Fideicomiso vs Corporation Which is Better for Buying Property in Mexico

Fideicomiso vs Corporation: Which is Better for Buying Property in Mexico?

You need to ensure that you are legally able to purchase real estate in Mexico if you are not a Mexican national. When buying property in Mexico, one of the first things to ask yourself is: Can you buy real estate in Mexico legally? This is especially true in the “restricted zones”.

Article 27, section 1, of the Constitutional Law of the United States of Mexico prohibits foreigners from acquiring property along the coast or within 50 km inland, and up to 100 km of our borders. It’s simple: our constitution was adopted in 1917, and little has changed since then. The risk of invasion was high in those days, therefore, it seemed logical to prohibit non-Mexicans from acquiring land at strategic locations.

Although the ban seems ridiculous, it is still in place because it benefits many people and institutions, especially banks. There have been many attempts to change the constitution, but no real changes. We can be almost certain that this will never change.

Due to this, expats coming to Cabo San Lucas in order to buy property have two options: obtain Fideicomiso through a Mexican bank OR their own Mexican corporation.

Both are very different and cater to specific needs.

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The Fideicomiso option is most commonly chosen by foreigners to purchase property in the region. The Fideicomiso has no exact equivalent in Canada or the United States, making it impossible to translate. We can only get close by referring to it as a “real property trust.”

The Fideicomiso de Zona Restringida is a legal document that allows a Mexican Bank to lend their name in order for you to use and manage a property. The property is technically under the name of the bank, but the Fideicomiso document explains that by paying an annual fee of $700 USD, the bank can be held responsible for ownership. The trustee is responsible for the use, administration, maintenance and civil responsibility of the property, as well as its rental income, mortgage loan, and sale proceeds. The trustees are told that the trust institution has no responsibility for the property.

Fideicomisos have many advantages. It is similar to a will. You can designate beneficiaries in the deed by presenting your death certificate along with a simple letter. Another advantage is that a lien cannot be placed on the lot because it’s not registered in your name. This means that your economic or legal issues will not affect your property. The biggest benefit is that if your property qualifies, and you get resident status as a trustee, then at the time of selling, the seller can be exempt from 100% of ISR tax on capital gains up to $3,800,000.

The price of forming a Fideicomiso is the only downside. The bank fees for the initial transaction (which includes the permit, a one-year fee paid in advance, and expenses) range between $2,000 to $2,500 USD. This is on top of the other closing costs, such as the acquisition property tax, rights and certificates, notary fees and attorney fees. A bank will also take around three weeks to give you the permit. This is after all of the documents and forms are submitted and the permit has been paid. The time it takes to get the documents and complete those forms is typically two or three weeks.


Corporations are easier to form. In two weeks, a Mexican corporation with two partners can be formed. They can be both foreigners, no Mexican citizenship is required. Don’t believe that. The maximum cost is $1,500. You can then use that money to purchase property in a similar way as a Mexican citizen (basically the corporation can perform all of the same functions as a Mexican). In a month-and-a-half, you will have the company formed and all the property registered under its name. With it, you can buy a car or pretty much anything else. The only advantages are the price and speed.

You are bound to an accountant by the corporation for life. An accountant will still charge you even if the corporation reports no income. You will need your resident status to be able to act as a corporate partner. Otherwise, you will be required to use powers of attorney granted by the Mexican corporation (which will mean that someone else will control your money, your land, your car and anything you do or buy through the corporation). Cash is not allowed to be used for any purchases made through a company. The biggest disadvantage is that there’s no way to avoid the capital gains tax when you sell the property. You can reduce your tax bill by keeping fiscal receipts of all the work you did in the home and deducting it from the sale price.

This makes it the best choice for those who want to start a business. A corporation is your best option if you want to start a business, or buy property that will not be used for residential purposes. You will be able to save some money on your income tax and, most importantly, you will have a legal income source in the country.

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A Fideicomiso is as secure as a corporation. Here are some pros and cons to think about:

Fideicomiso Pros:

  • This product is intended for residential use only.
  • The system is extremely secure.
  • The initial term is 50 years with the option of an additional 50-year renewal.
  • Beneficiaries may be named.
  • This option allows for tax strategies that reduce capital gains tax.
  • The Mexican government does not require you to file tax returns.

Fideicomiso Cons:

  • Bank Trustee is now more reluctant to accept subdivisions.
  • Sometimes it is more difficult to get a permit for construction.
  • The Bank Trustee must be paid an annual fee.

Corporate Pros:

  • No annual banking fee
  • Construction permits are now easier to obtain.
  • It is easier to get a subdivision permit.
  • If you want to use the property for a commercial purpose, then this is the best option.

Corporation Cons:

  • To designate heirs/beneficiaries for the shares of a Corporation, a separate will must be made.
  • Accounting fees can sometimes be expensive.
  • Additional administrative duties and work required to maintain the Corporation.
  • Tax returns must be filed annually and monthly.
  • When using a Corporation it can be difficult to lower the capital gains tax.

A Fideicomiso, in our opinion, is the best option if you are planning to buy property in Mexico for personal or residential use that won’t generate income. If you plan to start a company or buy the property for business purposes, you should form a corporation.

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