Accountancy in Mexico

>> Choice of Legal Form in Mexico

Foreign Investors generally do business in Mexico through a wholly owned subsidiary, either a General Corporation (sociedad anónima) or a Limited Liability Company (sociedad de responsabilidad limitada), which avoids being considered as having a permanent establishment in Mexico. Except for a few activities, there is no restriction to 100% foreign ownership.

These companies usually have a minimum fixed capital and a variable capital structure, so they can increase and decrease capital more easily.

There are similarities between both types of companies which are summarized  as follows:

  • Both types can carry out the same kind of business
  • Mexican taxation applies in the same fashion
  • Both require a minimum of two shareholders
  • Both can adopt the variable capital form
  • Liability of shareholders or partners is limited to the nominal value of their interest, except for tax purposes, where they are jointly liable
  • Differences are more in form than in substance

US investors frequently choose the limited liability company because it qualifies for the check-the-box election, to be treated as a flow through entity for US tax purposes.

The General Corporations and Limited Liability Companies, as well as other types of business entities are regulated by the General Law of Mercantile Companies.

The requirements to incorporate a General

Corporation or a Limited Liability  Company are:

  • Authorization from the Ministry of Foreign Affairs
  • Drafting By-laws
  • Executing a public deed before a Notary Public
  • Registering the Company before the Public Registry of Property and Commerce
  • Registering the Company before the

National Registry of Foreign Investment

  • Registering the Company before the Tax Administration System
  • Registering the Company before the Social Security Institute.

Mexican Subsidiaries and Parent Companies

Mexican subsidiaries owned by foreign corporations, partnerships or individuals are taxed on all income attributable to the Mexican corporation, whereas the foreign companies are usually subject to an income tax withholding only on payments made to them by the subsidiary, such as interest, royalties, technical assistance and the like.

Joint ventures are regulated in the same way as the general law of mercantile companies.

Financial Reporting

  • Accounting practices and requirements are outlined in the Commercial Code, Federal Tax Code, General Law of Mercantile Companies, public companies are regulated by the CNBV.
  • They require Mexican companies to maintain their accounting records and corporate books in Spanish and Mexican pesos.
  • Reporting to parent company in other language and currency is not restricted.

Private companies must prepare an annual report regarding the company’s operations during the fiscal year, which must be a calendar year. This report must be submitted at the Ordinary Shareholders’ Meeting by the chairperson of the Board  of Directors or the Sole Administrator of the company.

The annual report should be accompanied with:

  • Basic financial statement and footnotes.
  • A report signed by the Statutory Examiner (Comisario).

Public companies must comply with the above, and must submit audited financial statements to the National Securities Commission.

Financial statements in Mexico should be prepared in accordance with Mexican Financial Reporting Standards (FRS), but financial audits are not mandatory for privately owned companies.

The Mexican Board for investigation and Development of Financial Reporting Standards (CINIF) is the organization responsible for issuing the Mexican Financial Reporting Standard.


Latest version updated 25th October 2017

Country Breakdown

127.5

Million

Population

$

Mexican Peso

Currency

$ 8200

GDP

1.964

Million

km2