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 18.104.22.168 to 22.214.171.124.
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.
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