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VAT on real estate: land and housing exempt, 16 percent on commercial buildings, rents, furnished units and construction services, and how notaries handle it

Last verified: 2026-10-26 · Status: Stable

Sales of land and of buildings used as housing are VAT exempt, as are home construction services where the builder supplies labor and materials, while hotels, offices, warehouses and the building part of commercial property bear 16 percent. Rent of unfurnished housing and of farms used only for agriculture or livestock is exempt; furnished housing, hotels and commercial property bear 16 percent. A non housing building can be sold exempt if the deed states it will be used as a home and the tax is guaranteed until it has been used that way for six months.

USD conversions use MXN 18.6638 per US dollar, the US Federal Reserve H.10 noon buying rate in New York for 23 October 2026 (FRED series DEXMXUS), the latest observation available when this page was verified. Legal conversions in Mexico use the Banxico FIX, which differs slightly. Conversions are for orientation only.

Key facts

VAT standard rate	16 %LIVA art. 1o., as of 2026-10-26 · in force
VAT on sales of land and housing	Exempt LIVA art. 9o., sections I and II, as of 2026-10-26 · in force
VAT on unfurnished residential rent	Exempt LIVA art. 20, section II, as of 2026-10-26 · in force
VAT on commercial, furnished and hotel rents	16 %LIVA arts. 1o. and 20, as of 2026-10-26 · in force

The rule

1. Sales. VAT is not charged on the sale of land or of buildings attached to the ground used as housing; if only part is housing, only that part is exempt, and hotels are excluded. Other real estate sales bear the 16 percent general rate.
Cost to do it: Tax only.
Example: Office building MXN 20,000,000 with land of MXN 8,000,000: VAT on MXN 12,000,000 is MXN 1,920,000. / Price about USD 1,071,593; VAT about USD 102,873.Ley del Impuesto al Valor Agregado, DOF 29 December 1978, arts. 1o. and 9o., sections I and II, LIVA arts. 1o. and 9o., 1978-12-29 official text · verified 2026-10-26

2. Housing classification and construction. Old age homes and orphanages count as housing; new buildings are classified by the use for which they were built, considering specifications and permits. A building not used as housing can be treated as housing if the deed states the buyer will use it as a home and the tax is guaranteed; the guarantee is cancelled once the property has been used as a home for more than six months. Facilities used exclusively by residents without profit are housing. Construction of homes, extensions and installation of prefabricated homes are exempt when the provider supplies labor and materials, but urbanization works, markets, schools and commercial premises in housing developments are not.
Cost to do it: Guarantee costs apply when using the art. 28 option.Reglamento de la Ley del Impuesto al Valor Agregado, DOF 4 December 2006, arts. 28 and 29, Reglamento LIVA arts. 28 and 29, 2006-12-04 official text · verified 2026-10-26

3. Rents. Rent of property used exclusively as housing is exempt; with mixed use only the housing part is exempt, and the exemption does not apply to property provided furnished or used as hotels or guest houses. Rent of farms used only for agriculture or livestock is exempt. For furnished housing, VAT applies to the whole rent even under separate contracts. Commercial and industrial rents bear 16 percent.
Cost to do it: Tax only.
Example: A warehouse rented for MXN 350,000 a month bears MXN 56,000 of VAT, creditable for a VAT registered tenant. / Rent about USD 18,753; VAT about USD 3,000.Ley del Impuesto al Valor Agregado art. 20, sections II and III; Reglamento de la LIVA art. 45, LIVA art. 20; Reglamento art. 45, 1978-12-29 official text · verified 2026-10-26

4. Occasional sellers. A person who sells a taxable property occasionally, outside its business, pays the VAT by return within 15 days after receiving the price, with no credit of input VAT.
Cost to do it: Tax only.Ley del Impuesto al Valor Agregado art. 33, LIVA art. 33, 1978-12-29 official text · verified 2026-10-26

Transaction	VAT
Sale of land	Exempt
Sale of housing	Exempt
Sale of hotel, office, warehouse, retail (building part)	16 percent
Home construction with labor and materials	Exempt
Unfurnished housing rent	Exempt
Farm rent for agriculture or livestock only	Exempt
Furnished housing, hotel or guest house	16 percent
Commercial or industrial rent	16 percent

VAT on real estate transactions (LIVA arts. 9o., 20 and 33; Reglamento arts. 28, 29 and 45).

Worked example

A developer sells a mixed building in Querétaro for MXN 20,000,000: MXN 8,000,000 land, MXN 7,000,000 apartments and MXN 5,000,000 ground floor shops. VAT applies only to the shops: MXN 800,000 (about USD 42,864) (LIVA art. 9o.).

Step by step

1. Split the price in the deed between land, housing and non housing construction.
2. Charge 16 percent only on the non housing building part and issue the invoice.
3. Buying a non housing building to live in: state the use in the deed and guarantee the tax for six months (Reglamento art. 28).
4. Landlords of commercial property: charge VAT on rent and credit input VAT.

Common traps

No price split: the deed should separate land and construction or the taxable base is disputed.
Furnished rentals: the exemption is lost for the whole rent (Reglamento art. 45).
Hotels: never covered by the housing exemption (LIVA art. 9o.).
Urbanization works in housing developments: not exempt (Reglamento art. 29).

Sources

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