Bank Trust – What is it? When is it needed?
Mexico is a beautiful country and economically booming. You might have been thinking about either buying a property (or several properties as vacation rentals ) or developing a business here.
Good news! It’s a very good idea and totally feasible.
There are a few rules to respect, though.
This article will guide you through the various steps and explain two different schemes that will come in handy when you decide to make it happen i.e. setting up a Bank Trust (Fideicomiso) or a Mexican Corporation.
First of all, you have to know that a while back, it was impossible for Americans and Canadians to buy property in Mexico that was 50 km from any coastline or 100 km of a neighboring country (called the restricted zone). Only Mexican nationals were allowed to invest in land and properties located in this zone. The Mexican Constitution still stipulates that no foreigner is allowed to acquire land directly in this zone…However…some things have changed.
You can now invest in this zone through a Bank Trust:
A bank trust is a property interest held by a Mexican bank who´s sole purpose is to manage the property for the benefit of the owner. It is essential to remember that although the bank legally acts as the trustee and holds the title, your property is not an asset of the bank.
It is valid for 50 years and can be extended for another 50 years.
You will need to set up one Bank Trust per property. So if you buy 2 or 3, you will end up with 2 or 3 bank trusts.
There is, of course, an annual fee that you’ll have to pay (the fee can vary between 400-800USD per Trust, depending on the bank and each particular case). You will be the main beneficiary but the Trust allows you to designate two beneficiaries (whoever you want: your spouse, children, partner…) and if anything is to happen to you, they will automatically become main beneficiaries. The beneficiary has every legal right to occupy, rent, modify or inherit the property, and this is protected by the Mexican Constitution. The big advantage of this scheme is that there is no paperwork, you pay once a year and you are done for the next 12 months.
The other way to become a titleholder is through a Mexican corporation:
This scheme is advised if you are thinking of buying several properties (you can have as many properties as you want) for commercial use or if you are going to create another business. Indeed, you can operate a business through it, work from home, or run an internet business. It is actually quite simple to set up (it shouldn’t take more than a week) and you can incorporate under whatever name you wish. You need a minimum of two shareholders, though. This option has many advantages (tax wise for example) but on the downside, it involves a lot of paperwork and administrative work. This scheme requires you to pay on a monthly basis and probably to deal with an accountant (that you will have to pay as well).
You now are a little bit more aware of the different options offered to you if you want to buy in the restricted zone, but the best advice no matter what is always to ask a real estate professional.
At Living Riviera Maya Real Estate, we can help and guide you through each step. We have the experience, knowledge and we will find the solution that works best for you!