Do You Pay Sales Tax (IVA) on Real Estate in Los Cabos?

📍 Introduction: the tax that can surprise you (if you're not properly advised)

In Los Cabos real estate, everyone talks about ISAI or ISR… but VAT (IVA) usually gets overlooked.

Yet it can add up to 16% on certain purchase, sale, or rental transactions.

Understanding when it applies — and when you’re exempt — can save you thousands, even hundreds of thousands, of dollars.

This article covers everything you need to know about real estate VAT in Baja California Sur, with clear, real, up-to-date 2026 examples.

🧾 What is the VAT rate in Mexico and Los Cabos?

VAT (Impuesto al Valor Agregado) throughout Mexico, including Los Cabos, is 16%. But it doesn’t apply the same way to every type of property.

🏠 1. Used residential properties

✅ Exempt from VAT

This applies if:

• It’s a used house, villa, or condo
• It’s sold by an individual (not a company)
• It’s used as a primary residence

💡 Example: an owner sells their home in Cabo Bello for $850,000 USD. ✅ No VAT applies. Only ISAI (3% transfer tax) and ISR (if there’s a capital gain).

🏗️ 2. New residential properties

⚠️ VAT applies to the construction value — only when the seller is a legal entity (a company or developer) and the sale is part of its business activity.

How does it work?

• The land itself is exempt from VAT
• The construction does generate VAT
• The rate is 16% on the construction value
• The tax is usually included in the total price, but it’s important to request a detailed breakdown

📌 This applies only to new sales (first transfer of the property).

💡 Real example: new condo in Alvar (Quivira)

• Total price: $1,200,000 USD
• Estimated land value: $400,000 USD (VAT-exempt)
• Construction value: $800,000 USD
• VAT: 16% on construction = $128,000 USD

✅ The buyer must cover the VAT, unless the contract states “VAT included.” At Tu Casa Cabo, we always help you review this point before signing.

🏢 3. Commercial properties, offices, and retail units

❗ Always subject to VAT (16%), even if used.

Applies to:

• Retail spaces
• Offices
• Warehouses
• Hotels or investment projects
• Properties used for commercial rental or multi-unit Airbnb

💡 Example: retail unit in Plaza El Pescador: $350,000 USD. VAT: an additional $56,000 USD. ✅ Deductible if you purchase as a registered business (with the SAT).

🏆 4. Land sales

Residential land:
✅ Exempt from VAT, as long as it’s intended for primary residence and isn’t part of a business activity.

Land for commercial use or development:
❗ VAT does apply, especially if it’s sold by a company, is part of a subdivided lot, or has mixed/commercial land-use zoning.

💡 VAT can apply even to vacant land, depending on its intended use.

🏠 5. Real estate rentals

• 🏠 Long-term residential rental: exempt from VAT
• 🌴 Vacation rental (Airbnb): 16% VAT applies
• 🏢 Commercial lease: 16% VAT applies

📌 If you rent professionally, you must register as a landlord with the SAT or use a fiscally registered management company.

👤 Who pays the VAT?

Generally, the buyer or tenant, unless the contract states otherwise.

✅ In many new developments in Los Cabos, the price already includes VAT on the construction, but that’s not always the case. 👉 Confirm in writing whether the price is “plus VAT” or “VAT included.”

🧠 Can I deduct VAT if I buy for investment purposes?

Yes, if:

• You purchase as a legal entity (a company)
• Or as an individual with registered business activity
• And the property will be used for commercial or rental purposes

💼 VAT paid can be credited with the SAT, which improves your long-term profitability.

🤝 Conclusion: VAT isn’t optional… but it can be predictable

Real estate VAT in Los Cabos can be an unpleasant surprise… or a well-structured opportunity.

👉 At Tu Casa Cabo, we help you anticipate every tax cost of your transaction, analyze the property type and use, and sign with complete legal and financial clarity.

📧 Not sure if your transaction is subject to VAT?

📩 Email us: hola@tucasacabo.com
📅 Book a consultation with Yolanda Ramos: https://calendly.com/yolanda-ramos-tucasacabo/30min