Guide. How to buy a property in Huatulco as foreinger
Huatulco is a modern and well planned community able to deliver a title for foreigners for your purchase in a fair and timely fashion and it is very similar to what you are already accustomed to in North America.
The result will be you will have possession of an original title and proof of ownership after you complete the purchase.
There are two common ways to buy property in Huatulco. Each of the two ways has benefits for different types of owners.
#1 THE BANK TRUST
The Bank trust is designed specifically for the second home buyer who is buying the second home for personal use for themselves and family and friends. There is no Mexican tax structure in place to administer this type of ownership. Tax wise it is a freebee for the foreign owner. As a result if you want to lend it to business associates or family for their vacation and enter into some kind of financial arrangement with them, it follows any compensation needs to be collected in Canada or the USA and if that compensation results in income for you over and above costs it should be reported on your Canadian or USA income tax forms.
Setting up the Bank trust is similar, for example, to registering your title at the land registry office in Canada. The title is created by the combination of the bank and the licensed Notary who creates the documentation. Then a certified copy remains in the possession of the Bank trust. You will receive the original of the title yourself and should keep it with your other important papers. A sidenote, you will be required to name your next of kin. That person or entity will also appear on the title. In the event of your passing then your estate simply needs to present the death certificate and ID, and title flows to the successor.
These costs are the responsibility of the purchaser. The cost for creation of the title and supporting documentation is approx. 50,000 MEX Pesos or give or take $2,555 USD or $3,300 CAD.
Also there is an annual fee charged by the trust for safe keeping that begins starting on the second year after your purchase. That fee is 9000 MEX Pesos or more or less $600 CAD per year. The trust renews itself automatically every 99 yrs. And is backed by the Federal Government. When purchasing you could budget perhaps 6% – 6.5% of total purchase price which will include all the miscellaneous costs such as obtaining lien searches, tax certificates etc., much like in North America.
#2 THE MEXICAN CORPORATION
This type of ownership is custom tailored for the investor type purchaser. In simple language if you are mostly interested in renting your unit out and publicly advertising it for example on VRBO or Airbnb, and using your second home primarily to earn money, then it follows that you are considered a business owner in Mexico, and must follow the guidelines of any other Mexican business. You own 100% shares of the Mexican Corp, and your corporation owns the property.
Your corporate earnings are taxable in Mexico. This is a typical Corporation tax required to pay taxes on earnings, however you are able to offset expenses etc. There is also a tax very similar to the Canadian GST tax It is called IVA and can be 16%. You will be required to present regular financial statements etc.
Prepared by a Mexican certified accountant, much like a North American company. The cost of setting up a Mexican Corporation is Approx. 18,000 Pesos or more or less $1,200 CAD. The annual fees are approx. 10,000 MEX Pesos.
The corp needs to be doing some type of business as in rentals or buying more property etc., within 2 year. If not it will look like you are only trying to avoid creating the title and will draw the attention of the Mexican tax authority.
Summary On Purchasing
The average foreign purchaser will use the Bank Trust type of title, and share his or her good fortune of ownership with friends and family. And any compensation will be received outside of Mexico.
The investor with perhaps more than one unit and primarily using the property aggressively as an income producing investment, then the Corporation is the best way to go.