A common problem surfaces when a seller requests or demands that the buyer declares to the notario that the price paid for the property is lesser than that which was agreed.

How does this work?

The seller tells the buyer that if the actual sales price is declared to the notario this will result in excessive annual property tax, FALSE!

Some Sellers that are unaware or do not qualify for tax exemptions (such as that provided by article 93 of the Federal Income Tax Law) go to extents to avoid paying capital gains and when they persuade the buyer to consent in declaring a lower the price to save capital gains, they will then ask for 2 checks to be handed out.

One check is to be declared to the notary as the sale price for tax purposes and the second check (given under the table) covers the difference that would make the gain taxable, the problem is that if the buyer is unaware of this it will then become an issue if and when the buyer decides to sell the property because he actually consented to inherit the seller’s tax liabilities.

Rafael Solorzano
Attorney at Law / Licensed Exclusively in Mexico

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