Closing Costs When Buying Property in Mexico

When purchasing property in Mexico, buyers should be mindful of the following closing costs:

• Acquisition Tax (ISAI): A state and/or municipal transfer tax based on the property’s value, typically ranging from 2% to 5%.
• Notary Public Fees: Known as *Honorarios del Notario Público*, these fees cover the drafting of the *Escritura*, legal review, calculations, and closing coordination.
• Foreign Affairs Permit Fee: If acquiring residential property within the Restricted Zone through a *Fideicomiso*, a government fee is payable to the Ministry of Foreign Affairs.
• Bank Trust (Fideicomiso) Fees: This includes the initial setup/acceptance fee and ongoing annual fees.
• Appraisal Fee (Avalúo): The cost of the official property appraisal necessary for tax calculations and *Fideicomiso* establishment.
• Registration Fees: Paid to the Public Registry of Property to formally document the deed or trust.
• Legal Fees (Recommended): Many foreign buyers opt to hire their own attorney for an independent review of contracts and ongoing guidance throughout the process.

These costs can fluctuate based on the property’s value, location, and transaction specifics. It is essential to incorporate these expenses into your budget to ensure a smooth and financially sound purchase.

 IVA (Value Added Tax)

IVA (Impuesto al Valor Agregado) in Mexico is a Value Added Tax (VAT) that applies to the sale of goods, services, properties, and imports. It is a consumption tax collected at each stage of production and distribution, meaning it is gathered at every point in the supply chain, not just at the final sale to consumers. The standard IVA rate is 16%.

When buying property in Baja California, the IVA cost (Impuesto Sobre Adquisición de Inmuebles) generally falls between 2% and 5% of the property’s value. This tax is often the largest single closing cost item, as it is based on the property’s appraised value versus what the purchaser paid. The government wants their piece of the pie if you get a great deal on your property.

In addition to the IVA, other closing costs, such as notary fees, foreign affairs permit fees, and appraisal fees, can add an additional 3% to 8% to the purchase price. It’s crucial to budget for these expenses to avoid unexpected surprises during the transaction process.

The thing to note here is that we get our Century 21 Horizon Lawyer to provide an estimate of closing costs, the grey area is what the appraisal will come in at. 

Campo Land Purchases

If the sale is in a Campo most of the fees above are irrelevant. The buyer can expect to pay 5-10% of the purchase price in fees.

Ejido Land purchase involves

Consent and Approval: The transfer requires the consent and authorization of the Ejido Assembly, which governs the communal land use.

Documentation: Present required official identifications and proof of status. If married, the spouse must be present.

Payment of Taxes and Fees: Settlement of transfer taxes and local fees is mandatory.

Execution of Agreement: A formal document of cession is signed by both parties and authorized by relevant authorities.

Registration: The agreement is registered with appropriate agrarian authorities

It’s common a 5% tax fee is paid to the Ejido per transaction.