ISABI: The BCS Acquisition Tax That Blindsides Cabo Buyers at Closing

ISABI — the Impuesto Sobre Adquisición de Bienes Inmuebles — is the acquisition tax that the state of Baja California Sur charges on every real estate transfer. It is the single largest line item on your closing cost statement, and it catches American and Canadian buyers off guard because there is no direct equivalent in a US or Canadian real estate transaction. The closest comparison is a transfer tax or stamp duty, but ISABI is calculated differently and at a higher rate than most buyers expect.

Here is what I tell every buyer before they sign: ISABI is not negotiable, it is not optional, and it is not paid by the seller. It is your cost as the buyer, and you need to budget for it before you fall in love with a property.

What Exactly Is ISABI?

ISABI stands for Impuesto Sobre Adquisición de Bienes Inmuebles, which translates to "Tax on the Acquisition of Real Property." It is a state-level tax imposed by Baja California Sur on any transfer of real estate within its borders. Every Mexican state has some version of this tax, but the name, rate, and calculation method vary by state.

In BCS, ISABI is governed by the state's Ley de Hacienda (Treasury Law), and the rate is set annually in the state's revenue law (Ley de Ingresos). The current rate is 2% of the tax base, which is defined as the higher of:

• The declared sale price in the purchase agreement, or
• The catastral value (valor catastral) assigned by the municipal catastro office

In practice, the sale price almost always controls because catastral values in Los Cabos typically lag 30-60% behind market values. But this is not guaranteed — the notario is legally required to use whichever figure is higher.

How ISABI Is Calculated

The calculation itself is straightforward. The complexity is in understanding which value applies:

Step 1: The notario obtains the catastral value from the municipal catastro office. This requires a current catastral certificate (certificado catastral), which the seller typically provides.

Step 2: The notario compares the catastral value to the declared sale price in the purchase agreement.

Step 3: ISABI is calculated at 2% of whichever value is higher.

For example, if you are buying a condo in Palmilla for $1,200,000 USD and the catastral value is 12,000,000 MXN (approximately $650,000 USD at current exchange rates), the ISABI would be calculated on the $1,200,000 sale price: $24,000.

Now here is the nuance that trips up buyers from the US and Canada: in a standard American real estate transaction, the seller pays transfer taxes in most states. In Mexico, ISABI is the buyer's obligation. Period. This is not negotiable and it is not a convention that varies by deal — it is written into state law.

The Full Closing Cost Picture

ISABI does not exist in isolation. It is part of a closing cost stack that typically runs 4-7% of the purchase price for foreign buyers. Here is how the full picture looks on a $1 million property in Los Cabos:

ISABI is roughly 40-55% of that total. It is the elephant in the room, and it is the number that makes buyers from states with low transfer taxes — Texas, Florida, Arizona — do a double take. For deeper context on each line item, see our closing costs guide.

How BCS Compares to Other Mexican States

BCS's 2% rate is actually moderate by Mexican standards. Here is how the acquisition tax compares across the most popular foreign-buyer markets:

BCS at 2% is one of the lower rates among major Mexican real estate markets. If you are comparing Los Cabos to Cancún or Puerto Vallarta, the ISABI difference alone can be $10,000-$12,000 in your favor on a $1 million purchase.

The Catastral Value Question

The catastral value — valor catastral — is the assessed value assigned to a property by the municipal catastro office. It is used for property tax (predial) calculations and serves as the floor for ISABI computation.

In Los Cabos, catastral values are notoriously low relative to market prices. A $2 million condo in Pedregal might have a catastral value equivalent to $800,000 USD. This gap exists because catastral assessments are updated infrequently and tend to trail the actual market by years.

This matters for ISABI because the tax is calculated on whichever value is higher — sale price or catastral. In almost every transaction I have been involved in, the sale price exceeded the catastral value. But there are edge cases:

• Distressed sales: If a property is being sold significantly below market value (foreclosure, divorce, estate liquidation), the catastral value may actually be higher than the sale price. In that case, ISABI is calculated on the catastral value.
• Recent catastral updates: The municipality has been gradually updating catastral values upward in certain neighborhoods. If your target property was recently reassessed, the catastral value may be closer to market than expected.
• Pre-construction: For new-build properties purchased from a developer, the catastral value on the land alone is often much lower than the final sale price, so the contract price controls.

Your notario will provide the exact catastral value as part of the closing process. If the gap between catastral and sale price seems unusually narrow or the catastral is higher, ask why — it may indicate a recent reassessment or a discrepancy that needs resolution.

For more on how catastral values affect your annual property taxes as well, see our predial tax guide.

When and How ISABI Gets Paid

ISABI is collected by the notario as part of the closing process. You do not pay it directly to the state — the notario collects it from you, along with all other closing costs, and remits it to the state treasury on your behalf.

The payment happens at closing. You wire your total closing funds — purchase price plus closing costs — to the notario's escrow or trust account. The notario then disburses the purchase price to the seller, pays ISABI to the state, pays the registry fees, and retains their own fee. The entire process is handled in one closing session.

One thing that catches buyers off guard: ISABI must be paid before the property deed (escritura) can be registered with the Public Property Registry (Registro Público de la Propiedad). Until it is paid, the transfer is not complete. There is no payment plan, no deferral, and no installment option.

Can You Reduce ISABI?

Legally, no. ISABI is a state tax at a fixed rate, and the tax base is the higher of two objective values (sale price or catastral). Unlike the US, where property tax assessments can be appealed, the ISABI calculation is mechanical and does not allow for negotiation or appeals at the transaction level.

That said, there are legitimate considerations:

• Accurately declaring the sale price: The notario is obligated to declare the actual transaction price. Under-declaring to reduce ISABI is tax fraud under Mexican law and creates serious problems when you eventually sell — your cost basis will be artificially low, increasing your capital gains tax exposure. I have seen buyers save $10,000 in ISABI by under-declaring, then pay $50,000 more in capital gains tax on resale. It is a losing strategy.
• Early payment discounts on predial: While ISABI itself has no discount mechanism, paying your first year's predial (property tax) early — typically in January — usually comes with a 10-20% discount. This does not reduce ISABI but does reduce your total first-year carrying costs.
• Fideicomiso transfer vs new purchase: If you are buying from another foreign owner who holds a fideicomiso, the transfer can sometimes be structured as a trust beneficiary assignment rather than a full new purchase, which may result in a lower catastral reassessment. This is nuanced and requires an experienced notario — see our fideicomiso fee comparison for details.

How ISABI Compares to US Transfer Taxes

American buyers often ask how ISABI compares to what they pay at home. The honest answer: it depends entirely on which state you are buying in back home.

• Texas, Arizona, Utah: No state-level transfer tax. Buyers from these states experience the most sticker shock with ISABI.
• California: Transfer tax is typically 0.11% ($1.10 per $1,000) at the county level, though cities like Los Angeles and San Francisco add their own surcharges. Still well under 2%.
• Florida: Documentary stamp tax of 0.7% (0.6% in Miami-Dade). Lower than ISABI but in the same ballpark.
• New York: Transfer tax of 0.4% plus mansion tax starting at 1% for properties over $1 million, scaling to 3.9% above $25 million. New York buyers may actually find ISABI reasonable by comparison.
• Connecticut: Up to 2.25% on the full price for properties over $2.5 million. One of the few US states that rivals ISABI.

The key difference is philosophical: in the US, transfer taxes are often split between buyer and seller or paid by the seller entirely. In Mexico, ISABI is always the buyer's cost. Factor that into your total comparison when evaluating Cabo against US alternatives.