Yes, Mexico has property taxes. Every owner of residential or commercial real estate pays an annual municipal tax called the Predial, and buyers and sellers face separate one-time taxes at closing. The good news for most owners: the annual Mexico property tax bill is generally far lower than what an equivalent property would cost to hold in the United States or Canada. Foreign nationals owe the same taxes as Mexican citizens, and holding title through a bank trust does not change that.
The Annual Predial
The Predial is the yearly tax you’ll pay as long as you own the property. Its legal foundation is Article 115 of Mexico’s Constitution, which lets municipal governments levy taxes on real property and keep the revenue.1Constitute Project. Mexico 1917 (rev. 2015) Constitution – Section: Article 115 The money funds local services: streetlights, trash pickup, road maintenance, and policing.
The tax attaches to the property, not the person. Whether you’re a Mexican citizen, a permanent resident, or a foreigner holding title through a fideicomiso, the municipality expects payment. Each parcel sits in the local cadastral registry and gets an annual bill. Most owners receive a notice or can look up their balance at the municipal treasury office using the property identification number or a prior year’s receipt.
How Your Predial Bill Is Calculated
Your bill depends on the valor catastral, the government’s official assessed value of your property. Municipal assessors set that figure based on land area, the size and age of any structures, construction quality, and location relative to services and infrastructure. Local governments reassess periodically to reflect neighborhood development and market shifts.
The cadastral value almost always sits well below market value. That gap is the main reason Mexican property taxes feel so low compared to those in the U.S. or Canada. Once the assessed value is set, the municipality applies its local rate. Rates vary widely across Mexico’s roughly 2,400 municipalities, generally falling between 0.05% and 1.2% of the cadastral value. A property assessed at 2,000,000 pesos might generate an annual bill anywhere from 1,000 to 24,000 pesos depending on where it sits.
If you think the recorded size or condition of your property is wrong, you can request a review at the local cadastral office. Errors in the registry can inflate your bill, and correcting them before the payment window opens saves trouble later.
Payment Deadlines and Early-Payment Discounts
The Predial is due at the start of each calendar year, and municipalities reward early payment with real discounts. In many jurisdictions, paying in January earns a 20% reduction, dropping to 15% in February, 10% in March, and 5% in April. Exact percentages vary, but the pattern is consistent: the earlier you pay, the less you owe. On a bill of 10,000 pesos, a January payment could save 2,000 pesos.
Seniors aged 60 and over who hold a valid INAPAM card (Mexico’s national senior benefits program) may qualify for additional reductions on top of the early-payment discount. The size varies by municipality, so check with your local treasury office. The card is available to Mexican citizens and legal foreign residents alike.
You can pay in person at the municipal Tesorería, through authorized bank branches, or via the municipality’s online portal. In-person payments produce a stamped receipt worth keeping indefinitely. That receipt is your proof of compliance when you sell the property, apply for building permits, or need to show the property is lien-free.
What Buyers Owe at Closing
Buying property triggers a one-time transfer tax, the Impuesto sobre Adquisición de Inmuebles, or ISAI. It’s calculated on whichever is higher: the purchase price or the official appraisal value. Rates range from roughly 2% to 4.5% depending on the state. On a property valued at 5,000,000 pesos, that means 100,000 to 225,000 pesos in transfer tax, one of the largest single closing costs.
A Notario Público handles the calculation, collects the tax from the buyer, remits it to the municipal treasury, and files the deed with the Public Registry of Property. Without that filing, the sale has no legal effect. Notary fees for the overall closing typically run 1.5% to 4% of the transaction value, separate from the ISAI itself.
What Sellers Owe
Selling property triggers federal income tax (ISR) on the profit, and this is where costs can surprise owners who only budgeted for the low annual Predial. The rules differ sharply by residency status.
If you’re a Mexican tax resident, capital gains from a property sale are added to your annual income and taxed at progressive rates from 1.92% up to 35%. Residents selling a primary home can exempt gains up to approximately 700,000 UDIs (inflation-indexed units), which works out to roughly 5 to 6 million pesos. That exemption is available once every three years and requires proof of residency and a Mexican tax ID (RFC).
Non-residents face stiffer math. You can either pay a flat 25% on the entire sale price with no deductions, or elect 35% on the net gain after deducting your original purchase price, closing costs, and documented improvements. The second option usually produces a lower bill if you kept good records. There is no primary-residence exemption for non-residents.
The Notario Público calculates and withholds the capital gains tax at closing before releasing proceeds to the seller. This isn’t optional; the Notario is legally required to make sure the government gets its share before the transaction closes.
Tax on Rental Income
If you rent out your Mexican property, the income is subject to federal tax regardless of where you live. Mexican tax residents report rental income alongside other earnings and pay progressive rates up to 35%. Residents can deduct actual expenses or elect a standard deduction of 35% of gross rental income plus property taxes paid.
Non-resident owners generally owe a flat 25% on gross rental income. Proper reporting matters because the tax authority (SAT) has increasingly cross-referenced property registries with income filings, and owners who rent through platforms that report earnings to Mexican authorities are especially visible.
Foreign Owners Pay the Same Taxes
Mexico’s Constitution restricts direct foreign ownership within the restricted zone: all land within 50 kilometers of the coastline and 100 kilometers of an international border.2Consulado de México. Acquisition of Properties in Mexico Because most desirable beach and border towns fall inside that zone, foreigners typically buy through a fideicomiso, a trust held by a Mexican bank on the buyer’s behalf. Outside the restricted zone, foreigners can hold title directly.
Whichever structure you use, your property tax obligations are identical to a Mexican citizen’s. The trust is a legal vehicle for ownership, not a tax shelter. You’ll also pay the bank annual maintenance fees on the trust itself, but those are separate from the Predial and from any federal taxes.
What Happens If You Don’t Pay
Skipping the Predial is not consequence-free. Municipalities add monthly surcharges and interest to unpaid balances, and those compound. In some jurisdictions, penalty interest runs between roughly 0.5% and 2% per month on the outstanding amount. Let that accumulate for several years and penalties can exceed the original tax many times over.
Municipalities can also record a lien against the property in the Public Registry. A lien makes it effectively impossible to sell or transfer the property until the debt is cleared. In extreme cases of prolonged non-payment, certain municipalities have authority to initiate a public auction to recover the debt, though this is rare. The far more common outcome is that the lien simply blocks any future sale, trapping the owner until they settle up.
Foreign owners who leave Mexico and forget about their Predial are especially exposed. The debt doesn’t expire on its own, and you’ll discover it at the worst possible moment: when you’re trying to close a sale or transfer the trust to a family member.