Q: How do property taxes differ between Cabo, Puerto Vallarta and Punta Mita?
A: Overall, Mexico has very low property taxes, especially when compared to the U.S. or Canada.
Property taxes rates in Mexico are determined on a state-by-state basis and collected by local governments. Each state operates differently, and rates vary based on different factors, such as residential type, location and use. For example, rural properties often have lower tax rates than properties situated in tourist locations.
Property tax bills in Mexico are based on assessed value, determined by a municipal assessor, said international tax expert Enrique Hernandez-Pulido, a partner with Procopio, Cory, Hargreaves & Savitch, a law firm headquartered in San Diego, California. The assessed value is often lower than the fair market value
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The tax structures in Cabo and Punta Mita are more straightforward than in Puerto Vallarta. In Cabo, the tax rate is 0.17% of assessed value for residential property used by the owner and 0.36% for rental properties and undeveloped land within an urban subdivision. In Punta Mita, the tax rate on developed property is lower at 0.07% but a tad higher than Cabo on undeveloped land, at 0.4%.
In contrast, Puerta Vallarta has a progressive tax system. The highest bracket applies to properties with a tax value of over 219 million pesos (US$11.8 million), said Mr. Hernandez-Pulido. Owners of properties in this bracket will pay a fixed amount of approximately 92,000 pesos annually.
In lower brackets, the fixed amount drops. For example, a property tax with a value of 2.5 million Mexican pesos would pay approximately 4,100 pesos annually. Owners of a residential home of the same assessed value would pay 4,250 pesos annually in Cabo and 1,750 pesos annually in Punta Mita.
Buyers in Mexico also pay an acquisition tax, which is a one-time tax based on transaction value. This tax rate varies from jurisdiction to jurisdiction and ranges from 2% to 6%. Puerto Vallarta, Cabo and Punta Minta all have a 2% acquisition tax rate. Because the acquisition tax is based on the transaction value, which is often much higher than the assessed value, this tax can be significant.
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