Mexican property taxes for foreigners: buying, owning, renting and selling a lot

The four moments you pay tax

Each tax is collected by a different authority: the municipality, the state, or the SAT (Mexico's federal tax agency, the equivalent of the IRS or CRA). This table covers what applies in most municipalities in Quintana Roo and Yucatan.

Rates vary by municipality and change from year to year. Treat every figure in this guide as a reference point and confirm it with a Mexican accountant before you decide.

When you buy: ISAI, the acquisition tax

The main tax at purchase is ISAI (impuesto sobre adquisición de inmuebles). The buyer pays it, the notary calculates it and remits it to the municipality at closing. In most of the Riviera Maya and in Merida the rate is around 2% to 3%, applied to the highest of the agreed price, the bank appraisal and the assessed (cadastral) value.

On top of ISAI you pay the property registry fee, the appraisal and the notary's fee. Strictly speaking those are not taxes, but together they make up your closing costs, much like title, recording and transfer taxes in the US. If you buy through a bank trust you also pay the trust setup fee and an annual bank fee. See our full breakdown of closing costs for a lot in Mexico.

One warning: some sellers suggest declaring a lower price in the deed to save on ISAI. Do not do it. Your capital gain is calculated from that purchase price, so you will pay far more tax when you sell.

While you own it: predial, the annual property tax

Predial is Mexico's annual property tax. The municipality charges it on the assessed value, which is usually well below market value. As a result, a lot that would carry several thousand dollars a year in property tax in Texas, Florida or Ontario often costs a few hundred dollars or less in Mexico amount to confirm per lot.

It is billed once a year, early in the year. Many municipalities reward early payment: paying in January often earns a 10% to 20% discount and February a 5% to 10% discount. Some municipalities charge a higher rate on vacant land to encourage construction, so ask whether that applies to your lot vacant land surcharge to confirm per municipality.

• With a fideicomiso, the bank holds title but you pay the predial. The bill may be issued in the trust's name.
• Online payment is available in most municipalities using the lot's cadastral number.
• Keep every receipt. When you sell, the notary asks for certificates showing no unpaid predial or water bills.
• HOA fees are separate. The country club's monthly maintenance fee is not a tax and is paid to the club administration.

Do you need an RFC (Mexican tax ID)?

The RFC is your taxpayer number with the SAT, similar to an SSN or SIN for tax purposes. It is not always required just to buy, but you will need it as soon as you rent out a home, issue invoices or sell on the best terms. Getting it at purchase also keeps your deed file complete.

Temporary and permanent residents apply at the SAT with their CURP (population ID). If you do not live in Mexico, the process depends on your situation and on whether you will earn income here, so ask your accountant or the notary to guide you from the start.

If you rent it out: income tax, VAT and lodging tax

A vacant lot produces no rental income, but many buyers build a home to rent out part of the year. That is when three taxes kick in. Rates and the best regime depend on whether you are a Mexican tax resident, so use these as a starting point only.

• Income tax (ISR): residents pay on net income, with actual expenses or a flat 35% deduction. Non-residents typically pay 25% of gross rent, with no deductions.
• VAT on short-term rentals: furnished stays by the night or week count as lodging and carry 16% VAT. Unfurnished long-term residential leases are usually exempt.
• State lodging tax: Quintana Roo charges 5% of the stay price. Yucatan has a similar tax rate to confirm.
• Platform withholding: Airbnb, Vrbo and similar platforms withhold income tax and VAT on each booking. With an RFC on file the rates are 4% income tax and 8% VAT; without one they rise to 20% income tax and 16% VAT. Some platforms also collect the Quintana Roo lodging tax confirm which platforms collect it today.

Depending on your regime and income, platform withholding may be your final tax or just a prepayment. A Mexican accountant can tell you which applies to you.

Guide: live or invest in a country club →

When you sell: capital gains tax

When you sell you pay income tax on the gain: the sale price minus your purchase cost adjusted for inflation, minus deductible expenses such as ISAI, notary fees, commissions and improvements backed by official invoices (facturas). Start keeping those invoices now.

Unlike in the US, you do not file this tax yourself. The notary calculates it, withholds it from the sale proceeds and pays it to the SAT. Your job is to bring complete paperwork.

• Mexican tax residents add the gain to their income for the year and pay at progressive rates of up to 35%.
• Non-residents can pay 25% of the gross sale price, with no deductions, or 35% of the net gain if they appoint a legal representative in Mexico. The second option usually wins when the gain is moderate.
• Primary residence exemption: a seller's main home can be exempt on up to 700,000 UDIS of gain, once every three years. It only applies to Mexican tax residents who prove they live there with documents in their name. A vacant lot is not a home, and a foreigner who only visits on vacation generally does not qualify.

The closing process in Mexico →

Your home country taxes you too

The United States, Canada and France tax their residents on worldwide income. US citizens are taxed on it wherever they live. So rental income and gains from a lot or home in Mexico also go on your return back home. To avoid paying twice, Mexico has tax treaties with all three countries, and Mexican tax paid generally becomes a credit against your home country tax.

Your home country may also require you to report foreign assets or accounts, which can include a Mexican bank trust. Have your Mexican accountant and your CPA or tax preparer talk to each other so both returns line up. If you are still deciding how to hold title, read our guide to the Mexican bank trust (fideicomiso).

Our advice and next step

Hire a Mexican accountant who works with foreign owners before you sign, not when you sell. The fee is small compared with what good planning saves on capital gains, and they can get your RFC and set up the right regime if you plan to rent.

If you are looking at a country club lot in the Riviera Maya, we will send you the price, a reference assessed value and an estimate of ISAI, predial and HOA fees so you can compare with real numbers. We work in English, Spanish and French.

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