What Is ISABI and Why It Matters When Buying Property in Mexico

Buying property in Mexico is an exciting opportunity for many international buyers. Whether you’re looking for a second home, a retirement getaway, or simply a sound investment in a beautiful destination, understanding how real estate transactions work in Mexico is essential.

One important cost that often surprises first-time buyers is something called ISABI—a mandatory tax on property purchases. While it’s not the largest expense, it’s a required part of the process, and overlooking it can lead to delays and added stress. This article will walk you through what ISABI is, how much you should expect to pay, and why it’s important to include it in your planning.

What Is ISABI?

ISABI stands for Impuesto Sobre Adquisición de Bienes Inmuebles, or Real Estate Acquisition Tax. It is a one-time local tax paid when you purchase real estate in Mexico. The tax rate varies depending on the municipality where the property is located, and it is collected during the closing process.

How Much Is It?

In Baja California Sur, where popular areas like La Paz and Los Cabos are located, ISABI rates are:

  • 2% in La Paz
  • 3% in Los Cabos

For example, if you’re purchasing a property in La Paz for $300,000 USD, you’ll pay $6,000 USD in ISABI. If the same property were located in Los Cabos, the tax would be $9,000 USD.

It’s important to know that ISABI is calculated based on the highest of three values:

  • The purchase price
  • The cadastral value (used by the local property registry)
  • The appraised value from a professional valuation

This means that even if you negotiate a great deal on the property, the ISABI could still be calculated on a higher value if the appraisal or cadastral value exceeds the agreed purchase price.

 

Who Is Responsible for Paying ISABI?

In Mexico, the buyer is responsible for paying ISABI. It’s not shared between buyer and seller, as it sometimes is in other countries. That’s why it’s crucial to factor this tax into your budget from the very beginning of your purchase process.

When and How Is ISABI Paid?

ISABI is paid at the time of closing, which means when the final version of the deed is signed before a Mexican notary. However, it’s important to understand that:

You’ll need to provide the funds to the notary in advance, prior to the deed being finalized. The notary is in charge of paying the ISABI as part of the official closing process. Only after this payment is completed can the deed be concluded, submitted to the local land office (Catastro), and registered under your name at the Public Registry of Property.

Although the buyer does not pay the tax directly to the government, ensuring it’s paid through the notary before signing is key to avoiding delays or complications.

A Real-Life Example

Imagine you’re buying a plot of land in Los Cabos for $200,000 USD. The cadastral value is $210,000, and the appraised value comes in at $220,000. In this case, even though you agreed to pay $200,000, ISABI would be calculated based on $220,000—the highest of the three values. At a 3% tax rate, you would owe $6,600 USD instead of $6,000 USD.

Why It Helps to Have Legal Guidance

ISABI is just one part of the legal and administrative process of buying property in Mexico. While it may not be overly complex on its own, it can easily be mishandled if you’re unfamiliar with local procedures.

Working with an experienced closing attorney can help you:

  • Identify the correct value that will be used for calculating ISABI
  • Ensure the tax is paid correctly and on time
  • Prevent delays in deed registration or property ownership
  • Navigate the process with clear communication and confidence

For many international buyers, having someone knowledgeable on their side makes the experience more secure and less stressful—especially when dealing with a system that operates differently from what they’re used to.

 

Final Thoughts

ISABI may not be the first thing you think about when imagining your new home under the sun, but it’s a key part of every real estate transaction in Mexico. Being informed and prepared helps ensure a smooth closing and gives you one less thing to worry about.

The good news is, you don’t have to navigate this alone. With accurate information and the right team supporting you, the process can be smooth, transparent, and even enjoyable.

Buying property in Mexico should feel exciting—not overwhelming. With clarity and proper guidance, you’ll be able to focus on what truly matters: starting your next chapter in a place that inspires you.