In 2004, title number VII was added to the capital gains tax, called VII of the fiscal incentives, within you can find articles number 223 and 224 that grant benefits to trusts in which you can carry out activities related to real estate construction or acquisition of real estate for ownership or rental purposes. In 2005, article 225 was added to the fiscal benefits. In the present fiscal year, the Mexican legislators took the legislative framework for the real estate investment trusts. (REITs Real Estate Investment Trusts). This allows investors to benefit from commercial investments in important real estate enterprises, all they need to do is to acquire stock through a stock agent.
In order to standardize some of the aspects of the REITs in Mexico, there was an amendment to the law in 2004, which included a fiscal incentive for those dedicated to construction or real estate acquisition for leasing and ownership, with the right to profit from them.
The Real Estate Trusts (FIBRA) grant participation certificates for the investor’s market; the profit from these resources is deposited in investment funds of the Federal Government or investment institutions; through a liability document.
These particular trusts are related to real estate and these are for: construction or real estate acquisition for leasing purposes and ownership; the property must be leased for at least a year before transferring the property. The fiscal incentive is not to make partial capital gains payments, because profit is calculated through the contribution of the real estate trust which must be paid in case there were taxes to be paid. The condition to obtain this benefit is to invest at least 70% of the patrimony and the rest in Federal investments through investment institutions or liability documents.
The trustor transfers the property to the trustee, but without considering it a transfer of property in fiscal terms in order to have real estate participation certificates; which are representative real estate credit certificates, returns and other benefits within the patrimony of the trust. In regard to real estate, the trust patrimony must be constituted before a notary public and registered in the Public Registration Office in the same city in which the properties are located.
This investment is designed for developments that are looking for financing from public investors; for example, malls, residential developments and offices among others. It is important to mention that once these certificates have been issued, the holders can be individuals or enterprises, fiscal national or international residents. The benefits granted to this particular subject are some of the following: That along with the trust an enterprise with the same trustors can be constituted so that the enterprise can receive the real estate participation certificates and if they transfer these certificates in the securities market, according to the Securities Market Law, they would be exempt from such transfer. It is important to mention that amendment grants the benefit of not making partial payments until the the trustors lose the right to acquire the properties, this means that the trustors can seek financing through issuing certificates, there is not tax to be paid as long as they do not sell the properties. In addition a trustee might issue real estate participation certificates and an enterprise constituted by the same trustors acquires the certificates, but then they decide to merge and if they meet the fiscal requirements, such merge may not be considered a transfer. Another advantage is, this same merge can be divided to create two others and if they meet the fiscal requirements, it is not considered a transfer. Then years may go by, even death of the trustors, and never pay capital gains taxes, and yet profit can been obtained.
