The Fideicomiso · Foreign Ownership, Explained

What is a fideicomiso?

A fideicomiso is a Mexican bank trust. The bank holds the title to a home near the coast, and you, as the beneficiary, hold the rights to use it, rent it out, sell it and pass it on. Foreigners have bought coastal property in Mexico this way since the early 1970s. Here is how it works, what it costs, and how long it lasts.

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Year it became federal law
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Maximum term, renewable
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Beneficiary rights, yours
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Typical annual bank fee floor

Why it exists

Article 27 of Mexico's constitution bars foreigners from holding direct title to land within 50 km of the coast and 100 km of the borders, an area known as the restricted zone. Puerto Vallarta sits inside it. Since 1973, Mexican law has offered a way through: a Mexican bank takes the title as trustee, with a permit from the Ministry of Foreign Affairs, and the foreign buyer is named as the beneficiary.

This is not a workaround or a gray area. It is the route the law itself sets out, today in articles 11 to 14 of the Ley de Inversión Extranjera, Mexico's federal law on foreign ownership, and the trustee is always a licensed Mexican bank.

What it means in practice

  • A Mexican bank holds title as trustee and acts on your written instruction
  • You are the beneficiary, together with any co-buyers
  • Use, rent out, improve, sell: the decisions are yours
  • Up to 50 years per term, renewable at your request
  • You name substitute beneficiaries, who receive the rights after you

Legally, the bank holds the title and you hold the beneficiary rights, not a deed in your own name. In practice those rights cover what an owner does, and the IRS treats you as the owner, as explained below.

Put simply: the bank holds the paperwork. You hold the keys and make every decision.

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The Vocabulary

The fideicomiso in English

In English, a fideicomiso is a trust. For property it is usually called a Mexican bank trust, and the IRS calls it a Mexican land trust. These are the Spanish terms you will see in your closing documents.

  • Fideicomiso: the trust itself
  • Fiduciario: the trustee, a Mexican bank
  • Fideicomisario: the beneficiary, which is you
  • Fideicomitente: the settlor, usually the seller or developer who places the property into the trust
  • Zona restringida: the restricted zone along the coast and borders
  • SRE: the Secretaría de Relaciones Exteriores, Mexico's Ministry of Foreign Affairs, which issues the permit
  • Notario público: a lawyer appointed by the state government to formalize property deeds
  • Escritura: the deed, signed before the notario
The Numbers

What a fideicomiso actually costs

The costs are administrative, paid to the trustee bank, the Ministry of Foreign Affairs and the notary, separate from the price of the home.

  • Fideicomiso setup: $2,000–$3,500 USD, one time, covering the bank's setup fee and the Foreign Affairs permit
  • Annual bank fee: $500–$1,000 USD
  • Property tax (predial): roughly $500 USD/yr on an Avanti residence

Fees vary by bank, so ask for a written quote before closing. For context, a comparable Florida condo often carries $6,000 to $15,000 a year in property tax alone. These figures describe the cost of ownership, not the value of the home, which no one can promise.

How it works when you buy at Avanti

At Avanti, purchase documents are reviewed by a US attorney as part of the standard process, and the condo regime is legally registered. The fideicomiso is arranged with a major Mexican bank once your agreement is signed, and your name goes on the trust as beneficiary.

See the full step-by-step process →

Step by Step

How a fideicomiso is set up

The notario and the bank do the paperwork. This is the order it happens in, so nothing on the day comes as a surprise.

  • 01

    Agree the purchase and choose the bank

    You sign the purchase agreement and pick the trustee bank. Compare setup and annual fees, since they vary from bank to bank.

  • 02

    The Foreign Affairs permit

    The bank applies to the SRE for the permit. By law the ministry must answer within five business days at its central office, or thirty at a state office, and a request it does not answer in time counts as approved.

  • 03

    Sign the deed

    At closing you sign the escritura before the notario. The title passes to the bank as trustee, you are named beneficiary, and you name your substitute beneficiaries.

  • 04

    Registration

    The notario records the deed in the Public Registry of Property, which makes your rights a matter of public record.

  • 05

    Every year after

    Pay the bank's annual fee and the predial. Before a term ends, ask the bank to renew it.

Not the same as a US trust

The name misleads a lot of American buyers. In a typical US trust, the trustee manages the assets for the beneficiaries. In a fideicomiso, the bank only holds the title and acts on your written instruction. You manage the property, pay its taxes and bills, and make every decision about it.

Mexican law also requires the bank to record trust property separately from its own assets and to hold it only for the purpose of the trust. The property is held for you, not owned by the bank.

How the IRS treats it

In Revenue Ruling 2013-14, the IRS held that a fideicomiso in which the bank only holds legal title and transfers it at your direction is not a trust for US federal tax purposes. You are treated as the owner of the property.

That is why the foreign trust returns (Forms 3520 and 3520-A) generally do not apply to it. The ruling covers only that simple arrangement, so confirm your own situation with a tax advisor. Canadian buyers should ask their own advisor about Canadian reporting.

Questions

What buyers ask about the fideicomiso

What is a fideicomiso?

A fideicomiso is a Mexican bank trust. It lets a foreigner hold residential property in Mexico's restricted zone, the land within 50 km of the coast and 100 km of the borders, where the constitution bars foreigners from holding title directly. A Mexican bank holds the title as trustee, with a permit from Mexico's Ministry of Foreign Affairs, and you are the beneficiary, with the rights to use, rent out, improve, sell and pass on the property.

What is a fideicomiso in English?

In English, a fideicomiso is a trust. For property it is usually called a Mexican bank trust or a Mexican land trust. The bank is the trustee (fiduciario), you are the beneficiary (fideicomisario), and the seller or developer who places the property into the trust is the settlor (fideicomitente).

How much does a fideicomiso cost?

Setup typically runs $2,000 to $3,500 USD one time, covering the bank's setup fee and the Foreign Affairs permit, plus an annual bank fee of roughly $500 to $1,000 USD. Fees vary by bank, so ask for a written quote before closing. These are administrative costs, separate from the price of the home.

How long does a fideicomiso last?

Each term runs for up to 50 years and can be renewed at the beneficiary's request, under article 13 of Mexico's federal law on foreign ownership, the Ley de Inversión Extranjera. The law does not cap the number of renewals.

Do I really own the property, or just the trust?

Legally, the bank holds title and you hold the beneficiary rights. Those rights cover what an owner does: you decide how the property is used, rented, improved and sold, you keep the proceeds of a sale, and the rights pass to the substitute beneficiaries you name. The bank acts only on your written instruction.

What happens to my property if the bank has problems?

Mexican law requires the bank to record trust property separately from its own assets and to hold it only for the purpose of the trust (article 386 of the General Law of Negotiable Instruments and Credit Operations). The property is held for you, not owned by the bank.

Can I sell a property held in a fideicomiso?

Yes. If the buyer is a foreigner, you can assign your beneficiary rights to them with the bank's involvement, and the trust can continue in their name. If the buyer is Mexican, you instruct the bank to transfer the title to them. A notary formalizes either sale.

Does the IRS treat a fideicomiso as a foreign trust?

Not in its standard form. In Revenue Ruling 2013-14, the IRS held that a fideicomiso in which the bank only holds legal title and transfers it at your direction is not a trust for US federal tax purposes, and you are treated as the owner of the property. That is why the foreign trust returns (Forms 3520 and 3520-A) generally do not apply to it. The ruling covers only that simple arrangement, so confirm your own situation with a tax advisor.

Do foreigners need a fideicomiso everywhere in Mexico?

No. Outside the restricted zone, a foreigner can hold title directly after filing an agreement with the Ministry of Foreign Affairs and obtaining its permit. Puerto Vallarta is on the coast, inside the restricted zone, so a residential purchase there uses a fideicomiso.

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