Time-share ‘taxes’ on seller are a scam
The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
Dear Real Estate Adviser,
I’m selling a time share in Mexico through brokers. I had to pay a VAT tax, and now they’re telling me I have to pay a luxury tax. I will get it back upon closing, I’m told. But should I be worried?
— Roy B.
Be worried. Be very worried. Not only is it improbable you’ll get those fees back from these so-called “brokers,” it’s a virtual certainty that they have no intent to actually sell your time share — ever. This is almost surely a fraud. Sorry!
Sadly, the growing horde of frustrated owners trying to dump their overpriced, hard-to-resell vacation time shares has brought out an army of Internet scammers to prey on them.
How the swindle unfolds
Though their spiels vary, scammers posing as brokers will quickly tell sellers who contact them that they have “great” news. There’s a buyer for their time share lined up! First, though, the sellers will just need to prepay some contrived closing costs and other fees and deposit them into a sham escrow account for “reimbursement” upon closing, which of course, never happens.
About those taxes …
Just for the record, a VAT is short for value-added tax, a consumption tax similar to sales tax that’s levied on goods, services and, yes, some real estate. While Mexico does have a VAT that can technically be applied to time shares (but seldom is, say sellers), that tax would have been paid when you bought the unit.
As for a “luxury tax,” Mexico does have the equivalent of a capital gains tax on sales of residential dwellings that aren’t their sellers’ primary residence. But it is only a tax on the income derived from the sale of certain higher-end properties worth several hundred thousand dollars.
It’s very doubtful you’d make a thing on your resale, much less meet that luxury high-dollar threshold.
Watch out for upfront charges
These scammers obviously know enough about Mexican laws to twist all that tax information around when they target unwitting sellers. Moreover, nearly all legitimate time-share resellers take any fees out of the proceeds at the end of the transaction.
Please consider this an addendum to a recent column about time-share resale scams and legitimate resale options. (By the way, Reader, I immediately informed the author of the above question upon reading it about the likely scam in the hopes of staving off additional rip-offs.)
Roy, if the company that’s apparently trying to bamboozle you has a U.S. office, you can contact that state’s attorney general with any complaint. You can also file a complaint with the U.S. Federal Trade Commission, which operates as a consumer watchdog. Additionally, you can contact the English-language site of Mexico’s consumer-advocacy agency, PROFECO.
Here’s hoping you haven’t already paid that “luxury tax.” Good luck!
Ask the adviser
To ask a question of the Real Estate Adviser, go to the “Ask the Experts” page and select “Buying, selling a home” as the topic. Read more Real Estate Adviser columns and more stories about real estate.