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What deductions do sellers of property have when paying Capital Gains Tax?

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Article 119 of Capital Gains Tax Law (onwards, LISR) considers income for selling property the amount of the price obtained. 

Article 121 of LISR authorizes the following deductions:

  1. Cost of acquisition (or 10% of the current value, whichever is higher).
  2. Cost of improvements
  3. Notary fees
  4. Comissions

There is also an exemption of about $250’000 USD if the property is the home of the seller (article 93, fraction 29 of LISR). For foreigners who don’t currently live in such property as their main home, using this exemption can create criminal liabilities as it is only designed for personal main homes of people living in the country and in such property. 

Important things to consider:

  • The profit is the price minus the deductions.
  • Some deductions show depreciation over the years.
  • The tax is calculated over the profit. 

When using the pyramidal 35% tax option, Capital Gains Tax is calculated by applying a number of rules and tables from the Tax Service Agency (onwards, “SAT”) memorandums. The following is the table published by SAT. 

Calculation of Capital Gains Tax using this table is complex, so most Public Notaries use one of the available softwares, certified by the Tax Service Agency, for calculating this tax.

For different reasons related to regulations and different interpretations of them, most softwares exhibit changes between themselves in most calculations; nevertheless, such changes shouldn’t be substantial.

Be aware, if a Notary is offering you a very low Capital Gains Tax payment, specially if other notaries or lawyers don’t agree with such low number; you could be liable for fraud against the public administration.

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