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What is the Property Transfer Tax and who pays it?

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Property Transfer Tax is the tax paid by the buyer to acquire and transfer any property into his name. It is paid to the Municipal Government and it is usually calculated and retained by the Public Notaries.

In San Miguel de Allende this tax is usually called “Villarreal Tax” after the Municipal President who increased it from .5% to 4%.

It is usually of approximately 4% of the price paid by the buyer. But for inheritances and donations between immediate family members (direct ascending and descending lines), the rate is only 0.5%. The 2022 Income Law for the Municipality of San Miguel de Allende says:

Article 49.- The tax for acquiring property, in cases of donation and inheritances between married couples or relatives in direct ascending or descending line, will be of 0.5%. 

Because for a donation or an inheritance, there is no “sale price”, this rate is calculated with a valuation done by a certified valuator from the City Government. Most valuators are friendly and understand that the commercial value of a property fluctuates between a range, so it is possible to ask the valuater to choose the low range of the values he or she found.

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