If you are a property owner in Mexico and are planning to sell your property, it is important to understand the capital gains tax implications. However, the good news is that there are ways to qualify for a capital gains reduction in Mexico. In this detailed guide, we will walk you through the requirements and steps to take advantage of this opportunity.

A 1031 exchange, also known as a like-kind exchange, is a provision in the United States tax code that allows real estate investors to defer capital gains taxes on the sale of investment properties. This provision is named after Section 1031 of the Internal Revenue Code. While the 1031 exchange is specific to the United States, Mexico has a similar tax strategy known as a "1031 exchange of Mexican Internal."

In Mexico, trustee banks, or "fideicomiso" structures, are established to allow foreign buyers to acquire property within the restricted zones, which encompass areas within 50 km of the coastline and 100 km from international borders. While the bank holds the title, the foreign buyer retains all ownership rights, ensuring a balance of security and flexibility.