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4th Quarter 2012 Mexico Resort Real Estate Update

January 11, 2013

Every day more and more foreigners, including people from the United States, Canada, Asia and Europe, are acquiring Mexican property for retirement, rentals and vacations.

Cabo San Lucas, Mexico - Three major events occurred in the Fourth Quarter of 2012. One was political and the other two involved real estate. In the United States of America, President Barak Obama was elected for a second term, and the Mexican Association of Real Estate Professionals (AMPI) and the National Association of Realtors (NAR) staged their annual conferences.

AMPI's 41st Annual Conference - a Huge Success

The Mexican Association of Real Estate Professionals (AMPI) recently held its annual, conference and trade show in Guadalajara/ Tequila. Those attending called it a "HUGE" success. The word HUGE could refer to the number attending. Nearly 900 came to Jalisco for the event. There were educational events, social events, a trade show, AMPI's Annual General Assembly and an Extraordinary Assembly. Read more

Mexico's Golf Capital to have a New Course

I recall a golf story from more than a decade ago. Seems a group of golfers from the Chicago area went to a different destination each year. One year they decided to visit Cabo San Lucas. After a few days there, it was decided that Cabo would be their permanent site. "There are enough courses here that we can play a different one every day." Since then several new ones have been added and another is in the works.

Following is from a media release from the very successful Diamante project, "Diamante announces new golf course with Tiger Woods Design." The release goes on to say the course will be constructed at its 1,500 acre private oceanfront community on the Pacific coast in Cabo San Lucas. It will be the second one, the first Diamante Dunes opened in 2009.

Diamante CEO Ken Jowdy said, "We believe a Tiger Woods Design (TWD) course will be the perfect complement to Davis Love III's Dunes course and embody the high standards that we have set at Diamante."

TWD plans to integrate Diamante's rolling hills and spectacular views into a design of a very distinctive golf course. The resort phase encompasses 80 acres and will have all the amenities of a full service resort. The Vacation Club will have 200 residences and a 10 acre swimmable lagoon. There will also be a 100,000 square foot clubhouse, a cantina and 20 two bedroom residences.

Mexico Joins the Madrid Protocol

On November 19, 2012, Mexico' Secretary of the Economy, Bruno Ferrari, deposited the country's instrument of accession to the Madrid Protocol for the International Registration of Marks (Madrid System) in the World Intellectual Property Organization (WIPO).

With this action, Mexico became the 89th member of the international trademark system and the third country in Latin America to join the Madrid System. Mexico's accession to the Madrid Protocol provides trademark owners with the ability to protect their trademarks internationally through a cost effective, user friendly and streamlined process. It will also assist enterprises in Mexico that are seeking to expand to other countries.

Mexico's legal and institutional framework will guarantee the successful implementation of the Madrid Protocol in Mexico. Mexico's Institute of Industrial Properness is among the top fifteen IP offices receiving the highest number of trademark applications, worldwide.

The Madrid system is equally attractive to large businesses, as to small and medium size enterprises, which are the largest users of the system. The Madrid Protocol can be used as a means to foster regional and global economic growth, as it has been promoted by Mexico during its G-20 Presidency in 2012.

NAR Focuses on Global at Annual Conference

Global was the buzzword at this year's Annual Conference and Expo of the National Association of Realtors (NAR) in Orlando, Florida. Hundreds of REALTORS came from around the world to participated and share experiences. Read more

Paying Taxes on Your Mexican Rental Property

Every day more and more foreigners, including people from the U.S., Canada, Asia and Europe, are acquiring Mexican property for rentals and enjoyment. The market for rentals is huge. Many newcomers prefer to rent or lease a house or an apartment while they shop for the ideal location and home for purchase. Others simply prefer to rent a home or condominium for a super vacation, rather than stay in a hotel!

This increase in demand for housing and lodging has made the acquisition of rental properties an increasingly attractive investment. These rentals can be either long-term for those checking out the area prior to purchase, or short term for those extra special vacations.

What better and more secure income can be found than a house or apartment complex which will produce rental income for many years? Especially when it is most likely increasing in value at the same time! Investors can pay all cash, use funds from IRA accounts or even, possibly, negotiate seller financing to establish solid long-term gains.

Rental contracts can be simple and should always contain an arbitration clause. Just as in a rental in the U.S. or Canada, a security deposit is a good idea. For the real estate investor who has rental properties or is thinking of acquiring properties for rental an important consideration is how to declare and pay taxes on income.

Paying Taxes:

Mexican newspapers are full of headlines about the growing problem of foreigners who are renting their homes or condominiums and failing to pay Mexican taxes. Not only is this a violation of the terms of most bank trusts (fideicomisos), but also it is a violation of Mexican tax law and reprisals are severe.

FOREIGNERS ARE OBLIGATED TO PAY TAXES ON INCOME GENERATED IN MEXICO. Mexico's tax law is patterned after those of the United States and Canada and requires that any person, foreign or national, who owns property in Mexico, must declare that income in Mexico as well as in the owner's native country.

Tax authorities in the U.S., Canada and Mexico are working together and share information. Everyday there is more cooperation between the countries due to tax treaties. It is no longer possible to own a property in one country, enjoy income from that property, and not report it in BOTH the country where the property is located, and the country where the owner lives. Failure to comply means the owner is subject to double taxation and heavy penalties when the omission to file and declare is discovered.

In the past, there was only one way to pay tax on income and that method is complicated. The owner is required to obtain a taxpayer identification number and to make monthly declarations whether a tax is due or not.

To further complicate matters, in order to obtain the taxpayer identification number the foreigner who owns property and declaring income has to obtain an FM3 resident permit from the Mexican government which permits the rental of property. This system is cumbersome and may require a lengthy stay in the country and regular renewal of immigration documents. This option however permits deductions of legitimate and authorized deductions from gross income.

In February of 2010, new Mexican regulations were published which offer a simplified payment option in which the foreigner who owns property may pay the tax without obtaining an immigration document. No deductions for expenses are permitted against the tax paid in Mexico. This is however considered to be a great advance in assisting foreigners to comply with tax obligations in Mexico and the ideal way to obtain valid and legitimate receipts for the taxes paid which can be presented to tax authorities in the owner's home country as a credit against income and to offset expenses there. This method avoids double taxation.

Owners of rental properties in Mexico can now consider both options and elect the option which will work best for their individual situation.

If you own a property in Mexico and rent it often or even only occasionally, it is advisable that you make arrangements to declare income and pay the tax. You can sleep easily knowing you have complied with tax laws! It has never been simpler to enjoy a return on investment, monthly income and pay taxes in accordance with the law! Be sure to view our video on the subject.
John Glaab is Vice President, International Marketing, at The Settlement Company.
He is a Certified International Property Specialist and a founding member of AMPI Los Cabos. John recently received the National Association of Realtors new award, International Member of the Year. For further information, contact John at John.Glaab(at)