Purchasing property in Mexico by someone who is not a resident of Mexico – restrictions on purchasing
The law in Mexico prohibits non-Mexican citizens from directly owning real estate in restricted areas. As defined by law, these restricted areas are located within 100 kilometers or less from any of Mexico’s borders and 50 kilometers or less from any coastline.
Also, ejido lands—lands granted by the Mexican government to the indigenous people of Mexico—cannot be owned by foreigners.
However, this restriction can be bypassed by purchasing real estate in Mexico in two ways: through establishing a trust known as a “Fideicomiso” or by using a Mexican corporation.
Establishing a trust with a Mexican bank
As mentioned above, the restriction on purchasing real estate in Mexico’s restricted areas can be circumvented by having the purchase and ownership of the property held by a trustee or a resident Mexican corporation. This condition can be met through a Mexican bank, which effectively acts as the trustee and creator. In the Mexican property registry, the bank will be registered as the owner of the property.
Although the Mexican bank is registered as the legal owner, the beneficiary of the trust will be the foreign buyer who enjoys all the rights associated with property ownership—such as occupying, renting, selling, transferring to an individual (local/foreign) or a business entity, and of course, appointing future beneficiaries in the event of death.
All decisions regarding the property are made by the beneficiary, while the trustee bank is responsible for carrying them out in practice. The trust is legally limited to a period of up to 50 years but can be renewed thereafter.
If the beneficiary is dissatisfied with the bank, they have the right to change the trustee—that is, to switch banks at any time they desire without being forced to sell the property and terminate the existing trust.
To establish a trust in Mexico, several requirements must be met
- Approval from the Mexican Ministry of Foreign Affairs – This is necessary to ensure that foreign investment complies with Mexican laws regarding property ownership by non-citizens.
- A Mexican bank acting as the trustee – The bank will hold the legal title to the property, acting on behalf of the foreign beneficiary.
- A contract signed and ratified by a Mexican public notary – This formalizes the establishment of the trust and ensures that the agreement is legally binding under Mexican law.
Additionally, there are restrictions specific to establishing a trust with a bank
- The trust can only hold and purchase one property at a time.
- In cases where the size of the purchased property exceeds 2,000 square meters, the foreign buyer (beneficiary) must present a commitment letter stating that they will invest a specific amount of money (as per Mexican law relative to the size of the property) to obtain a purchase permit from the Mexican government.
The tax implications of a trust for an Israeli resident are influenced by several key factors:
The tax treaty between Israel and Mexico is designed to prevent double taxation, which benefits Israeli investors by potentially reducing their tax liabilities.
To read the full article on the tax treaty for the prevention of double taxation and the tax regime in Mexico, you can click on the following link.
According to Israeli law, the existence and establishment of a trust must be reported if the creator (purchaser) and/or beneficiary is an Israeli resident. Such a trust is considered Israeli for tax purposes and is therefore subject to taxation in Israel. This requirement ensures transparency and compliance with Israeli tax laws. Similarly, in the case of establishing a Mexican corporation, an Israeli resident must report their income and profits from foreign business activities, as well as the fact of holding a foreign corporation. This reporting is necessary to align with Israeli tax regulations and effectively manage Israeli residents’ international tax obligations.
