When choosing a jurisdiction to enter the Latin American market, businessmen often focus on Mexico. This is not only because of the large domestic market of Mexico (population 140 million), but for many other factors, such as relatively developed infrastructure, geographical location, etc. When choosing the legal form for a company in Mexico, most people choose the Sociedad de Responsabilidad Limitada de Capital Variable — which is very close in essence to companies in the form of LLC and is considered for tax purposes as non-transparent corporation.
Registration of a company in Mexico takes about 3 weeks and can be done remotely through a local agent, who will need to issue a power of attorney to be signed and certified in the country of your residence. It will take another 2 weeks to register the company with the tax authorities (get a tax number and an electronic signature for tax purposes) and open a bank account. Within 40 days after registration, a company with foreign capital must register with the Register of Foreign Investment.
Mexico allows incorporation of companies with 100% foreign capital, but some activities are restricted from it, such as transportation and telecommunications services. The minimum number of shareholders is 2. Shareholders can be both individuals and legal entities. However, it is necessary to consider the fact that bigger withholding tax will apply if a parent company is located in an offshore jurisdiction. If the company wants to hire a foreign director, they will first need to obtain a local work visa and a tax number for him.
The corporate tax rate (SAT) in Mexico is 30%. VAT rate (IVA) – 16%. Taxes are paid in advance on a monthly basis, together with the submission of relevant reports – until the 17th day of each month.
The fiscal year is standard from 1st of January to 31st of December. The final tax return and financial statements must be submitted by 31st of March of the year following the reporting year. Accounting is conducted according to local standards (Mexican GAAP).
In Mexico, there is a practice of electronic invoicing, any other format of invoices is invalid for tax purposes. The issue of invoices is possible through an online portal on the website of the tax service or through an accounting firm.
Example of an electronic invoice
Up to date Mexico has executed agreements on the avoidance of double taxation with, among others, the following countries: Germany, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Korea, Denmark, Ecuador, Spain, Finland, France, Greece, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Norway, New Zealand, Holland, Poland, Portugal, United Kingdom, Czech Republic, Slovenia, Romania, Singapore, Sweden and Switzerland, Ukraine, Russia.
