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Allan responds to a question about paying tax when you sell your property in Mexico

Dear Allan,

I’ve heard that when I sell my condo I may have to pay taxes based on the fluctuation of the peso/US dollar exchange rate. Is this correct?

Dale

Hi Dale,

Thanks for your question. The answer is yes. The regulation called the “Reglamento de la Ley del Impuesto Sobre la Renta” covers this topic. Essentially, if you purchased your condo when the peso was 12 to 1 dollar and now you are selling it at roughly 19 to 1, the government looks at that difference as profit and charges you. Although your purchase price might be in US dollars, that amount is converted to pesos for tax purposes.

For example, if you purchased your property at $100,000 USD when the peso was 12 to 1 and then sold it for $150,000 USD when the peso was 19 to 1, the Mexican government does not see a profit of $50,000 USD, but rather a profit of $1,650,000 pesos. That is $150,000 x 19 to 1 = $2,850,000 pesos less $100,000 x 12 = $1,200,000.  So essentially, instead of having a profit of $50,000 USD, you have a profit of $86,842 USD ($1,650,000/19).  

As you can imagine, the more the profit and greater the exchange rate difference between purchase and sale, the more you’ll have to pay.

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