For Spanish 
Can We Legally Rent Our Vacation Home?
by John and Margaret Fleming
Many Americans buy vacation homes in Puerto Peñasco, expecting to spend
nearly every weekend using them. Later they may find that they can't get away
as often as they would like, so they decide to rent them to their friends and
acquaintances for weekends and holidays. We had heard various rumors about this
practice. Some people told us that to do this legally, each owner must have
an FM3 (a document attesting to an immigration status with different rights
than those of a tourist). Others said that the owners must have a Mexican corporation.
Still others said the only thing necessary is for the owners to pay taxes on
the rentals in Mexico.
We thought that it would be a good idea to find out exactly what the truth is, so we consulted Armando Ramirez, one of the two notarios in Puerto Peñasco.
A notario is a state official appointed by the governor. In accordance with the Roman legal system, the notario's certification gives authenticity to legal acts and documents, such as contracts. He is a legal expert who can give advice to parties on how to comply with the law in whatever they wish to do, but he can not litigate. In Mexico all real estate transactions must be closed by a notario.
Armando listened to our question and then explained that the term "rent" carries two meanings in law. One is lodging. This is the type of service offered by hotels in which the accommodations are furnished, the linens are changed, and the place is cleaned. The other is long-term rental, in which the owners provide the accommodations but not the services associated with lodging.
It is not illegal for Americans to rent properties to others on a long-term basis. But to provide lodging it is necessary to have a business, to be registered, and to pay taxes. The way to do this is through a Mexican corporation.
To set up a corporation takes some time but is not difficult. A Mexican corporation does not have to have Mexican stockholders. For example, ours has two American stockholders.
There are some Americans who rent their vacation homes as lodgings, but do not pay taxes in Mexico (perhaps not in the U.S. either). By doing this they are in direct competition with hotels and other businesses that have to pay taxes for renting out lodgings. The Mexican government has not in the past had adequate personnel to enforce some of the laws governing this practice, but now computerized systems are making it possible to exchange information between the U.S. and Mexico. It may not be possible to evade those taxes for much longer.
Mexico wants American business, but it wants to be sure proper procedures are followed. The best way for those who want to rent lodgings is to form a Mexican corporation. It would certainly be less expensive than the fine that might be assessed or the loss of a vacation home.