[BUYING AND SELLING REAL ESTATE IN MEXICO] 169
An individual may hold title over real estate property in Mexico, directly or indirectly, allowing her/him to use, enjoy and dispose such property, through three different means: (i) as the direct owner, holding a property title under her/his name; (ii) through a Mexican corporation, as a stockholder; or (iii) through a bank trust, as a beneficiary. As a foreigner, the latter two would be the most recommended vehicles to hold title of land in Mexico. (a) Foreign-Owned Mexican Corporation A foreign-owned Mexican corporation (a “ Mexican Corporation ”) is a vehicle frequently used by foreign investors to carry on business in the country and not just to hold title over real estate. As a national, provided that all LIE requirements are met, a Mexican Corporation complies with the Mexican Constitution requisite to hold title over private property. However, it is important to point out that holding title of real estate through a Mexican Corporation must be achieved in accordance with the corporate purpose of the entity. A Mexican Corporation is typically incorporated before a “public faith officer,” such as Notarios Públicos (authorized by local governments) or Corredores Públicos (authorized by federal authorities) and requires a minimum of two (2) shares or equity holders since the concept of single- stockholder corporations — with a sole exception 2 — is not allowed under Mexican 2 Simplified stock corporation ( sociedad por acciones simplificada ), which is a recently created type of entity not useful to acquire real estate. It is allowed to be incorporated by an individual single- shareholder (no entities allowed as shareholders). However, this type of entity is not recommended for foreign investment purposes, since its main purpose is to regulate small businesses. Its shareholders may not have any equity participation in any other Mexican entity that allows them to control such entity and the corporation’s annual total income shall not exceed the equivalent to $6.8 million Pesos (approximately $405,000.00 Dollars, as of September 2023) .
law. It will have to conduct the corporate activities of any company, such as annual stakeholders’ meetings, have an active administrative body, file tax statements, etc. We strongly advise seeking local legal counsel in order to properly incorporate and tailor- make the corporation’s purpose to the specific client’s needs. The main advantages of holding real estate property through a Mexican Corporation could be, for example, that a national entity, pursuant to applicable immigration requirements, would directly own the real estate, it could allow its stakeholders to live and work in the country and there is no limit as to the number of properties it may own. While the main disadvantages of a Mexican Corporation could be, for example, the undertaking of the daily corporate activities, including, but not limited to, its management, accounting reports, tax filings, LIE filings regarding its foreign stakeholders, etc. (b) Mexican Trusts Mexican trusts are very useful and flexible and therefore widely used by foreigners as a vehicle not only to acquire real estate, but for general business purposes as well. It provides solution to a wide range of personal and commercial needs. Trusts are mainly regulated by the Mexican General Law for Negotiable Instruments and Credit Transactions ( Ley General de Títulos y Operaciones de Crédito or “ LGTOC ”). Pursuant to the LGTOC, a Mexican trust is created pursuant to a commercial contract by which a settlor transfers title and management of certain assets and/or rights to a trustee — generally a bank or any other financial institution authorized to act as such under applicable Law — , so that the
ILN Real Estate Group – Buying and Selling Real Estate Series
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