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Fideicomiso or Corporation?

White ornament

What is Fideicomiso?

A fideicomiso allows a foreign buyer to hold property with all the rights of a citizen. With a single fideicomiso, you can hold many Mexican properties. Above all, owning the properties with continuance, and will the property to your heirs. Plus, you can transfer the trust to another foreign buyer, if you want to sell.

A fideicomiso is good for 50 years and is renewable thereafter (by you or your heirs). It can be held by one or more individuals or by an entity. The setup ranges from US$350 to US$600.

Buying Property In Mexico Through A Corporation?

Foreigners can also own land in restricted areas through a Mexican corporation. These can be 100% foreign-owned. Only consider a corporation when buying real estate strictly for investment or business. If you plan to subdivide and develop land, a Mexican corporation makes sense.

Corporations come with more restrictions and reporting requirements than fideicomisos. You need to submit monthly reports on income and expenses. After that, a certified accountant needs to complete it. Then, send it to the Mexican Department of Treasury. Property held in a corporation is considered commercial, so it’s subject to extra taxes.

The initial costs to set up a corporation will vary depending on the attorney. The least required is $50,000 Mexican pesos (about US$2,800 at today’s exchange). Moreover, you’ll also incur costs for the certified accountant to maintain it (US$600 to US$800 per year).

Both options are secure, following are some PROS and CONS for you to consider:

Fideicomiso:

Pros:

  • This is for residential purposes.
  • It is very secure.
  • It is for 50 years, plus the option to renew for an additional 50 years.
  • Beneficiaries can be appointed.
  • Tax strategies to reduce capital gains taxes are possible with this option.
  • No need to file any tax returns with Mexican Government.

Cons:

  • Subdivisions are being harder now to be accepted by the Bank Trustee.
  • Permits for Constructions are sometimes more difficult to be obtained.
  • Annual Bank trust fee payment has to be done every year to the Bank Trustee.

Corporation:

Pros:

  • No annual bank fee.
  • Construction permits are easier to be obtained.
  • Subdivision permits are easier to obtain.
  • Corporation is meant for commercial purposes, so if a business is the intention of the property, this is the ideal option.

Cons:

  • A separate Will needs to be done to appoint heirs/beneficiaries of the shares of the Corporation.
  • Accountant fees can be sometimes expensive.
  • More administrative duty / work to maintain the Corporation.
  • Annual and monthly tax returns need to be filed.
  • Capital gains taxes can be high when using a Corporation, it is more difficult to reduce the CGT.

Diamante Realtors has been in business for 15 years in Baja California Sur, Mexico. Under the able leadership of its broker, Brian Westerlund (originally from Vancouver, Canada) Diamante is the premiere brokerage for foreign and Mexican buyers in La Paz, La Ventana, Cabo San Lucas, San Jose del Cabo, East Cape, Pescadero, Cerritos, Loreto and more.

With 15 bilingual agents in total and offices in Cabo, La Paz and La Ventana, Diamante works throughout the region providing honest and professional advice and assistance to buyers and sellers. We have completed over 700 sales and have represented buyers and sellers alike in negotiating all kinds of closings.