Commercial Real Estate
Are you thinking of buying or selling a commercial real estate in Mexico? Then it’s time to break out your calculator. We at Cabo Premiere have discovered many of our clients are unaware that commercial real estate transactions are subject to the IVA tax. So take the price listed then add 16%, that is what you’re going to pay. Not a pretty picture. No wonder, we do not see much in the way of a commercial real estate industry here in Los Cabos.
Signs signs everywhere are Se Vende signs. Sellers put a sign in the windows reading “Se Vende”. Buyers like to call sellers directly thinking that they will get a better deal without using a real estate agent, or so they think. The seller and the buyer negotiate and finally, a deal is made. Fast-forward, now it’s time to sign the closing papers and guess what, surprise! Hola IVA tax! The buyer now has to pony up an additional 16% of the purchase price at the time of closing. Therefore depending on the price of the commercial real estate property that could be tens of thousands of dollars that the buyer must pay. This really could be a deal-breaker if you are unaware of it because the deal can not go forward until the tax is paid.
Please keep in mind that this tax law applies to all commercial real estate transactions in Mexico. There is no way around this tax, well not legally that we know of. Currently, the IVA tax is 16%. The IVA tax is not paid to the seller it is paid to Notario (in trust) at the time of closing.
So, in conclusion, make sure you take the 16% IVA tax into consideration before finalizing your commercial real estate purchase transactions.