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Mandatory Annual Report For Residential Properties In Mexico City With A Cadastral Value Above 4.5 Million Pesos

Mexico City, february 2025

The Government of Mexico City has established a new tax obligation for taxpayers owning residential properties with a cadastral value exceeding 4.5 million pesos. This obligation requires the submission of an annual report to the Administration and Finance Department (Secretaría de Administración y Finanzas) (the “Department”) in accordance with the provisions published in the Official Gazette.

The obligation was included at the end of December 2024 and came into effect on January 1, 2025, with an amendment to Article 132 within the chapter on Property Tax in the Fiscal Code of Mexico City (Código Fiscal de la Ciudad de México) (the “Code”). This amendment requires taxpayers liable for property tax on residential properties with a cadastral value greater than $4,524,974.08 pesos to submit an informational declaration regarding the condition of such properties.

It is important to highlight that this report does not alter property rights, use, or possession of the properties, and personal data will be safeguarded in accordance with current regulations. According to the publication, the authorities indicate that the incorporation of this report is for statistical purposes, with the goal of updating cadastral information and strengthening tax management.

Failure to comply with this obligation or to do so late may result in a fine ranging from $4,272.00 pesos to $10,821.00 pesos, in accordance with the Code (Article 466).

Taxpayers who meet this requirement are advised to prepare for the annual submission of this report. Although specific details regarding the exact format of the report have not yet been issued, it is essential to stay alert for the release of the general rules by the Department to avoid potential penalties.

Decreto Por El Que Se Otorgan Estímulos Fiscales Para Apoyar La Estrategia Nacional Denominada “Plan México”, Para Fomentar Nuevas Inversiones, Incentivar Programas De Capacitación Dual E Impulsar La Innovación

Mexico City, January 2025

On January 21, 2025, a decree issued by Mexico’s President, Claudia Sheinbaum, was published in the Official Gazette of the Federation, granting various tax incentives as part of the national strategy called “Plan Mexico” (the “Decree”), whose objective establishes, among other goals, strengthening the national industry for the local and regional market; expanding import substitution with value chains; generating jobs; and strengthening scientific, technological development and national innovation.

The tax incentive consists of the possibility of making the immediate deduction of the investment in new fixed assets*, acquired from the effective date of the Decree until September 30, 2030, deducting in the fiscal year in which the investment is made the amount resulting from applying to the original amount of the investment the percentages established in Article Two of the Decree in substitution of those established in the Income Tax Law.

1. Requirements to apply for the tax incentive:

Registration: The taxpayer must be registered in the Federal Taxpayer Registry (RFC) and have the tax mailbox enabled.
Tax Compliance: Have a positive tax compliance opinion.
Project: Submit an investment project, a collaboration agreement with the Ministry of Public Education (in terms of dual training programs), or a project for certification (as applicable).
Approval: Obtain a compliance certificate from the Evaluation Committee.
Guidelines: Comply with the guidelines established by the Evaluation Committee.

2. Restrictions:

It is only granted to legal entities that are taxed in terms of the Income Tax Law under the general regime of Title II or under the Simplified Trust Regime, as well as to individuals with business and professional activities.
It does not apply to certain assets, such as office furniture and equipment, conventional vehicles, automobile armoring equipment, or fixed assets that cannot be individually identified, as well as airplanes that are not dedicated to agricultural aerial spraying.
The assets must be used for a minimum period of two years immediately following the year in which the deduction is made.

3. Tax Incentives:

Article Second of the Decree establishes the percentages that may be applied to deduct investments, varying from 35% to 91% depending on the type of good or the activity for which they are used and the year of investment.
For value-added tax purposes, the immediate deduction established in the Decree is considered a fully deductible expense.
An additional deduction is granted equivalent to 25% of the increase in expenses incurred for employee training (provided they are registered with the Mexican Social Security Institute) or innovation expenses (related to investment projects for inventions or for obtaining initial certifications required to join value chains) with respect to the average expenses incurred in the last three fiscal years.

4. Evaluation Committee:

An Evaluation Committee is created under the Decree, composed of one representative from the Ministry of Economy, one from the Regional Economic Development and Relocation Advisory Council (without voting rights), and one from the Ministry of Finance and Public Credit, whose purpose is to administer the application of these tax incentives, validate the projects, and establish the guidelines for the deductions.

5. Limitations and exclusions:

Companies in liquidation, with tax credits, or related to undue tax practices cannot access the tax incentives.
The investment (acquisition of new fixed assets) must be strictly used for the development of the taxpayer's main activity.

6. Term and supervision:

Companies must register investments and training carried out to maintain eligibility.
The tax incentives are applicable until September 2030, with a total amount available of up to 30 billion pesos.
The Decree overrules the “Nearshoring Decree” published on October 11, 2023.
The Tax Administration Service may additionally issue general rules for the application of the Decree.

With these incentives related to Plan Mexico, the federal executive seeks to promote investment in Mexico in strategic sectors, encouraging domestic companies to integrate into value chains and thus promoting Mexico's economic development. The aim is to transform the Mexican economy through tax incentives intended to attract investment, generate jobs, and prioritize and promote technological development and innovation, towards a more competitive and sustainable economic model.

Decree To Regulate Temporary Lodging Offered Through Digital Platforms

México City, October 2024

In order to regulate temporary lodging offered through digital platforms such as Airbnb, regulate the vacation rental market and mitigate unfair competition within the traditional hotel industry, on October 3, 2024, Mexico City’s Government issued a decree by which several provisions of the Tourism Law of Mexico City, the Housing Law for Mexico City, and the Law for the Integral Reconstruction of Mexico City, were amended (the “Decree”).

The Decree includes several limitations and a new regulatory framework for temporary tourist lodging, establishing a maximum occupancy limit for lodging units registered in digital platforms of 50% per year, providing that in case of exceeding such percentage, their registration in the Hosts Registry (Padrón de Anfitriones) may not be renewed, being able to register again one year after the denial date.

Likewise, it is included that, in case of offering more than 3 properties per host or for longer periods, the provisions of the Law of Commercial Establishments must be followed, including, among other things, the registration of the commercial establishment code and the operation notice.

It is important to note that, in accordance with the decree published on April 4, 2024, by which the Tourism Law was amended, several obligations were established for the owners or possessors of properties that offer temporary tourist lodging in Mexico City, as well as for the digital platforms offering these services.

Such reform included, among other things, the implementation of the Hosts Registry and the Digital Platforms Registry, in the first one the Hosts must register and comply, among other things, with the following requirements:

Register the properties offered to tourists
Provide clear and detailed information on the characteristics and prices of the property being offered
Keep an updated record of the occupancy of their properties
Provide every six months a detailed report of such registry to the Secretary of Tourism of Mexico City

On the other hand, it was established that the technological platforms must register in the Digital Platforms Registry, and comply, among other things, with the following:

Keep their registration updated, renewing it every two years
Request from the hosts the registration certificate and folio granted by the Secretary of Tourism
Provide the Secretary of Truism, every six months, with a detailed report of the properties occupancy

Finally, by means of the Decree, the Housing Law and the Law for the Integral Reconstruction of Mexico City were also amended to prohibit the use of social and popular properties and reconstruction housing programs for temporary tourist lodging.

Amendment to the Civil Code for the Federal District and Mexico City´s Housing Law relatedto rental housing

Mexico City, August 2024

On January 29, 2024, certain amendments to the Civil Code for the Federal District (“Code”) and Mexico City’s Housing Law (“Housing Law”) became effective, pursuant to provisions related to the leasing of residential housing (provisions considered of public order and social interest that cannot be waived by agreement between the parties). The primary objective of these amendments is to protect the balance in the leasing market, fostering and promoting affordable rental housing for low-income people in Mexico City (the “Reform”).

Articles 2448-D and 2448-F of the Code and Articles 1, 5, 12, 13, 21, 24, 26, 53, 59, 60, and 73 of the Housing Law were amended in accordance with the following: Article 2448-D of the Code, prior to the Reform, established 10% as a limit to the annual increase of the amount paid monthly for rent; a provision that, following the Reform, now establishes that the increase on the agreed monthly rent may never be greater than the inflation rate reported by the Bank of Mexico in the previous year.

The Registry will not be public (except by judicial resolution) and will be regulated in accordance with the criteria of the Law of Transparency, Access to Public Information, and Accountability of Mexico City (Ley de Transparencia, Acceso a la Información Pública y Rendición de Cuentas de la Ciudad de México) and the Law of Protection of Personal Data in Possession of Obligated Parties of Mexico City (Ley de Protección de Datos Personales en Posesión de Sujetos Obligados de la Ciudad de México). It is important to point out that no sanction will be enforced on any lessor that decides not to register its current lease agreements.

In accordance with the Reform to the Housing Law, Mexico City’s government will establish several programs targeted to various sectors of the Mexico City community, with priority given to the low-income population, workers, single mothers, and young people between 18 and 35 years old. These programs will seek to promote equality and equity conditions that guarantee and promote the right to affordable rental housing. Additionally, Mexico City’s government will propose to the Ministry of Finance administrative and/or tax facilities to support the construction of this type of housing.

Tax Incentives For Key Sectors Of The Export Industry

Mexico City, October 13, 2023

On October 11, 2023, the Ministry of Finance and Public Credit published in the Official Gazette of the Federation a decree granting tax incentives for ten key sectors of the export industry, as well as for taxpayers engaged in the production of cinematographic or audiovisual works.

This tax incentive entails making immediate deductions on new fixed assets whose acquisition is intended to be used exclusively for the development of key activities, deducting in the year in which the investment is made the percentages set forth in the decree.

Furthermore, the tax incentives include an additional 25% deduction during the fiscal years 2023, 2024 and 2025 for training granted to the beneficiaries’ employees of such tax incentives.

Santa Fe Real Estate Controversy

Controversy over certain assets in the Santa Fe neighborhood of Mexico City

Mexico City, September 22, 2022

Since September 12, 2022, certain newspapers of national circulation made public a number of controversies related to certain real estate assets located in the Santa Fe neighborhood of Mexico City, which are apparently exclusively linked to the property formerly identified as Prolongacion Paseo de la Reforma #371, currently segregated into 19 plots of land with an approximate aggregate surface of 20,740 sqm.².

This situation had been initiated since the year 2016, following the filing of lawsuits by the Institute of Administration and Appraisal of National Assets (Instituto de Administracion y Avaluos de Bienes Nacionales) claiming (i) the return of certain real estate assets, as a consequence of the invalidity argued by such authority of all the precedent actions over the property abovementioned, or (ii) the imposition to the owners of such properties of an indemnity payment penalty in favor of the Federation in connection with such assets.

As a result, in 2021 the Special Prosecutor's Office for Organized Crime (Fiscalia Especializada en materia de Delincuencia Organizada) opened several investigation files deriving in the seizure operations that have been recently carried out.

CONAGUA Administrative Resolution

Resolution on the Commencement of Emergency due to Severe, Extreme or Exceptional Drought in Basins for 2022

On July 12, 2022, the General Resolution on the Commencement of Emergency due to Severe, Extreme or Exceptional Drought in Basins for 2022 was published in the Official Gazette of the Federation, which, as part of the National Development Plan 2019-2024, seeks, among other priority purposes, the protection of the environment, through the efficient use of water during periods of drought.

The Resolution aims to guarantee a water supply to populations in places with extreme drought conditions, according to the Mexican Drought Monitor, and foresees: (i) the possibility of temporarily limiting existing water rights, through provisional water volume reductions for basin users suffering from severe drought conditions; (ii) the possibility for concessionaires and assignees of concessions to temporarily assign or transfer their rights to CONAGUA and request the interruption of the cancellation of the unused concessioned volumes, as long as the emergency continues, among other provisions.

Regulation of Real Estate Operations and Services in the State of Mexico

Mexico City, June 3, 2022

On May 2, 2022 the Regulations of Book Nineteen of the Administrative Code of the State of Mexico (the “Regulations”) were published in the State of Mexico’s Official Gazette, which, together with the Administrative Code of the State of Mexico (the “Administrative Code”) seek to regulate real estate operations and services in the State of Mexico, consisting of intermediation acts, tending to the execution of purchase and sale agreements, lease, donation, loan with mortgage guarantee, transfer of ownership, trusts, adjudication, assignment and/or any other agreement to transfer ownership, use or usufruct of assets, as well as administration, commercialization and consulting of the same (the “Real Estate Operations”), through certification, registration and monitoring processes of the activities of real estate service providers and registered real estate companies that carry out real estate operations in the State of Mexico.

Pursuant to the foregoing, service providers and real estate companies that intend to carry out Real Estate Operations in the State of Mexico must be (i) certified by the Secretary of Economic Development of the State of Mexico; (ii) register in the Registry of Real Estate Service Providers; (iii) comply with the provisions of the State of Mexico’s Code of Ethics for Real Estate Operations and Services; and (iv) comply with all other obligations set forth in the Administrative Code and its Regulations. However, those individuals or legal entities that have a right in rem (derecho real) over the assets or have the owner's authorization in compliance with the applicable laws are exempt from requiring such certification, and may promote, sell and lease assets directly, without the requirement to count with the certification and/or registration, and without using real estate service providers and/or real estate companies services.

Economic Reactivation Plan 2022-2024

Administrative Measures regarding Urban Development Matters

On March 17, 2022, the Economic Reactivation Plan for Mexico City 2022-2024 (the “Reactivation Plan”) was published on the official website of the Urban Development and Housing Ministry of Mexico City (“SEDUVI”), which seeks to accelerate the economy of Mexico City in the wake of the COVID-19 pandemic, through the promotion of family economy, and the construction, housing and tourism sectors, by means of three main axes: (i) Support to the public, social and solidarity economy; (ii) New instruments to support construction, housing and economy in general; and (iii) Actions to relaunch the tourism and cultural sector.

Based on the foregoing, on March 22, 2022, administrative measures regarding urban development matters to promote Mexico City’s Economic Reactivation Plan 2022-2024 were published in the Official Gazette (Gaceta Oficial de la Ciudad de México), where 4 main points are addressed:

(i) Guidelines for the Conversion of Offices to Housing, which main objective is to grant tax benefits through the transformation or adaptation of an asset to a use other than that for which it was originally intended, for optimal utilization; (ii) Submission of Urban and Environmental Impact Studies through Ventanilla Única and digital procedure (Ventanilla Digital), as well as the creation of the Comisión de Impacto Único, in order to facilitate the evaluation and approval of such studies; (iii) Update of the Special Program for Urban Regeneration and Inclusive Housing 2019-2024, which aims to reverse and correct processes of renewal of old urban centers, the increase in land prices and the main violations of urban dispositions, seeking the generation of Inclusive Housing and thus improve Mexico City´s urban conditions; and finally (iv) Administrative Measures to the Housing Institute of Mexico City (INVI) in connection with the processing of a Notice of Construction that does not required a Construction Manifestation or a Special Construction License for real estate projects intended for low-income housing.

Supreme Court Ruling Against Various Provisions of the Mexican Law on Asset Forfeiture

On January 6, 2022, the ruling on theUnconstitutionality Action 100/2019, filed onSeptember 9, 2019 by the National Human Rights Commission against various provisions of theNational Law on Asset Forfeiture (the "Law") and resolved by the Plenary of the Supreme Court ofJustice (the “SCJN”) in June 2021, was published in the Official Gazette of the Federation.

The SCJN, in its ruling, although invalidated some ofthe challenged provisions of the Law, the rest still subsist and remains in force. The declarations ofinvalidity formally took effect as of June 22, 2021, the date on which the Federal Congress was notified of the resolutions of the ruling by means of Notices 5024/2021 and 5025/2021, without retroactive effects to previous ongoing proceedings.

Generally speaking, the resolutions adopted by theSCJN with respect to the Unconstitutionality Actionof the Law establish that (i) asset forfeiture only applies to assets whose legitimate origin cannot be proven, element that refers punctually to the origin of the assets and not to their use or destination, as established in the Law; (ii) the action of assetforfeiture proceeds with respect to criminal conducts set forth in federal, general and local laws; (iii) the action of asset forfeiture under no circumstances has unlimited statute of limitations; (iv) the District Attorney may not access databases of other authorities, nor order the securing of assets as a provisional measure, without prior court order; and (v) one of the grounds for the early sale ofassets by the authority that established that thedisposal was necessary due to the “nature of theasset” is removed, since such circumstance was ambiguous and generated uncertainty as to theassets that fell into such category.

Finally, regarding the requirements to assume that an acquisition was made in good faith, it was necessary to prove, among other things, (a) theincapability of the purchaser to know that the assetsubject to forfeiture action was used as instrument, object or product of an illegal act or to hide or mix assets resulting from the illegal act; and (b) in theevent of having learned of the unlawful use of theasset, to have prevented or given a timely notice to the competent authority, elements that are invalidated and will no longer be required to prove good faith.