Capital Gains Tax (ISR) When You Sell in Puerto Vallarta: How the Notario Actually Calculates It

There is a moment in a Mexican closing that catches foreign sellers completely off guard.

You are at the notaría. The buyer’s funds are ready. And the notario tells you the amount being withheld from your proceeds for ISR — impuesto sobre la renta, Mexico’s income tax as applied to a property sale.

For sellers who kept good records, the number is usually manageable. For sellers who did not, it can be six figures on a property they barely profited from.

The difference between those two outcomes is almost never luck. It is paperwork, and most of that paperwork had to be collected years before the sale.

A note before we start: this article is general information, not tax advice, and the figures in it are approximations that move. I am a real estate agent, not an accountant. Use this to understand how the calculation works and what paperwork matters — then confirm your own numbers with a Mexican contador and your notario.

First: the notario is not your accountant

This is the structural thing to understand about Mexican closings, and it is genuinely different from how it works up north.

In Mexico, the notario público is not a notary in the U.S. sense of someone who stamps signatures. A notario is a licensed attorney appointed by the state, and they carry personal legal liability for the transaction. Among other duties, they are legally required to calculate your ISR, withhold it from your proceeds, and remit it to SAT — generally within 15 days of the transaction.

What that means practically:

The notario is not trying to get you the lowest bill. They are trying to get the number right, because they are on the hook if it is wrong. They will apply the calculation that produces the lower tax where the law gives you that choice, and they will accept the legitimate deductions you can document. But they will not go hunting for your paperwork, and they will not accept a receipt that does not meet SAT’s requirements just because you say you spent the money.

They calculate from what you hand them. Undocumented spending is invisible. Not disputed — invisible.

The two calculations, and why one of them is brutal

If you are a non-resident for Mexican tax purposes, Article 161 of the Income Tax Law gives two methods:

Option A — 25% of the gross sale price. No deductions. Not the profit; the entire sale price. Sell for $500,000 USD and the tax is $125,000 USD, whether you bought it for $450,000 or inherited it.

Option B — 35% of the net gain. Higher rate, but applied only to actual profit after legitimate, documented deductions.

The notario calculates both and applies the one that results in less tax for you.

Here is where sellers get hurt. Option B is only better if you can document your deductions. With no records, your “net gain” on paper looks like nearly the whole sale price, 35% of that beats 25% of gross, and you land on Option A — taxed on the full sale price of a property you may have made very little on.

I have watched sellers lose tens of thousands of dollars at a closing table because a kitchen renovation was paid in cash to a contractor who never issued a factura.

What actually counts as a deduction

Under Article 121, the deductions the notario can apply against your gain include:

• Your original acquisition cost, as stated in your escritura, indexed for inflation over the years you held it
• Capital improvements — construction, additions, renovations — backed by proper CFDI facturas
• Notary fees, taxes, and closing costs you paid when you bought
• The commission you are paying on this sale
• The professional appraisal (avalúo), where required

Three things quietly disqualify most of what foreign sellers try to deduct:

It must be an improvement, not maintenance. A new bathroom, an added room, a rebuilt terrace — deductible. Repainting, fixing the AC, replacing a water heater — not. The line is roughly whether you improved the property or kept it functioning.

It must be a real CFDI factura with your name and your RFC on it. Not a receipt. Not a bank transfer screenshot. Not a handwritten note from your contractor. A properly issued electronic invoice — which means you needed an RFC before the work was done, and you needed to ask the contractor for a factura at the time, when you still had leverage because you had not paid yet.

The property description has to line up. The improvement should be traceable to this property, and ideally reflected in the escritura or a construction manifestation.

If you take one thing from this article: the deduction is won or lost years before the sale. By closing day, it is far too late.

The exemption most foreign owners cannot use

Mexican law exempts capital gains on the sale of your casa habitación — your primary residence — up to a cap of 700,000 UDIS. The UDI is an inflation-indexed unit published by Banco de México; in early September 2026 it sits at roughly 8.81 pesos, putting the cap in the neighborhood of 6.1 million pesos. Check the current UDI value at closing, because it moves every day.

The requirements:

• You must be a persona física (an individual, not a company)
• The property must genuinely be your primary residence — not a second home, not a rental, not an investment
• You can use the exemption only once every three years
• The sale must be formalized before a notario

The residency question is where foreign owners get confused, and the answer is better than most expect: if you actually live in Mexico as a temporary or permanent resident and this is genuinely your home, you can qualify on the same terms as a Mexican national. The law even presumes — absent evidence to the contrary — that a foreigner with a casa habitación in Mexico is a tax resident. Your nationality is not the obstacle.

Proof is the obstacle. The notario will ask you to demonstrate you actually lived there, typically through utility bills — CFE, SEAPAL — plus your residency card or voter ID, in your name, at that address, going back several years. Notarios commonly ask for up to five years of history.

This is precisely where the snowbird pattern fails. If you spend four months a year here, keep the CFE account in the developer’s name or the property manager’s, and your official address is in Calgary, you will not clear that bar. Not because you lied, but because the documentary record says the property was a second home — which, honestly, it was.

If you think you might qualify, get your RFC and CURP sorted and put the utilities in your own name now, not the year you sell. I walk through which document does what in RFC, CURP, INE, IMSS: which document do you actually need, and the residency paths in temporary vs permanent residency.

If you are a non-resident, you need a legal representative

One more requirement that surprises people: a seller who is a resident abroad generally must designate a legal representative in Mexico for tax compliance purposes on the transaction.

It is a routine step, and your notario or accountant will guide it — but it is a step, it takes time, and discovering it two days before your scheduled closing is how closings get postponed. Ask about it when you list, not when you sign.

What to do right now, whenever you plan to sell

If you are selling within a year:

1. Gather every improvement factura you have. Sort by year.
2. Find your escritura and confirm the acquisition value recorded in it.
3. Get your RFC current and active if it is not.
4. Ask your notario for a preliminary ISR estimate before you accept an offer. Any good notario will run the numbers early. Knowing the figure changes how you negotiate.
5. If you might qualify for the exemption, start assembling your utility history immediately.

If you are not selling for years:

1. Get an RFC now, even if you do not think you need one yet.
2. Never pay a contractor without asking for a factura first. Build it into the quote conversation, not the payment conversation. A contractor who will not invoice is telling you something about how they operate — I wrote about that in finding a reliable contractor.
3. Put CFE and SEAPAL in your own name.
4. Keep a single folder — physical or digital — with the escritura, fideicomiso, every factura, and every predial receipt. Future you will be grateful in a very specific, quantifiable way.

The honest summary

ISR is not a hidden trap and it is not unfair. It is a normal tax with a documentation requirement that foreign sellers are simply not warned about in time.

Sellers who keep records pay tax on their actual profit. Sellers who do not can pay tax on their entire sale price. Same property, same profit, radically different outcome — decided by whether someone asked for a factura three years ago.

If you are thinking about selling in Puerto Vallarta, let us look at your paperwork before we talk about price. Sometimes a few months of preparation is worth more than any negotiation I could run for you.

Message me on WhatsApp and we will go through what you have.

— Neft Román, Legacy Vallarta Realty
Member of AMPI Puerto Vallarta y Compostela

---

This article is general information only and is not tax, legal or accounting advice. Rates, thresholds and the UDI value cited here were accurate when published and change over time; the UDI in particular moves daily. ISR outcomes depend on your residency status, your documentation, and details specific to your property, and no article can tell you what you will owe. Confirm your situation with a Mexican accountant (contador) and your notario before making any decision. I am a real estate agent, not a tax advisor — but I will make sure you are talking to the right people early enough for it to matter.