By Dolores Pérez Islas
There are many investment possibilities in Mexico for foreigners both in beach destinations such as Huatulco and Puerto Escondido; as in historical cities such as the city of Oaxaca; or even destinations in cosmopolitan cities like Mexico City and Guadalajara. A foreigner can buy with all legal certainty but must make sure that all necessary procedures are accomplished according to the Mexican legal system.
There are three aspects that a foreigner should consider when doing real estate operations in Mexico:
1. When you buy a property outside of the prohibited zone.
When a foreigner buys a property outside of the called restricted zone that implies a distance of 100 km to the interior of the country and 50 km from the coasts, that is, if he buys, for example, a property in the city of Oaxaca, said person must only agree with the Mexican government, through the Ministry of Foreign Relations, that it is considered as a national in relation to that acquisition. This process responds to what is known as the Calvo clause, a principle according to which foreign citizens must necessarily be treated by local courts, avoiding the diplomatic intervention of the country of belonging. It is a procedure that is one more requirement for foreign purchasers. The other costs such as deed and taxes do not cost them more because they are foreigners.
2. When the foreigner buy a property within the prohibited or restricted area.
In accordance with article 27, section I of the Political Constitution of the United Mexican States, foreigners are prevented from acquiring direct ownership of lands and waters in a strip of one hundred kilometers along the borders and fifty in the beaches, only the use and exploitation of real estate located within this restricted area is allowed, through the constitution of a trust. However, the regulatory framework of the foreign investment law allows foreigners to use the trust figure to take advantage of a property that is within the restricted or prohibited zone, such as Huatulco and Puerto Escondido.
In this sense, a banking institution is required so that, as trustee, this is the one that manages. By law, these types of trusts have a maximum duration of 50 years, which the interested party may request to be extended
for a further 50 years. That way, you can take advantage of the use of the property for up to 100 years. Usually it is the foreigner who must cover the cost of the trust, which will vary according to the rate of the fiduciary institution that will act as a “trust”. The corresponding permit must be processed with the Ministry of Foreign Affairs and the fiduciary notify said secretary when that permit has been used to access the real estate.
3. When the foreigner buy a property trough a Mexican corporation
Foreigners can manage, own, represent and operate Mexican corporations with some restrictions in industries such as mining, airports, and telecommunications. However, there are no investment restrictions on foreign-owned Mexican corporations to buy, sell and / or develop properties. A corporation in Mexico must have two shareholders, both can be foreigners and it is not necessary that one of them be Mexican.
There are different types of corporations, the type will depend on the purposes and tax purposes. Once this corporation is formed, it will be able to acquire properties in any part of Mexico, including the restricted zone.
Investing in Mexico implies that the foreigner can ensure not only the viability of the investment with the most appropriate instrument but also soak up all the elements that must be considered in order to correctly manage their assets and obtain the maximum return on investment with all the legal certainty.