From the 2022 Mexican tax reform (RMF 2022 2.8.1.20., 2.8.1.21., 2.8.1.22., 2.8.1.23)
Within the context of the international effort Mexico is part of and in order to comply with international standards regarding the exchange of information and transparency as well as the fight against tax evasion, the financing of terrorism and money laundering, legal figures and trusts will be required to obtain and keep all relevant information related to their controlling beneficiaries. In line to the international accords, penalties would apply in cases such legal figures and trusts fail to comply with such obligations.
Taking the foregoing into account, amendments to some articles and even the introduction of some others to the Tax Code are aimed to increase scrutiny of transactions carried out by and through trusts and legal figures. These amendments are also aimed at harmonizing the current provisions with the international accords to which Mexico is a party. These additions are contained in Articles 32-B, Section V,* 32-B Bis,** 32-B Ter,*** 32-B Quáter,**** 32-B Quinquies,***** 42 and 49 of this code.
As such, domiciliary inspections performed within the foregoing context will be carried out in accordance with the procedure established in Articles 42 Section XII and 49 of this code, as amended, in addition to all other requirements currently in existence.
In terms of the first paragraph and Section XII of Article 42 of the Tax Code, tax authorities are empowered to determine if compliance with tax and customs provisions has taken place as well as to determine omitted taxes and the commission of tax crimes. In order to do so, they are allowed to audit taxpayers, jointly and severally liable parties, related parties, tax advisers, and as of the entry into effect of these amendments, it is made clear that financial institutions, trustees, settlors and their beneficiaries, and the contracting parties or members in the case of any other legal figure, are also subject to these provisions.
Article 49: For purposes of Sections V, XI, XII and XIII of Article 42 of this code, domiciliary visits to taxpayers, tax advisors and as of 2022 to financial institutions, settlors, trustees, beneficiaries, and legal figures must be performed at the their tax domicile. The same will apply to the domiciliary visits to legal figures, in which case the visit must be performed at the tax domicile of their contracting parties or members, or at their business establishments, branches, premises, offices, warehouses, or fixed and semifixed spots on public roads. The visits can be performed as well to third parties related to those contracting parties or members of the legal figures, provided the visits are performed during the time they are opened to the public and in places where busine ss activities are carried out or the tax advisory services referred to in Articles 197 to 202 of this code (reportable schemes) are performed, or where the activities giving rise to the fulfillment of the obligations established in Articles 32-B, Section V, 32-B Bis, 32-B Ter, 32-B Quáter and 32-B Quinquies of this code are carried out or the legal acts thereon are held, executed, have effects, documented, or registered.
If upon performing the domiciliary visit referred above, the authorities identify that tax obligations have not been fulfilled, the corresponding resolution will be formulated. Prior to the issuance of this resolution, the taxpayer, tax advisor, financial institutions, settlors, trustees, beneficiaries, and the contracting parties or members of a legal figure, as well as third parties related to them, will be given three business days to challenge the aforementioned assertion through the filing of the corresponding evidence. If it is identified that the visited person is not registered in the Federal Taxpayers Registry, the authority will require the necessary data for their registration, without prejudice to the sanctions and other legal consequences derived from such omission.
* 32-B, Section V. Financial entities will be required, among other obligations, to secure the name, nationality, tax residence, and all relevant contact information, including the tax payer id number of their clients.
** 32-B Bis VII/VIII. Financial institutions may undertake the operations they are authorized to carry out, if they comply with the procedures to identify foreign accounts and reportable accounts among the financial accounts and to file the information required by the CRS and by the Estándar para el Intercambio Automático de Información sobre Cuentas Financieras en Materia Fiscal referred to by the OECD.
The tax authorities will enter into collaboration agreements that allow them to coordinate and exchange information with other agencies that are competent over entities and legal figures that are financial institutions. This, with the objective to coordinate supervision and verification of the effective implementation of the CRS. This will permit as well to adopt relevant actions to achieve compliance with the comprehensive tax information exchange agreements Mexico has in effect and the inter-institutional agreements signed based on them (FATCA).
*** Article 32-B Ter. Legal entities, settlors, trustees and beneficiaries, in the case of trusts, as well as contracting parties or members, in the case of any other legal figure, are required to obtain and keep, as part of their accounting, reliable, complete and updated information of its controlling beneficiaries. This information will be provided to foreign tax authorities upon request and under the protection of an international treaty in force Mexico is part to, which contains provisions for the reciprocal exchange of information.
SAT will be empowered to request information related to controlling beneficiaries. This information request will be notified to trustees, settlors, beneficiaries, in the case of trusts; the contracting parties or members in the case of any other legal figure; as well as, to third parties related to them. The request for information from their controlling beneficiaries will be performed in accordance with the applicable provisions of this Code (Article 134 — general rules applicable to notifications). The information so requested needs to be provided within the 15 business days following the date on which the notification takes effect. This period may be extended for 10 more days, as long as there is a duly justified request for an extension and it is submitted prior to the completion of the aforementioned term.
Notaries, brokers and any other person involved in the formation or execution of the contracts or legal acts giving rise to the incorporation of entities or the formation of legal figures, will be required to obtain all relevant information to identify their controlling beneficiaries and to adopt reasonable measures in order to verify their identity. The same would be applicable to financial entities participating in such legal acts within the context of information related to financial accounts.
In cases where the tax authorities request information regarding the controlling beneficiaries from entities, legal figures or the parties referred above, the information so requested would need to be provided within the 15 business days following the date on which the notification takes effect. This period may be extended for 10 more days, as long as there is a duly justified request for an extension and it is submitted prior to the completion of the aforementioned term.
Public registries across Mexico, the Financial Intelligence Unit, the Banking and Securities Commission, the Commission of the Retirement Savings System, and the Insurance and Surety Commission, will assist SAT by corroborating the accuracy of the information that is being provided by trusts, trustees, settlors, the contracting parties or members of legal figures and the third parties related to them, the persons involved in the conclusion of relevant contracts, as well as financial entities and members of the financial system related to controlling beneficiaries.
**** Article 32-B Quáter. For the purposes of this Code, the controlling beneficiary shall be understood as the individual(s) or group(s) of individuals who:
– Directly or through another person or entity or through any legal act, obtain the benefit derived from their participation in a legal entity, a trust or any other legal figure. Likewise, controlling beneficiaries are those who ultimately exercise the rights of use, enjoyment or disposition of goods or services or those in whose name a transaction is carried out, even when they enjoy the benefits or perform these transactions on a contingent basis.
– Directly, indirectly or on a contingent basis, exercise control of the legal entity, trust or over any other legal figure. It is understood that an individual or group of individuals exercises control when, through the ownership of securities, by contract or by any other legal means, they are legally entitled to:
- Impose, directly or indirectly, decisions in the general shareholders or partners meetings, partners or equivalent corporate structures, or appoint or dismiss the majority of the directors, administrators or their equivalents.
- Maintain the ownership of rights that allow, directly or indirectly, to exercise the vote Mexico: with respect to more than 15% of the share capital, or
- Manage, directly or indirectly, the administration, strategy or main policies of the entity, trust or any other legal figure.
In the case of trusts, the settlor or settlors, the trustee or trustees, the beneficiaries as well as any other person involved in the transaction ultimately exercising effective control over the contract, even on a contingent basis, shall be considered controlling beneficiaries. Administrative guidelines to be published by SAT will regulate this further.
In cases where their application is not contrary to the nature of Mexican tax provisions, the recommendations issued by the International Financial Action Group and by the Global Forum on Transparency and Exchange of Information for Tax Matters organized by the OECD are considered as source of interpretation along with the international standards to which Mexico is party of. (“Grupo de Acción Financiera Internacional / Foro Global sobre Transparencia e Intercambio de Información con Fines Fiscales”).
***** Article 32-B Quinquies. Entities, trustees, settlors, and beneficiaries, in the case of trusts; as well as the contracting parties or members, in the case of any other legal figure, must keep the information regarding the controlling beneficiaries referred to in Article 32-B Ter of this Code updated. When there are modifications in the identity or participation of the controlling beneficiaries, the entities, settlors, trustees or beneficiaries, in the case of trusts; as well as of the contracting parties or members, in the case of any other legal figure, must update said information within 15 calendar days following the date on which the modification has taken place.
Finally, in terms of the recently added Articles 84 M and 84 N of the Tax Code, and without prejudice of criminal sanctions, economic penalties up to $2,000,000 Mexican pesos for each controlling beneficiaries, would be applicable upon failing to comply with the foregoing obligations.
This reform was publicized on December 27, 2021, and enforced from January 1, 2022.
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