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“Inmigrante [FM2]” and capital gains


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Immigration Papers Necessary to Avoid Capital Gains Tax in Mexico

Recent changes to interpretations have made it necessary for people to have an “inmigrante” immigration document, previously known as an “FM2” to be able to qualify for an exemption on paying taxes if there is a gain* on the sale of their home.

Changing from a “no inmigrante [FM3]” to an “inmigrante [FM2]” requires the following:

1) Proof of economic solvency, currently defined by showing bank statements for the last 3 months with:

a) Monthly deposits of 400 times the Mexico City minimum wage ($62.33 pesos) which is $24,932 pesos or $1,944US (at the exchange rate of $12.82 pesos per dollar as of 2/22/2012).

B) A balance equal to or exceeding 12 times the above, i.e.$299,184 pesos or $23,337US in a bank account.**

c) The law has a provision for an exemption of up to 50% of the income requirement if you own your residence and live in it.

d) Spouses and dependent children can be economic dependents of the primary person and therefore only need to show 50% of the income required. For example a husband and wife where only the husband has income or the bank statements are only in his name would have to show 150% of the income or $37,398 pesos or $2,917US per month or the minimum running balance of $448,776 pesos or $35,005US. The aforementioned still may be reduced by the 50% for home ownership.

2) Copy of a utility bill (electricity or phone). Copy of the bill for property tax payment if attempting to use the owner occupied income reduction option.

3) Current valid “no inmigrante [FM3]” immigration document. Please note if your “no inmigrante [FM3]” is expired or you are renewing late you may be required to renew your “no inmigrante [FM3]” prior to obtaining an “inmigrante [FM2].” Please check the reverse side of your “no inmigrante [FM3]” to see the expiration date under the heading “”Fecha de vencimiento” and remember Mexico uses a different date system where the day appears before the month so 10/03/2012 means you expire March 10, 2012.

4) Copy of current, valid passport.

5) Payment of fees (we charge $5,250 pesos total*** including all government fees)

6) New photos, 3 front and side.

7) Application filled out and request letter.

Important note about changes to the current immigration law in use:

A new immigration law was passed last year and is supposed to be implemented this year. There will be no more “no inmigrante [FM3]”, “inmigrante [FM2]” and “inmigrado” immigration statuses and instead the current “no inmigrante [FM3]”, “inmigrante [FM2]” will revert to the new status of “resident temporal” and those with the “inmigrado” status will revert to the new “residente permanente” status.

These changes have been rumored to be implemented this year but currently the regulations have not been created nor changes to companion laws such as the customs law for importing foreign vehicles.

One thing we do know for sure is that the notaries will require people to have the new “residente permanente” status to be able to qualify for an exemption on gains from the sale of their home. People may change to the new status at the time their “inmigrante [FM2]” comes up for renewal. As the regulations have not been created yet, it is hard to say what the requirements will be and any difference to the ones currently in place.

Two myths about the “inmigrante” immigration document, previously known as an “FM2”:

1) Under current law you (assuming retiree and not working papers) may import and drive a foreign plated vehicle. Many people have heard erroneously that “inmigrante” immigration document, previously known as an “FM2” holders may not drive or import a foreign plated car. This is untrue.

2) You may go directly from a tourist visa (FMM) to a “inmigrante” immigration document, previously known as an “FM2” without the need to first obtain a “no inmigrante” immigration document, previously known as an “FM3.”

*Please note that many times there is a “phantom gain” which may trigger a taxable event due to the old custom of placing a value on the deed of less than the transaction value and the current practice of placing the true transactional value, thereby in many cases creating a taxable gain even where the seller realizes no gain or even sells for a loss.

**By bank account any deposit account is accepted whether in the US, Canada or Mexico, among other countries. Please note they will accept checking accounts, savings accounts, investment accounts, retirement accounts and the like. Any account statements not in Spanish will need to be translated into Spanish.

***Economic dependents add $300 pesos to price.

My office does all the paperwork and tries to make all of the process less of a bureaucratic nightmare. You see us one to fill out the papers and then the next time to get your new “inmigrante [FM2]” card.

Lic. Spencer Richard McMullen

Attorney At Law (Mexico)

Jalisco State Court Approved Translator

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Will INM allow, if the new rules aren't yet in place, an 'inmigrante' of one year, after many years on an FM3, to apply for 'Inmigrado'. When we went to 'inmigrante' last year, they told us, "Next year, residente permanente". However, it seems they may not be ready yet.

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I don't think they will play mix and match with the rules (can't use old, current procedure for some things and new to be implemented for others), still too early to tell, new law doesn't mention travel restrictions, i.e. time outside the country.

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Question for Spencer (or any other interested persons)

* Concerning the capital gains tax for FM3-status Expats on a sold home here @ Lakeside

1. Several WB members have mentioned that an FM3 holder would have to pay 25% (some say 30%) of the total sales price.

2. Other WB'ers have said you would only be taxed on the net gain

Examples:

1. One buys a home for $250,000 USD and sells the home for $275,000 USD (for a net gain of $25,000)

SO, WHICH IS IT? DO YOU PAY CAPITAL GAIN TAXES ON THE TOTAL SALE PRICE OF $275,000 USD

OR, PAY CAPITAL GAIN TAXES ON THE NET GAIN OF $25,000?

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I thought you were exempt if this was your first home. And no tax laibility if you owned a second home ( only home) for 5 years.

Then we heard you had to have an FM2 for this to happen. So If I sold a home right now with FM3 , I would be taxed? I was one of those persons who have a really small sale amount on my title which in no way is near what we paid for it. So would get killed with capital gains.

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The notarios have a computer program to calculate the tax as well as they can read the deed. My advice is if you are thinking of selling to have them review the deed first. Recently I had a client and I read their deed, client wanted an FM2 but I had my doubts so we reviewed the deed first and found out that there would be no capital gians due so then she didn't have to waste money on the FM2.

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The course I went to for the changes effective January 2010 mentioned having at least a CURP. I'm not sure if SMA has different interpretations or what.

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  • 2 months later...

Spencer, if I have a “inmigrante [FM2]” when I die will my heirs pay the taxes on the gain based on my status or on theirs which would be a tourist visa? Thanks

I'd also be interested in the answer to this query.

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I recall a notario saying it is based upon the seller's immigration document so it might pay to have the heirs stay a few weeks to get an FM2.

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Expired FM3 penalties depend how much time and run around 20 days minimum wage per month ($1,246 pesos) with a one month minimum, that is what they have been fining people recently as their practices seem to change every now and then.

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In SMA they are starting a fine with no grace period. Up to 10 days late and fine is about $100! It goes up from there.

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