Land Purchase in Mexico (General Information)

(i) According to the Mexican Law, corporations with foreign investment participation can acquire land in any place within the Mexicana territory. The Law also provides that Foreign Direct Investment (FDI) may acquire real estate within the so-called “restricted zone” (i.e. the strip of land 100 kilometers wide along the border and 50 kilometers wide along the coast). This rule applies for industrial facilities and housing premises to be used by employees working at the facilities; consequently, foreign investors may acquire such properties without restrictions.

(ii) Foreign individuals may acquire residential real estate within the restricted zone, through the incorporation of a trust mechanism, by which the foreigner becomes the exclusive beneficiary of the rights to use such property.

(iii) In the specific case of manufacturing/assembly plants, location is a key decision to be made, not only due to the proximity to customers, but also considering infrastructure available, industrial costs and incentives granted by the State and Municipal authorities.

These incentives basically refer to: tax exemptions; training programs; special prices for land and improvement of infrastructure.

(iv) Under Mexican Law, an acquisition of real estate requires compliance with different formalities, to secure proper title (e.g. due diligence to confirm no liens and encumbrances; incorporation of a subsidiary, execution of different agreements with governmental agencies and/or private entities such as developers, industrial parks, obtaining of licenses, environmental, zoning).

(v) When acquiring land, other considerations must be taken into account, since in some cases, the government (city, state or federal) could be the owner of the land, or in some other cases an industrial park; private owners or agrarian communities (Ejidos) may be the owners. In any of the foregoing cases, different legal formalities must be accomplished, in order to have proper legal title on the properties. For instance in the case of the Ejidos, it is possible to acquire land from them, however, a special process is required in order to purchase land from the Ejido, by obtaining special approvals from the Board.

(vi) All real estate acquisitions must be legalized before a Public Notary, who will issue the title certificated included at a public deed.

(vii) Real estate acquisition, generates different taxes and duties such as:
Transfer of Property Taxes, Valued Added Tax (on constructions), appraisal expenses, registration duties with the Public Registry of the Property and other duties imposed by different authorities, depending on the nature of the project (environmental, land use, government concessions, permits, licenses).

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