The tax a foreign seller pays in Mexico is calculated by the notario, recorded in the deed, and paid over shortly after signing. By the time it appears, it is arithmetic rather than a decision.
It does not have to work that way. The rules sit in one article of the income tax law, Article 160 of the Ley del Impuesto sobre la Renta, and the part that matters most to a foreign seller is that there are two ways of being taxed and you can choose between them.
This page explains both, sets out who calculates the tax and when, and tells you what to have ready. It is the practical version, and it says plainly which questions need a Mexican accountant or your notario rather than a web page.
Two ways of being taxed, and the choice is yours
Article 160 gives a foreign seller of Mexican real estate two routes, and they differ in what the tax is charged on rather than only in the rate.
The flat route. A single rate is applied to the total proceeds of the sale, with no deductions at all. Not your profit. The whole sale price.
The gain route. Alternatively, you may elect to have the maximum rate of the income tax tariff applied to the gain rather than to the proceeds. That rate is higher than the flat one, and it is worth confirming the rate that applies in the year you sell, because the tariff is revised.
The difference is the base. One applies a lower rate to a much larger number. The other applies a higher rate to a much smaller one. Which produces the lower bill depends entirely on how large your gain is relative to your sale price, and that is a question about your numbers rather than about the law.
Which route wins, and why you cannot work it out from a web page
The honest answer is that it depends on two things, and only one of them is about the law.
It depends on the two rates, which are revised, so any comparison published today has a date on it whether or not the page tells you.
And it depends far more on how large your gain is relative to your sale price. A seller whose gain is most of the price and a seller whose gain is a small fraction of it are asking different questions, and the same two routes answer them in opposite ways. This is why the comparison cannot be done in the abstract: it is arithmetic on your numbers, not a rule about Mexico.
Two things to hold on to before anyone models it for you.
“Gain” does not mean the sale price minus what you paid. It means the gain as determined under Title IV, Chapter IV of the law, which is a different and generally smaller number once the permitted deductions and adjustments are applied. The next section explains why.
And the calculation that decides it is the notario’s. Both routes are worth modeling against your actual figures before you list rather than after you sign, which is a short enough piece of work to be worth asking for early.
This reflects our latest information and can change. Ask us to arrange a preliminary calculation of both routes against your own figures, through the notario or an accountant, before you accept an offer.
How the gain is worked out
Article 160 does not calculate the gain itself. It sends you to Title IV, Chapter IV, and that is where the mechanism lives.
Two features of it matter to a long-term owner, and together they explain why the taxable gain is not the sale price minus the purchase price.
The original cost is adjusted for inflation. What you paid a decade ago is not treated as a decade-old peso figure against today’s sale price. There is an indexing mechanism, and on a long hold it is the adjustment most worth asking your accountant to quantify.
The construction element depreciates. The law separates the land from the building and treats them differently, with the construction portion written down over time.
The two pull in opposite directions: indexing raises your deductible cost, depreciation of the building reduces part of it. Which effect dominates depends on how long you have held the property and on the split between land and construction. We have deliberately not published the indexing and depreciation percentages, because they sit in a provision we have not read in full here, and publishing a formula we have not verified would be worse than publishing none.
Certain costs you incurred are deductible against the gain, including qualifying improvements. Which of your receipts will actually be accepted is the part no published source can tell you, and it is the reason the section on what to do before you list exists.
Who calculates it, and when
In a normal sale through a public deed, you do not file this yourself.
As of October 2026, Article 160 puts the obligation on the notario. They calculate the tax under their own responsibility, record it in the deed, and pay it over within fifteen days of the deed being signed.
This reflects our latest information and can change. Statutory periods and rates are revised, and the notario handling your sale is the person to confirm both.
Three things follow, and they are the reason to engage early.
The notario decides the number. So questions about your deductions and your receipts are questions for the notario’s office, not for your agent.
The clock runs from signing. Which means the documentation supporting any deduction needs to be with them before closing, not after.
They calculate under their own responsibility. So a deduction you cannot evidence is unlikely to be taken on trust, and that is a feature of the office rather than an attitude to you.
You do not need a Mexican representative
This one is worth stating flatly, because it is often reported the other way round.
Article 160 provides that where the sale is recorded in a public deed, no representative in Mexico is required in order to elect the gain option.
If you have been told you must appoint a Mexican representative before you can be taxed on the gain rather than the gross, ask where that requirement comes from. For a sale by public deed, which is how residential property is sold in Mexico, the article says otherwise.
Before you list
Three things are worth doing while you still have time to do them.
Find your closing file from when you bought. The deed, the appraisal and the acquisition tax receipt establish your cost base. Reconstructing them years later is slow and sometimes impossible.
Gather your paperwork for work you have done. Qualifying improvements can be deductible, and what counts as qualifying, and what form the evidence has to take, is a question for the notario’s office or an accountant. Mexican invoicing rules are stricter than a receipt, so ask early what will be accepted. If the person who did the work never issued a formal invoice, that is worth knowing now rather than at closing.
Ask for a preliminary calculation before you accept an offer. The notario or an accountant can model both routes against your actual numbers. It is the difference between choosing a route and being told one.
Pricing comes first, and our guide to pricing your home explains why. Our Seller’s Guide covers the full process.
What this page cannot tell you
Whether the principal residence exemption applies to you. There is an exemption in Mexican law for a seller’s principal residence, subject to a cap and to eligibility conditions. Whether you qualify is a genuinely technical question, and the eligibility test is the contested part rather than the existence of the exemption. Published figures for the cap vary, so we publish neither the cap nor the test. If it might apply to you, that is a conversation with a Mexican accountant, and it is worth having before you list.
Which of your receipts will be accepted. That is the notario’s judgment on your actual paperwork.
Which route is better for you. It depends on your gain, the deductions available and your own position. This page tells you what the two routes are and sends you to the people who can run the numbers on your own figures.
Frequently Asked Questions
How is capital gains tax calculated when a foreigner sells property in Mexico?
Article 160 of the income tax law provides two routes: a flat rate on the total proceeds with no deductions, or the maximum rate of the income tax tariff applied to the gain determined under Title IV, Chapter IV. The rates differ and so does the base, and the seller may elect between them. Both rates are revised, so confirm the ones that apply in the year you sell and ask for both routes to be costed on your own figures.
Can I really choose between the two methods?
Yes. Article 160 sets the flat basis on total proceeds and provides the option to apply the tariff rate to the gain instead. Which produces the lower figure depends on the size of your gain relative to the sale price.
Which of the two routes will cost me less?
It depends on how large your gain is relative to your sale price, and the two rates are revised, so it is not a question a web page can answer for your sale. Ask the notario or an accountant to cost both routes on your own figures before you accept an offer.
Do I need a Mexican representative to be taxed on the gain?
Not where the sale is recorded in a public deed. Article 160 provides that no representative in the country is required to exercise the option in that case, whatever you may have been told.
Who calculates the tax, and when is it paid?
The notario, under their own responsibility. It is recorded in the deed and paid over within fifteen days of the deed being signed.
Why is my taxable gain not just the sale price minus what I paid?
Because the gain is calculated under Title IV, Chapter IV, which indexes your original cost for inflation and depreciates the construction element of the property. Both adjustments apply and they pull in opposite directions, so the result is a different figure from the simple subtraction and which way it lands depends on your own hold and your own land-to-building split.
Is this Article 160 or Article 161?
Article 160. Several published sources place the gain option in Article 161, which covers different ground. If a guide sends you to 161 for the election described here, it is pointing at the wrong provision.
What should I do before I list?
Locate your original closing file, gather compliant invoices for improvements, and ask for a preliminary calculation of both routes against your own numbers before you accept an offer.
If you take one thing from this page, it is that the choice between the two routes is yours and it is made before the notario does the arithmetic, not after. Ask us to put the question to the notario and an accountant while you are still deciding what to accept, and we will help you get both routes costed on your own figures.