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000070 Visit since
| EXEMPTIONS FOR THE PAYMENT OF CAPITAL GAINS
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by Prof. German Estrada
January 10th, 2004 |
As promised in our first article,
we are going to "transcribe" the
corresponding article of the Fiscal Law that used to
deal with the payment of Capital Gains.
Article 77 of the Fiscal Law (SAT=IRS) Exempted Income
Income derived from the following types of earnings
are exempted: Income from the sale of residential
property, if the TAXPAYER has lived in it for a minimum
of at least two years previous to the sale.
Income Tax Regulations: When selling one's residential
property: In order to benefit from clause XV
of Article 77 of the LAW, the TAXPAYER* will have
to prove before the Notary Public that formalizes
the transaction, that it has occupied such property
for at least two years previous to the proposed sale.
Telephone, electricity or gas bills are accepted as
proof.
This law was reformed, and took out the
condition of the two years, leaving only in Article
109 of the ISR Law the legend that says:
..."Income exempted..the
home of the TAXPAYER "
Especially in the Restricted Zone (100 kmts. from
the Border and 50kmts. f rom the beach), ALL foreigners
that want to buy a property within this areas, can
do it by using a legal instrument called Bank Trust,
where
the Bank hold the title and the buyer acquires only
the rights to use the property for up to 50 years (renewable)
He can built, remodel, rent or sale the property, but
always giving notice to the Bank that hold the Trust
.
As the Bank, the Title-holder
, is the "owner" of
the property, the Title is in its name, as it is also
at the Public Registry, as well as in the receipts
of the Property Tax payments, and such Fiduciary Bank
as a
corporation is deemed to be
a "moral" person, the
exemption of Capital Gains Tax cannot be applied to
the seller. The term "physical" applies to individuals,
while "moral" applies to corporations.
*Note: The important concept
with regard to this "exemption" is
that of "TAXPAYER", and the Secretaría de Hacienda
(SAT=IRS) in Mexico City has confirmed that it can
only be applied to "physical persons".
Outside of these Restricted
Zones, in the interior of Mexico, every person, regardless
of nationality, can buy a property without having
to use a Bank Trust and, consequently, it can make
use of the benefit of the above written article 109,
and can be exempted of such tax. However, if you
bought through a Bank Trust and you still have your
property under such Trust, then you're NOT cover
by the term "physical person",
and you will have to pay Capital Gain Taxes.
Many people, especially Lawyers
and Notaries in PV, have tried to "interpret" these Laws. However, as far
as we know and have been told by the highest echelon
of Officials in the Secretaría de Hacienda,
SAT (IRS), as well as many other Notaries in and outside
of the coastal areas, "Fiscal Laws are to be strictly
applied, and not to be interpreted"..; consequently,
if one of these Notaries allows you not to pays this
Tax, even in cases where you have a Bank Trust, it
is them, the Notaries, the ones that will bear the
responsibility for applying such exemption, as they
are co-responsible, together with the seller, to pay
it.
If they take this risk, let them, eventually, pay
the price!
Note: This article is re-printed every year for the
benefit of the new readers of the pvmirror.
gestrada@pvnet.com.mx
Prof. Germán
Estrada is the author of the best selling book,
"México
Mágico: Everything You Wanted To Know
About... But Nobody Told You..." available in Puerto
Vallarta at The Net House, Mail Boxes, Etc., Books,
Books as well as directly from the author by internet.
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