International Correspondence Lawyers & Financial Experts
ICL DIRECTORY
Company Formation & Tax Rates
Mexico
Kindly supported by:
Goodrich, Riquelme y Asociados Law Office
Paseo de la Reforma 265
Mexico City, D.F. 06500
México
Tel.: (011-52) (55) 5533-00-40 to -55
Fax: (011-52) (55) 5525-1227
Mail: mailcentral@goodrichriquelme.com
Internet: http://www.goodrichriquelme.com
| Sociedad Anónima de Capital Variable (S.A. de C.V.) *1 | Sociedad Anónima (S.A.) *1.1 | Branch | |
| Company law | The Mexican Companies Law (Federal Law) | The Mexican Companies Law (Federal Law) | The Mexican Companies Law (Federal Law) |
| Company purpose | free | free | main company |
| Founders | 2 (minimum) to 50 | 2 (minimum) | main company |
| Capital requirements | 3,000 MXN | 50,000 MXN | - |
| Liability | limited by shares | limited by shares | main company |
| Costs of incorporation | about 50,000 MXN | about 50,000 MXN | about 50,000 MXN |
| Incorporation | notarization of articles of incorporation; entry in local commercial registry, depending on corporate domicile; publication in official gazette | notarization of articles of incorporation; entry in local commercial registry, depending on corporate domicile; publication in official gazette | branches must be approved by the National Commission of Foreign Investments and Ministry of Foreign Relations, and registered at the Public Registry of Commerce. |
| Company name | free + company form | free + company form | free + company form |
| Formalities | moderate | moderate | moderate |
| Credit / funds | possible | possible | rather not possible |
| Accounting obligation | yes | yes | yes |
| Management | at least 1 director | at least 1 director | at least 1 director |
| Nationality | Mexican | Mexican | Mexican |
| Image | good | good | main company |
| Taxation | IT, AT, VAT ** | IT, AT, VAT** | IT, AT, VAT** |
- - - - - - - - - - - - -
| Income tax | Corporate tax | Profit tax | VAT | |
| Tax rate | 28% | are already included in the Income Tax | are already included in the Income Tax | 15% |
*1 Limited Liability Company
*1.1 Stock Corporation
- Sociedad Anónima (S.A.): nominal capital is determined in statutes and articles of incorporation; subsequent changes of nominal capital require amendment in statutes.
- Sociedad Anónima de Capital Variable (S.A. de C.V.): minimum capital and variable capital are determined in statutes and articles of incorporation; the amount of variable capital can be changed at will to suit future requirements.
*2 For tax purposes, the foreign company will receive the same treatment as a permanent establishment in Mexico (see above) and will pay taxes on the income generated from such branch offices at the normal corporate tax rate of 28%. However, the foreign company should be careful to avoid the possibility of having the income generated by the foreign company outside of Mexico to become attributable to the operations in Mexico. This possibility is due to the "force of attraction" rules contained in Mexico's tax legislation, which will sometimes require a taxpayer to include in his taxable income, income generated from abroad.
*2.1 The corporate tax rate is 28%.
Consolidated Tax Return: Companies that are part of a group may consolidate 100% of their profits/losses. Taxpayers must disclose in the tax report issued by an independent public accountant the amount of income tax that has been deferred as a result electing to file a consolidated tax return. The provision regulating the disclosure is not clear on what exactly must be reported, as there are different interpretations of the appropriate procedure to be followed for quantification purposes. Failure to disclose this information will result in a deconsolidation of the group.
*2.2 Tax on assets:
There is also a Federal Tax on Corporate Assets, established at a 1.25% rate. This tax will be applied on certain current assets and on fixed assets of Mexican companies and foreigner's assets within Mexico to be transformed and returned out of Mexico (e.g. "Maquila"). This tax will be paid on an annual basis through monthly provisional payments. If in any fiscal year the income tax paid by a company exceeds the tax on assets paid by such company, the taxpayer may request a refund equivalent to the amount of tax on assets paid for that fiscal year and for the previous 10 (ten) fiscal years in which the tax on assets had been paid and the taxpayer had not requested a refund. Likewise, if in any fiscal year the tax on assets paid, exceeds the income tax paid, the taxpayer may credit against the tax on assets the income tax paid. Additionally, the Tax on Assets is not due during the pre-operational period, the first three years of operation, and during the liquidation of the company unless this liquidation lasts for more than two years. There is an option whereby the local manufacturing company can assume the tax liability of the foreigner on the assets to be transformed and as a consequence the liability on the foreigner is avoided. Through this option the local manufacturing company can credit this tax against its own corporate income tax.
Withholding third party taxes:
a. Fees for independent services. In case a resident company pays fees for independent services rendered within Mexican Territory by residents in Mexico a 10% tax will be withheld. In case the individual or legal entity resides abroad, but renders services within the Mexican Territory the withholding gross rate shall be of 25%. In accordance the provisions of the U.S.-Mexico Tax Treaty, and those of most of the Tax Treaties signed by Mexico. It is established that the income of this type can only be taxed by the state of residence of the rendered of the services. Such income can be taxed by the state different from the state of residence if: a) the renderer has a permanent establishment in the state different from his state of residence; or b) the staying period of the service renderer in the foreign country different from the country of its residence exceeds 183 calendar days during any continuous twelve month period, since the renderer will automatically acquire residence in that other state by exceeding the mentioned limit.
b. Salaries. All salary payments for workers residing in Mexico will be subject to a withholding tax of up to 28%, and for workers that reside abroad, the tax shall be calculated applying the rates of the ITL.
