Fideicomiso: How Foreigners Buy in Mexico

A fideicomiso is a Mexican bank trust that lets foreign buyers hold residential property inside Mexico's restricted zone, within 50 kilometers of the coast or 100 kilometers of a border. The bank holds title as trustee, while you, the beneficiary, keep every right of ownership: to live in the property, rent it, remodel it, sell it, or pass it to your heirs. The trust runs for 50 years and is renewable indefinitely.

 

Establishing a Trust

 

A Notario Publico in Mexico is much different than a Notary Public in the U.S. In Mexico, Notaries are specialized attorneys who act on behalf of the state and federal government in relation to any transaction; they are comparable to a U.S. Clerk of Courts. On average, you can obtain your trust within 60-90 days. In some cases, title has been transferred in as little as two to three weeks.

 

Escrow and Clear Title

 

The Purchaser should only release funds when he or she receives clear title. By utilizing a U.S. or Mexican third party escrow service like First American Title Company, Stewart Title Guaranty, or one of several escrow service providers in Mexico, your money is held in an individually numbered escrow account until your trust is complete and the property rights have been transferred to you, the Purchaser.

 

Title Insurance

 

When you purchase real estate in Mexico, it is recommended you consider Title Insurance for your property purchase. We insure our cars, homes and our health — it is just as important to insure one of your largest investments: your property. Title Insurance is available for properties in Mexico purchased by U.S. and Mexican citizens through Stewart Title.

 

Naming Beneficiaries and Heirs

 

In the trust document, the Purchaser must name the Beneficiary or foreign owner of the property. The purchaser can be an individual, multiple partners, a foreign corporation, an estate trust, a living will, or another entity. The Trustee of the trust (the Mexican bank) will take direction from whomever you name as the Beneficiary.

 

You also can name a U.S. corporation as the Beneficiary of the trust. This is perfectly legal. If you sell the shares in the U.S. corporation, you create a real estate transaction in Mexico, and all Mexican capital gains taxes apply. We suggest to consult this with a tax professional before purchasing or selling Real Estate in Mexico.

 

You can own a property in a Mexican corporation and take title fee simple only if the property is for development or investment purposes and you cannot own property through Mexican corporation to bypass the trust process.

 

It is against the law for a foreigner to own property in a Mexican corporation for residential purposes. This refers to Article 190 of the Mexican Revenue Code and is also declared in the International Tax Treaty between the U.S. and Mexico. If this is done, and you do not pay the Mexican taxes, you will have created a tax burden over the property for the new owner.

 

Owning in Mexico may sound complicated, but if you have a Cabo Real Estate professional to guide you through the process, you will be living your dream before you even know it.