Multiple Purpose Financial Institutions (SOFOMES) created.

August 26, 2006
Multiple Purpose Financial Institutions (SOFOMES) created.

On July 18 th a decree amending various provisions of Mexican law was published in the Official Journal of the Federation (Diario Oficial de la Federación) establishing a new regulation for financial leasing and factoring companies, as well as creating a new form of financial entity called a multiple purpose financialinstitution (SOFOME). The reforms amended the General Law of Credit Instruments and Operations, the General Law ofCredit Organizations and Auxiliary Activities, the Foreign Investment Law, the Income Tax law, the Value Added Tax Lawand the Tax Code, among others. The purpose of these reforms is to facilitate lending, financing and factoring transactions,permitting these activities to be carried out by SOFOMES, without the necessity of obtaining authorization from the Mexicanfederal government. SOFOMES may have as their principal activity the continuous and professional offering of loantransactions, leasing and/or financial factoring. Additionally, the decree eliminates restrictions on foreign investment inrelation to financial leasing and factoring companies, so that the corporate capital of the new SOFOMES may be comprised upto 100% by foreign investment. From a tax perspective, SOFOMES will enjoy, in general terms, the same tax treatment thatlimited purpose financial institutions (SOFOLES) enjoy, with the decree establishing that interest generated from financialleasing and factoring activities of SOFOMES will not cause the imposition of Mexican Value Added Tax (IVA).

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