Trust vs. Corporation



A Mexican (Real Estate Property) Trust, called a "Fideicomiso"**, or simply Trust, is established when the purchase is for residential purposes. This purpose includes leasing the property.
** A Fideicomiso is a trust agreement, much like an estate trust, giving you all the rights of ownership
A company is incorporated only when the buyer has commercial speculation purposes, which include of course, the acquisition of real property.
It must be granted before a Mexican Notary Public.
It must be executed before either a Mexican Notary Public or a Commercial Notary Public.
The cost to set up the Trust is approximately $2,600.00 USD. Notary Fees will be added to this amount.
The cost to incorporate a Mexican Corporation is approximately $1,700.00 USD. The fees for the Purchase-Sale Agreement will be added to this amount.
N/A. The Trust and the transfer of the real property, occur simultaneously.
In order to transfer real estate properties, a notarized agreement will have needs to be executed (ie, either for Purchase-Sale Agreement, contribution of capital to the real estate properties, donation, public auctions, etc).
A Power of Attorney may be used to establish the Trust.
A Power of Attorney may be used to incorporate a Mexican Corporation.
The Trust takes at least two to three weeks to establish, since the permit is obtained in Mexico City.
It takes one week to incorporate a Mexican Corporation. The permit is issued locally in one business day.
Only one person is necessary to set up the Trust.
At least two persons are required in order to be able to incorporate a Mexican Corporation.
A Mexican Financial Institution will retain title to the Real Estate Property. It will grant the Trust Beneficiaries the use and possession of same.
The Mexican Corporation will retain possession and ownership of the real property. The members will have control of the Mexican Company.
The Trust Beneficiary is only obliged to obtain the permit and pay the initial fee to the Financial Institution. The financial institution will submit all notices before the Federal Government.
The obligations of the members of a Mexican Corporation, or their legal representatives, are to obtain the tax ID number of the company and record same with the National Registry of Foreign Investments.
It is mandatory to record the Trust with the National Registry of Property.
It is mandatory to record a Mexican Corporation with the National Registry of Commerce.
A Mexican Corporation must have a CPA.
Either the address of the real estate property or the address of the CPA may be registered as the address used for tax purposes.
It is mandatory make a yearly payment to the Financial Institution that is retaining the ownership of the real estate property. The rate is approximately between $550.00 USD and $700.00 USD + 16% IVA (Value Added Tax).
The CPA will file monthly tax returns and an annual tax report with the Ministry of Finance and Public Credit (Secretaria de Hacienda y Credito Publico in Spanish)**. There is no dormancy status for Mexican Corporations. Accountant professional fees for filling monthly reports with a zero balance can be anywhere from $500.00 USD to $750.00 USD a year per company.
** Secretaria de Hacienda y Credito Publico Mexico’s finance ministry
A Mexican Corporation is subject to be auditing by the Ministry of Finance and Public Credit.
US Citizens will have to report on the Real Estate Trust to the US Treasury Department.
US Citizens will have to report on the incorporation of a Mexican Corporation to the US Treasury Department.
If the beneficiary leases the Real Property in Trust, the corresponding taxes will be paid by the Financial Institution, which will charge an additional fee to do so.
If a Mexican Corporation is active, the CPA will collect a fixed quota based on the time devoted to the company's accounting. Such quota starts at approximately $100.00 USD a month.
The Trust includes a clause pertaining to inheritance stating that the heirs can be appointed in the Real Estate Trust Agreement, and can be changed by means of a letter addressed to the Financial Institution.
The Mexican Corporation does not include an inheritance clause. A Mexican Last Will and Testament costs approximately $350.00 USD each.
1. In case of the death of one of the members, there will need to be a probate conducted in Mexico.
2. In some cases, the Mexican Corporation will need to be dissolved and liquidated, selling the real estate property in order to transfer same to the creditors or the heirs.
More properties may be added to the Trust. However, the cost to do so will be practically the same as that paid for the first property.
A Mexican Corporation may acquire as many properties as desired. The costs will consist solely of the Purchase-Sale Agreement.
If there is a desire to sell the real estate property, the Trust is transferred to the buyer, or cancelled.
If a Mexican Corporation transfers the real estate property, the members will continue to be subject to the tax obligations hereinbefore mentioned, whether or not it has assets.
The Capital Gain Tax may be exempted if the Trust Beneficiary complies with certain requirements.
Real Estate Property transfers are not subject to the IVA (Value Added Tax).
Real Estate Property transfers may be subject to IVA (Value Added Tax), if the real estate property being transferred is for commercial purposes.
The Mexican Corporation may transfer 100% of the stock to the buyers. This transfer includes all inventory and assets of the company (including real estate property).
When a Mexican Corporation is transferred, the tax rate is 25.00% of the value of the stock, whether or not there is any profit.
When a Mexican Corporation is transferred, and there is no profit, an accountant certified by the SHCP shall issue an opinion regarding same. The accountant fees for this are approximately 30.00% of the unpaid taxes.
Each and everytime the Financial Institution executes a public notarial instrument under instruction of the Beneficiary (powers of attorney, mortgages, etc), there will be charged starting at $300.00 USD + 16% IVA (Value Added Tax) + for Notary and recording fees.
Only Notary and recording fees will be charged for issuing powers of attorney, mortgages, etc.
The Mexican Corporation has the obligation to keep three corporate books: 1) General Assemblies of Shareholders; 2) Increases or Decreases of Capital; 3) Shareholders information.
The General Assembly of Shareholders is the highest authority of the Mexican Corporation. Some resolutions need to be notarized and recorded into the Public Registry of Property and Commerce. The costs run from $350.00 USD if notarized. If not, they can run starting at $50.00 USD.
Subject to Property Tax.
Subject to Property Tax.
Deductions. In order to deduct expenses, a corporate account must be opened in the name of the Mexican Corporation. All payments over $2,000.00 pesos must be effected through checks or wire transfers and an official invoice (factura) must be obtained, which has been issued by the supplier, or the person or entity who is providing the service.
Deductions. All payments under $2,000.00 pesos may be paid in cash. Nevertheless, it remains obligatory to obtain the official invoice (factura) issued by the supplier or the person or entity who is providing the service, and the cash expense must be reimbursed withdrawing said amount from the corporate account.
Any improvements made to the real estate property, must be paid from the corporate bank account.
Profits may be greater.
The Financial Institution must be notified of any improvements made to or on the real estate property.
  1. The fees are approximate amounts and may vary.
  2. The IVA (Value Added Tax) for 2011 in the state of Yucatan is 16%.
  3. The IVA (Value Added Tax) for 2011 in the state of Quintana Roo is 11%.
  4. The characteristics and regulation for a Real Estate Trust established for commercial purposes are not included in this article.
  5. All amounts are based on 2011 rates.
  6. Environmental regulations, encroachments and liens, will need to be verified beforehand.