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Identification Requirements for Controlling Beneficiaries under Mexico’s Federal Tax Code

March 29, 2022

Mexico’stax authorities published a Decree amending articles 32-B Ter, 32-B Quater,and 32-B Quinquies of the Mexican Federal Tax Code in the OfficialJournal of the Federation last November 12, 2021. Such Decree established anidentification framework applicable to controlling beneficiaries, defined as individualswho directly or indirectly own, control or benefit from the income generated bylegal entities, trusts, and any other type of legal form domiciled in Mexico.

Thesenew tax obligations became effective January 1, 2022 and are in addition to theidentification and reporting requirements established in the Mexican FederalLaw of Prevention and Identification of Transactions with Illicit Proceeds. Thenew tax obligations are regulated by the Miscellaneous Tax Resolutions for 2022in rules to

The referenced requirements may be summarized as follows:

1. Identifying the individual or individuals considered ascontrolling beneficiaries.

2. Identifying the layers in the chain of ownership or indirectcontrol, from the controlling beneficiaries to the source of business.

3. The implementation and safekeeping of information in aninternal file as part of one’s accountability records, as to the information ofthe controlling beneficiaries with supporting documents.

4.Implemention of an internal control system to ensure theinformation in the internal file is trustworthy and is kept updated.

5. The identification and verification of the identity of thecontrolling beneficiaries, which must be performed by a notary public, public mercantileprocessors, and any other person involved in legal acts in connection with the sourceof business, controlled or affiliated entity.

6. Providing to the Tax Administration Service (“SAT” for itsacronym in Spanish) the information of the internal file or the informationheld by a notary public, public mercantile processor, financial institutionsand any other party involved.

The monetary sanctions for not complying with these new taxobligations range from $500,000.00 to $2,000,000.00 Mexican pesos (roughly $25,000.00to $100,000.00 US dollars as of March 2022 exchange rate) for eachnon-complying controlling beneficiary.

If the controlling beneficiary is non-Mexican, it will benecessary to determine on a case by case basis what information and supportingdocuments should be required, which is comparable to the information requested ofMexicans.

The obligation to integrate and keep an internal file appliesequally to legal entities formed prior to January 1, 2022.

These new obligations and the identification framework implementedin Mexico has as its origin in the recommendations issued by the OECD to eradicatetax havens and improve transparency and information exchange among its members.  For this reason, the information that the SATreceives may be further provided to other countries’ tax authorities, subjectto an applicable international treaty.

Please contact us for any further information.


Contact Information:

Rene Cacheaux |

Joseph B. Newton |

Felipe Chapula |

Jorge Ojeda |

Miriam Name |

Iker Dieguez |

Natalie Ceron |

Esteban Gomez Aguado |

Julieta Guzman |

Mexican Tax Authorities Update Electronic Invoicing System

February 17, 2022

On February 13, 2022, Mexico’s Tax Administration Service (“SAT” per its acronym in Spanish) published communication 010/2022, detailing updates to the Internet Digital Tax Invoice (“CFDI” for its acronym in Spanish) applicable to the issuance of invoices, from version 3.3 to version 4.0. Based on such updates, it is important to consider, among others, the following changes:

a) It is now mandatory to include the name and tax address of both the issuer and recipient of the CFDI, and the purpose for which the CFDI will be used; and

b) Regarding payroll receipts, employees must provide their Taxpayer Registry Number (“RFC” for its acronym in Spanish) to their employers, along with their full name and postal code on file with the SAT, which employees may look up and review electronically.

With the purpose of improving the tax services and making compliance with tax obligations easier, the SAT granted a transitional term until April 30, 2022, to adjust to the new issuance of invoices and paystubs.  During this interim term taxpayers may use both CFDI versions, 3.3 and 4.0.

Please contact CCN’s attorneys in case you require additional information.

Contact Information:

Rene Cacheaux |
Miriam Name |
Esteban Gómez Aguado |

Nuevo Leon Approves Important Changes to State Payroll Tax

January 31, 2022

On December 23, 2021 the State of Nuevo Leon published in the Official Journal for the State of Nuevo Leon Decree No. 037 amending key provisions of the Treasury Law for the State of Nuevo Leon including changes to Chapter Eight pertaining to the Payroll Tax (“ISN” – per its acronym in Spanish). Such changes include a new article 154-Bis increasing the scope of the ISN to include all payments carried out under the category of fees that are similar to wages, per the terms of article 94 of the Income Tax Law.

Chapter Eight already contemplated certain fees categorized as being similar to wages under the ISN (directors’ fees, services mainly rendered to one provider, among others). However, based on the amendment entering into force as of 2022, new types of payments not previously included will be taxed under the ISN, the most relevant being advance payments to members of companies and associations.

Therefore, there are reasonable legal arguments to protest the constitutionality of article 154-B of the Treasury Law for the State of Nuevo Leon entering into force as of January 1, 2022, as advance payments to members of companies and associations exceed the ISN’s original purpose.

In accordance with rules of Mexico’s Supreme Court of Justice, the amendment may be protested within (a) 30 business days following its entry into force, or (b) within 15 business days of the first ISN payment.

Contact Information:

Rene Cacheaux |
Miriam Name |
Jorge Ojeda |
Jorge Sánchez Cubillo|
Eduardo Parroquin |
Esteban Gómez Aguado |

Mexico to Conduct Audits on Outsourcing Matters

January 7, 2022

The Department of Labor and Social Welfare (“STPS” per its acronym in Spanish) has announced that during the course of 2022 it will perform audits of companies to verify possible violations of the Federal Labor Law (“FLL”) in outsourcing matters. The STPS has created a new questionnaire containing 12 questions, which it will use to ensure companies’ compliance with outsourcing rules. The STPS will conduct a first evaluation using the Specialized Services and Works Provider’s Registry (“REPSE” per its acronym in Spanish) to identify any red flags.

Based on the above, it is vital for companies to comply with new outsourcing regulations. On this point, bear in mind that such regulations forbid the outsourcing of personnel for the entire workforce of a contracting employer company which shares the same or similar commercial activity of the outsourcing contractor.

Likewise, the amendments to the FLL allow the subcontracting of specialized services or works that are not part of the corporate purpose or main commercial activity of the company, only by contracting individuals or entities that render specialized services that are properly registered with the REPSE. Such registration must be renewed every three years, and specialized services providers are required to file periodic notices with the Mexican Social Security Institute and the National Institute for Employees Housing Fund.

The amendments also provide that in case of a provider’s violation of its labor, social security or tax obligations in connection with its employees rendering specialized services, the beneficiary company will be considered as jointly liable for all corresponding fines and penalties. Penalties for breach to the outsourcing regulations are: (i) a fine equal to 2,000 to 50,000 Measure and Update Units (UMA per its acronym in Spanish) (from  $179,240.00 a $4,481,000.00 pesos), for carrying out the outsourcing of personnel without proper registration, at the authority’s discretion; and (ii) that tax invoices issued for unallowed personnel outsourcing services are considered without legal effect, and therefore expenses for such services would not be deductible for income tax purposes. Further, value added tax paid would not be credited.

The above information outlines why it is important for companies to verify their current and future contracts with service providers to avoid potential instances of non-compliance under new regulations.

Contact Information:

Pablo Saenz |
Fernanda Magallanes |

Mexico Creates New Remote Training Program for Employees

November 23, 2021

According to Mexico’s National Statistics and Geography Institute, the current domestic unemployment rate is 4.4%, giving it the second highest unemployment rate in Latin America based on figures reported by the Interamerican Development Bank. It has become more important for employees and candidates to become more skilled in order to increase their success rate when searching for employment. For this purpose, Mexican Government has implemented the Remote Training Program for Employees (“PROCADIST” for its acronym in Spanish), which aims to promote the development and perfection of skills, capabilities and competencies of employees.

This new program was developed to provide to the employees of any company or business access to the program's online platform to obtain various types of training. Among such types of training, seven modules exist, which consist of the development of socioemotional skills, competence standards, additional education, business education, labor law amendments, improvement of labor productivity and knowledge of safety and sanitation measures in the workplace.

All of the abovementioned categories have 32 modules which delve further into each one of these areas. The program is designed to be completed in 16 hours, within a maximum of 10 days. The platform is accessible online from any electronic device, 24 hours a day, 7 days a week, allowing employees to take courses at their convenience, without interfering with an employee’s scheduled activities.

PROCADIST modules have been designed in a way that the employees will learn through audio, video, photos, animation and tutorials. Likewise, it is important to consider that the program is free, allowing employees of any company to access the courses.

Employees can learn about effective communication in the workplace, develop teamwork skills, customer care, physical and mental health habits and increase innovation abilities. Something important to keep in mind is that PROCADIST includes training as to Official Mexican Standards (NOMs), with detailed information regarding safety policies in force with which all employees must comply to avoid workplace accidents.

In summary, the improvement and development of the Mexican workforce’s competencies, qualifications and abilities, in addition to being a legal requirement under Mexican Federal Labor Law, increasingly relevant in the current labor market, especially since employers are in need of better qualified employees. Moreover, PROCADIST is a tool that can be extremely useful for companies and employees.

We are always available to assist with matters related to compliance with Mexican NOMs and labor law.

Contact Information

Pablo Sáenz |
Fernanda Magallanes |

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