Incorporation and Citizenship
Q:
What are the advantages and disadvantages of incorporation & citizenship? Colette Désy
A:
The major advantage of incorporation or citizenship is that you can avoid having to establish and maintain a Bank Trust (Fideicomiso) for property purchases. The Mexican
government views a Mexican corporation similarly to that of citizenship and therefore no Bank Trust is required for purchases in the restricted zones – those areas near the border or coast.
The costs of forming a corporation can vary greatly, depending on the type of corporate status you are going for. However, the tax implications should be weighed carefully; particularly when it comes to Capital Gains. Capital Gains taxes vary considerably for Individuals and Corporations and MEXLend recommends its purchasers considering Incorporating within Mexico for the sole purpose of purchasing property, consult with an attorney experienced in both Real Estate and Tax.
For some it may be a wise decision, for others an unnecessary one. For more detailed information on Capital Gains Taxes in Mexico, please see Wayne Franklin’s beautifully written column on the subject in past
Tribune issues numbers 516 and 517.
From a mortgage viewpoint, the great disadvantage of buying property as a corporation is that most lenders will not finance a Residential Purchase in the name of a Corporation.
Remember, the Bank needs a confidence level in its ability to foreclose in the event of non-payment or non-performance on the loan. Foreclosing when corporate ownership is in place, represents a large obstacle for most Banks. Obtaining Residential Financing as a Corporation is not impossible, but the options are limited and costs can be higher. Most Residential Lenders prefer lending to individuals.
Becoming a Mexican citizen is a serious step involving a great deal of forethought and commitment. If you thinking of becoming a citizen solely for the purpose of buying a home, then you are on the wrong track. The Fideicomiso (Bank Trust) is a secure instrument for foreigners looking to purchase in Mexico and buyers should not be daunted by it. By far, the vast majority of foreign purchasers go this route.
Both Incorporation and Citizenship can offer advantages.
However, the important point to note is that neither is necessary for home ownership in Mexico.
Financing is available for Dual Citizens, US Citizens and Mexican Citizens equally.
Mortgage Financing is beginning to become available for Canadian Citizens as well.
MEXLend currently works with 7 Different Lenders, offering 56 Different Loan Programs. Regardless of a borrower’s citizenship, it is likely we have a mortgage program to fit most needs.
MEXLend, Inc. is a Mexican mortgage brokerage offering loan options in Dollars and Pesos for buyers looking to purchase vacation or investment property throughout Mexico.