upon Its' Reception

The purchase / sale document signed by buyer and seller is generally legally valid between the parties to the transaction It most likely contains the description of the Mexico property, the price to be paid to the seller, and any other special terms and conditions It may be drawn up by the parties, their agent(s), or by a third party It should be considered as an interim contract, however Until the final deed is drafted by, and signed before a Mexican Notary Public and duly registered, the transfer WILL NOT provide valid notice to third parties This final deed must be recorded in the Mexico Public Registry Office of the municipality in which the property is located Mexico's land registry system functions in much the same manner as those in the United States or Canada Unless the deed for the rights of the beneficiary has been recorded, there may not be a remedy for the purchaser who neglected to obtain a registered deed…his interest, his investment, may be lost

When a foreigner is acquiring residential property for which a Mexico bank trust is required, the purchaser should receive a deed which has been signed by the bank trustee before a Mexican Notary Public This will name the beneficiaries and the substitute beneficiaries of the trust in accordance with the purchaser's instructions A full description of the property must be included, seller's capital gains taxes paid and buyer's acquisition tax paid These receipts should be included in the deed document which may consist of eight or ten pages, or more The final page of the document should bear the stamp of the Public Registry, together with Book and Page numbers and the date on which it was recorded If this stamp is not on the document, the transaction has not been completed, the buyer is not fully protected

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 www.TOPmexicorealestate.com

“Where 11 TOP real estate experts from ALL regions of Mexico come together to share their Tips & Knowledge to help you buy safely !”

The Mexico real estate market has gone through various changes over the last several years Title insurance, escrow accounts, and financing are new options and tools now available to help the non-Mexican acquire La Paz real estate properties and even properties throughout various regions of Mexico.

Until recently, most Mexico homes and condominiums were for sale for all cash or financed by the seller With the advent of NAFTA however, several mortgage companies have entered the Los Cabos and Cancun real estate marketplaces and offer long-term financing for qualified buyers If you are considering financing your purchase, and are buying in a location where financing is offered, it makes sense to investigate the terms and plans available, select the company of your choice and make lender approval a condition for the purchase

If the seller will be financing your purchase, request that title be transferred to you and a pledge guarantee contract executed guaranteeing payment Traditionally, sellers have preferred to hold title to the rights in their name and transfer title to the rights only upon receipt of payment in full from the buyer Meanwhile, however, the seller may die, may disappear, may go bankrupt… a risky situation for the buyer The prudent buyer will insist upon a transfer of title and registration of a mortgage or pledge in which he gives his rights in the property as security for payment of the remaining purchase price In the event of default by the buyer, the seller must conduct a proceeding similar to a judicial foreclosure in the United States and Canada It is troublesome, as is any foreclosure in any country in the world but not notably more problematical The registered title and recorded pledge or mortgage provide the buyer a greater comfort level in his investment The lender also enjoys protection in having his loan recorded and will have an established legal proceeding to follow in the event of default by the buyer

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 www.TOPmexicorealestate.com

“Where 11 TOP real estate experts from ALL regions of Mexico come together to share their Tips & Knowledge to help you buy safely !”

I have various articles written on the subject of How to Buy Your Mexico Home, if you wish to follow this series please click here to see the first post on PURCHASING YOUR MEXICO DREAM HOME Below I continue the series discussing the Mexico Condo regime.

INVESTIGATE THE STATUS OF THE MEXICO CONDO REGIME

A word of caution for those who are considering the purchase of a condominium or a lot in a subdivision In the La Paz Mexico real estate market, just as it is in the rest of Mexico and in other countries, the unit, or lot must be legally described and an individual property tax number issued This individual property must be registered in both the Property Tax Office and in the Mexico Public Registry of Property Often, a developer will spend time and energy on promoting the sale of the Mexico Real Estate properties prior to completing the establishment of the Condominium Regime Until this is completed, legal title to an individual unit or lot cannot be granted since there is nothing to describe! Be sure to investigate the status of the condominium regime prior to completing the offer to purchase!

INSIST UPON RECEIVING A REGISTERED TITLE

The Purchase/sale document signed by buyer and seller is generally legally valid between the parties to the transaction It most likely contains the description of the property, the price to be paid to the seller, and any other special terms and conditions It may be drawn up by the parties, their agent(s), or by a third party It should be considered as an interim contract, however Until the final deed is drafted by and signed before a Mexican Notary Public and duly registered, the transfer WILL NOT provide valid notice to third parties This final deed must be recorded in the Mexico Public Registry Office of the municipality in which the property is located Mexico's landregistry system functions in much the same manner as those in the United States or Canada Unless the deed for the rights of the beneficiary has been recorded, there may not be a remedy for the purchaser who neglected to obtain a registered deed… his interest, his investment, may be lost.

When a foreigner is acquiring residential property for which a Mexico bank trustis required, the purchaser should receive a deed which has been signed by the bank trustee before a Mexican Notary Public This will name the beneficiaries and substitute beneficiaries of the trust in accordance with the purchaser's instructions. A full description of the property must be included, seller's Mexico capital gains taxes paid and buyer's acquisition tax paid These receipts should be included in the deed document which may consist of eight or ten pages, or more The final page of the document should bear the stamp of the Public Registry, together with Book and Page numbers and the date on which it was recorded If this stamp is not on the document, the transaction has not been completed, the buyer is not fully protected

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 www.TOPmexicorealestate.com

“Where 11 TOP real estate experts from ALL regions of Mexico come together to share their Tips & Knowledge to help you buy safely !”

I have been putting together various posts on the processes involved on how to buy Mexico real estate. You can see the previous posts on this series by clicking here Mexico Dream Home Below I will start to discuss the Mexico Bank Trust

Payment of the purchase price is not enough In order to have a valid ownership interest in the property which you are buying it is necessary to have the title recorded This puts the rest of the world on notice that the property is yours If you area a foreign person purchasing property in many parts of Mexico, including the La Paz Mexico real estate market and all of the Baja pensinsula, the property will transfer not to your name but to the name of a Mexican bank as trustee for your interests The Mexican constitution prohibits direct ownership of real property by foreigners in the “prohibited zone”, a strip of land thirty miles wide along its seacoasts and sixty miles wide along its borders with the United States and Guatemala/Belize, as well as the entire Baja peninsulaThis is the reason for the bank trust, the “fideicomiso”, which has been established under the guidelines of the Mexican government so that foreigners may be protected in their property acquisitions

Whether you are purchasing in a zone requiring a bank trust or in an area where title can be taken directly into your name, it is necessary that this transfer take place and your interest registered as soon as possible after the successful conclusion of the negotiations to purchase your dream property Until this transfer takes place you are vulnerable: the seller may die, the heirs may be unwilling to recognize your rights in the property , you may become involved in a lengthy and expensive probate proceeding Meanwhile, your interest may not be recognized by the authorities should you wish to obtain a building permit, by the bank should you wish to borrow money and use the property as collateral or as part of your assets; by the courts should a third party also claim an interest in the land, or, very importantly, should you later decide to sell it

The prudent buyer of real estate in the United States or Canada would not consider leaving his title “in limbo” in either of those two countries; one should not do so in Mexico either.

The foreigner purchasing real estate in Mexico is buying personal, not real property if the acquisition is on the Baja Peninsula, within thirty miles of any coastline on the mainland, or within sixty miles of any border The acquisition is personal property How does personal vs. real affect the foreigner who acquires property under a Mexican bank trust The effect is negligible Instead of using the words; “transfer of title” one should more property say “transfer of trust rights”, or, “assignment of trust rights” In practical terms the beneficiary has full control of the property He may direct the trustee bank to 1. – lease the property, 2.- mortgage the property, or 3.-sell the property The foreign owner enjoys full rights of usage and may do anything to the property permitted under Mexican law He enjoys the same rights of dominion as any Mexican citizen who has direct title to the property He may construct a building, tear it down or modify it in compliance only with the local zoning and planning ordinances or, if applicable, the home owner's condominium regime A permit to acquire the rights in the property must e obtained from the Secretary of Foreign Relations and the terms of the permit form a part of the deed Currently, the term for a trust is fifty years Multiple renewals are permitted under that law By requesting extensions each fifty years a property may be controlled by a family or business entity for generations

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 www.TOPmexicorealestate.com

“Where 12TOP real estate experts from ALL regions of Mexico come together to share their Tips & Knowledge to help you buy safely !”

In March and in our Mexico real estate blog, I posted the articles part 1 and part 2 You can read part 1, by clicking here; Purchasing your Mexico Dream Home Below is the continuation of these first two parts

In my experience in the La Paz real estate market as well as many parts of Mexico, I ask this singleimportantquestion to the buyers and agents, “Does your seller have a registered title to the Mexico real estate property” Many foreign buyers, in order to avoid the closing costs in Mexico, or through ignorance, have paid for their property, taken possession of it, and have never obtained a Mexico registered title! Ask for a copy of your Seller's title documents and reserve the right to examine them prior to the release of any part of your payment If they are in Spanish have them translated and, if in doubt consult with a neutral third party about their probable validity It should be added that if the seller has never acquired title to the property he is selling, it can often be remedied The buyer should be aware of this condition, however, and be certain that the person who accepts his offer is truly the holder of the title Additionally, he should make arrangements for the additional costs, if any, involved in this double transfer

Author Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 www.TOPmexicorealestate.com

“Where 11 TOP real estate experts from ALL regions of Mexico come together to share their Tips & Knowledge to help you buy safely !”