Capital Gains Taxes in Mexico

Capital gains tax (ISR sobre la ganancia de enajenación de inmuebles) is paid by the seller when selling property in Mexico. It is calculated on the difference between the original purchase price and the final sales price—this “utility” is the taxable gain.

Deductions and Strategies

There aren’t “tricks” to avoid capital gains tax; instead, the law provides deductions for legitimate expenses related to acquiring, maintaining, and selling the property. Some of the most important include:

Real Estate Agent Commissions

Commissions paid to licensed agents are deductible and can significantly reduce taxable gains.

CFDI (Digital Tax Receipt) of Your Purchase

If you purchased your property after 2011, you should have a CFDI (Comprobante Fiscal Digital por Internet) showing your purchase price. This is essential for reducing your tax liability.

Improvements and Renovations

Any permanent improvements—such as air conditioning systems, water purification systems, or structural remodeling—can be deducted, provided you have official invoices (facturas) from registered providers. Furniture and removable items do not qualify.

Common Misunderstandings

Receipts or memory of expenses are not enough—you need facturas tied to your property.

Only improvements that remain with the property count toward deductions.

RFC Requirement for Foreigners- Foreigners do not need an RFC (Mexican tax ID) to sell property or apply the deductions listed above. These basic deductions are available to everyone. However, obtaining an RFC as a tax resident of Mexico may unlock additional tools, such as exemptions for a primary residence (if you haven’t sold in several years). But to qualify: At least 50% of your income must come from Mexico, and you cannot maintain tax residency in another country. When applying for an RFC, you declare under oath that Mexico is your primary tax residency. Misrepresenting this could result in serious consequences.

For most foreign sellers, the best strategy is to keep complete, official records of purchase documents, commissions, and property improvements. These deductions alone often reduce capital gains significantly—without requiring an RFC or tax residency in Mexico.

Mariana Plowes – Attorney in Cabo - mph@bajalegalgroup.com