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Trust vs. Corporation

Buying Real Estate in Mexico

Friday, 14 March 2008

Buying Real Estate in Mexico:

Fideicomiso or Mexican Corporation?

It is well known that when buying real estate in the Riviera Maya, the law provides that since it is a restricted zone, foreign investors must incorporate a transfer of dominion trust to a bank. Nevertheless, the law itself permits a Mexican corporation with foreign owners to acquire the property in a restricted zone. The ambiguity, along with the idea of reducing costs, has caused a great number of real estate deals to be made through Mexican corporations.

It is important to know that the process of establishing a Mexican corporation includes many taxes, legal and migratory liabilities and even if it seems less expensive at first glance, than the incorporation of a Transfer of Dominion Trust (fideicomiso) with a bank, in the long run it is not. It is important to consider what the law permits when buying real estate in Mexico.

There are a series of liabilities, reports, and legalities, as well as tax reports, involved in the incorporation of a mercantile corporation, and it is also required to hire an accountant to navigate through the complexities of taxes and liabilities in a foreign country. It is also important to note that a corporation must have an Administrator or a Legal Representative, who is legally in charge of signing on behalf of the corporation. In the case of foreign corporate ownership, where the owners are their own corporate administrators, it is required to process their migratory status (FM3), which is harder to get with each passing year due to the strict regulations that immigration is imposing in these and other cases. With a bank trust the only liabilities are an annual administration fee, and grants all the rights to the owners, enabling the owner to lease, or sub-lease property, as well as other benefits corresponding to a regular owner.

Consequently it is recommended to foreign investors, that before they decide to acquire real estate in the Riviera Maya by means of a corporation, to go through their reasons for foreign investment as well as their reasons for staying in Mexico i.e.; to live here as a year round resident or just to do business in Mexico. If your desire is to invest in projects in the Riviera Maya versus living here as a resident, it is recommended to start a Mexican corporation. But if you want to acquire real estate for residential purposes only, it may be a simpler process to go through the process of a bank trust . Before you decide to choose either option check with your realtor and/or attorney to thoroughly explain all of the tax, migratory and legal liabilities of a Mexican Corporation versus a Transfer of Dominion Trust.

Miguel Angel Garcia Garcia, Attorney at Law
Real Estate and Corporate lawyer

Original article

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