Chapter 4: In This Chapter Introduction Foreign ownership Financing Commercial real estate Residential real estate Rental property Licensing and brokerage Government Legal system Taxes and fees Economy and business What you need to know Beyond the basics Key contacts Page 73

Map of Mexico Source: CIA World Factbook Page 74

Introduction to Mexico Federal republic divided into 31 states and one federal district (Mexico City) – Estados Unidos Mexicanos Largest Spanish-speaking country in the world – Indigenous languages spoken in the south Page 74-76

Mexico—The Rich Tapestry Source: Wikipedia Page 77

Mexico—The Rich Tapestry Source: Wikipedia Page 77

Mexico—The Rich Tapestry Source: Wikipedia Page 78

Mexico—The Rich Tapestry Source: Wikipedia Page 78

Foreign Ownership of Real Estate Fideicomisos Ejidos Co-propiedad ownership Timeshares Fractional ownership Page 79-83

Financing Mortgages by Mexican banks have increased since 1997 bank reforms Cash transactions still common Cross-border mortgages Source: Asociación de Bancos de México, with data from Banco de México Page 83-84

Commercial Real Estate Maquiladoras Resorts and hotels Medical facilities – Access to health care for second-home buyers, retirees, and medical tourists – Other developments and housing Page 84-87

Residential Real Estate Second-home market – Cancún – Los Cabos – Puerto Vallarta – Ixtapa – Acapulco – Manzanillo – Mazatlan Non-resident Mexicans Residential trends Page 87-89

Space Measurement Balconies and patios included Page 90

Rental Property Pro-tenant Provisions differ by civil law in each Mexican state Leases – Mexico City example Page 90-91

Licensing and Brokerage No registration required – Sonora, Sinaloa, and Guanajuato require registration – Nonresidents must obtain immigration status permitting them to work Listings Transaction process Appraisals Responsibilities of notario Page 91-92

Realtor.com/international Page 92-95

What You Should Know About Government Check-and-balance system with executive, legislative, and judicial branches Pro-market policies to seek investment Government struggles to balance pro- market policies with corrections to economic inequity Page 95

Legal System Civil law system Notarios and attorneys can quickly access written codes to offer opinions and guide transactions Litigation infrequent due to costs, lack of punitive awards, and length of proceedings Legal system highly evolved, but always engage a competent local attorney Page 96

Real Estate Taxes and Fees Tax or FeeAmountPaid by Acquisition Tax %Buyer Notario Fee %Buyer Registration Fee %Buyer Certificate of No Liens/No Tax DebtUS $50-100Buyer Bank Trust Initiation FeeUS $ Buyer Bank Trust Annual FeeUS $ Owner (Buyer) Foreign Affairs Permit$1500Buyer Title Insurance %Buyer Land or Building Survey Fee*VariesBuyer Appraisal Permit Fee0.3%Buyer Escrow Fee %Buyer Agent Commission3-6%Seller Property Tax (annual payable to state) % of valueOwner (Buyer) Source: Global Property Guide Page 97

Business and Income Taxes Individual income tax – Progressive up to 30% – Nonresidents taxed on Mexico-sourced income Business income tax – Generally 30% – Nonresident corporations taxed on Mexico-sourced income Withholding tax – Interest paid to non-residents: % – Royalties paid to non-residents: 25-30% Capital gains – Generally 30% Value-added tax – Generally 16% Other taxes Page 98

Economy and Business Exports to USA – 25% of GDP – 80% of total exports Oil and gas – Largest source of foreign currency Remittances – Second largest source of foreign currency Transportation and communication Page

What You Need to Know Opportunities Foreign ownership restrictions Transactions with fideicomiso system – Roles of other professionals Availability of mortgages – Cash transactions common Mexican economy – Trade with USA – Oil and gas – Remittances – Transportation and communication Pro-market policies to facilitate trade Page

Beyond the Basics Greetings Physical contact Business cards Business style Company hierarchy The softened “no” Punctuality Business dining Tipping Gifts Page

Key Contacts AMPI US-Mexico Chamber of Commerce USA Embassy in Mexico City USA Consulate in Monterrey Mexico Tourism Board FONATUR Page