First, Mexico is the most populous and largest country in terms of its territory, throughout Central America and one of the most opportune to invest.
A very controversial country, in reference to that it shares a border with the United States, its gastronomy is very popular worldwide, its paradisiacal beaches that make it a tourist destination per excellence, cradle of great artists, and have an exceptional Mayan culture.
As for the economic environment, this year 2019, has undergone changes in reference to its tax rates, investments and laws, all this in consequence of the political change that is taking place in Mexico.
- Before investing in Mexico, you should take into account the most prominent characteristics of the economy of this country, such as:
- Profitable investments in Mexico
- Through which incentives does Mexico boost foreign investment?
- Tax incentive programs:
- The theme of visas in Mexico
- Classification of companies in Mexico:
- Steps to open a company in Mexico:
- Taxation in Mexico.
Before investing in Mexico, you should take into account the most prominent characteristics of the economy of this country, such as:
The currency that circulates in Mexico is the Mexican peso with a value of $ 0.053, that is, it is well below the value of the US dollar.
It is important to highlight that the annual inflation rate was 3.84%, according to data provided by the newspaper The Economist.
In reference to the figure of the Gross Domestic Product (GDP) in the first quarter of 2019 it was 276,940 million euros, at a rate equivalent to 0.1%.
On the other hand, the National Consumer Price Index (INPC), registered an inflation rate of 2.99%, taking into account that this figure was published by the National Institute of Statistics and Geography (INEGI) of Mexico.
With that been said, it should be clear that the inflation rate is not the same INPC rate. As the inflation rate of that country is measured based on statistical data of increases or decreases in the value of products and services that are throughout the nation, whether basic or luxurious. On the other hand, the INPC is measured based on the value of the basic basket (food, toiletries, basic services) that covers the needs of the Mexican population.
All these data reflected in the previous paragraphs, are conducive to build the financial structure of your business plan, if you decide to invest in this country.
A very important tip and the newspaper Expansión reports, is that Mexico currently registers its lowest inflation rate, that is to say that the economy, despite the political uncertainty, is marching ideally and this translates into a good opportunity to invest.
Profitable investments in Mexico
Since you know the crucial data of the Mexican economy, now I present the best options to invest in Mexico:
• Fast-food restaurants
• Rolling coffee shops
• Bakery and pastry shops
• Tourism and hospitality
• Import of clothes and stores.
• Computer stores and electronic devices.
• Language schools
• Event organization agencies
• Transport and freight companies.
• Home medical care (home nursing)
• Organic food products
• Natural and alternative medicine
In Mexico, the food industry is currently developing on a large scale, for its exquisite cuisine, whether organic or fast, in supermarkets or restaurants, this is a business that guarantees the return on investment, of course, you have to leverage in chefs and Mexican chefs to master this business model.
Another booming industry in Mexico is logistics, transportation and freight, although Mexico is considered very dangerous to travel by land, it is a growing industry, more and more Mexicans like to purchase items online, especially in the main cities like Jalisco, Mexico City, among others.
Through which incentives does Mexico boost foreign investment?
Today, the Mexican state has created a series of programs that boost the growth of foreign investments, here are the highlights.
Foreign trade incentive programs:
• Import Tax Return to Exporters (DRAWBAK): grants the possibility of obtaining a refund of the general import tax, canceled for the goods that were added to the export merchandises.
• Decree for the Promotion and Operation of the Export Maquiladora Industry (IMMEX): An instrument allows the temporary importation of the necessary goods, in order to be used in a productive or service process destined to the manufacture, transformation or repair of merchandise of foreign origin. Without covering the payment of the general import tax, the value added tax and, where appropriate, the compensatory fees.
• Sector Promotion Programs (PROSEC): they are a mechanism aimed at companies producing certain merchandise, through which they are allowed to import, with a preferential ad-valorem tariff, various goods to be used in the elaboration of specific products.
• New Scheme of Certified Companies (NEEC): it is a program that promotes the implementation of internationally recognized minimum standards for security, in alliance with the private sector and that provides benefits to participating companies.
Tax incentive programs:
• Immediate deduction: it is a deduction that is applied, to promote investments, except in metropolitan and influence areas, such as in Mexico City, Monterrey and Guadalajara.
• Federal tax incentives for companies that do not have established permanence in Mexico: it is applicable to eligible maquiladora companies, which under certain conditions that, are provided with a reduction in income tax payment.
• Tax credits for federal taxes on research and development: eligible companies can receive a tax credit of 30% of the total expenditure on research and development activities, including processes and design.
Technological development and innovation programs:
• Innovation Stimulus Programs: these are support programs for societies that invest in research projects that promote the promotion of technology and innovation, aimed at developing new products, processes or services.
• International Fund: It is an International Cooperation Fund for the development of scientific and technological research between Mexico and the European Union.
The theme of visas in Mexico
Mexico is a country with different visas to enter its territory, and different for each activity you want to do there. To obtain visas you have to enter the website of the National Institute of Migration, or enter the consulate of Mexico in your country, these procedures can last from 2 to 30 business days.
To enter as an investor in Mexico, with the purpose of:
– Know investment alternatives.
– Make direct investment or supervision.
– Represent a foreign company.
– Carry out commercial transactions.
You will need a Business Person Visiting Visa as a Multiple Migration Form (FMM), which will allow you to stay for 6 months.
Now to establish a Mexico company, these visas (any of them) are necessary:
• Visitor Visa without Permission to Perform Remunerated Activities: it can be extended up to 10 years, it will not allow you to receive compensation from third parties but to invest in the Aztec country.
• Temporary Resident Visa Investor Category: which lasts from 1 year to 4 years.
These two visas will allow you to perform these activities:
– Participate in any proportion in the capital of Mexican companies.
– Acquire assets.
– Enter new fields of economic activity.
– Manufacture new products.
– Open and operate new businesses.
– Expand or relocate existing ones.
Also, relax under the law of foreign investment, so that you know even more the benefits that you are granted as an investor in Mexico, especially in terms of your rights and duties.
Classification of companies in Mexico:
In Mexican territory there are different classifications of companies, but for purposes of law and taxes, companies are considered according to their legal form.
Classification of companies according to legal form:
• Unipersonal: belongs to only one individual. Which responds with your assets to any legal or tax liability.
• Collective company: they are a company constituted by more than one person. And shareholders respond to their tax or legal duties.
• Cooperatives: they are intended to generate economic benefits for its members, and it is non-profit. They are usually made up of producers, workers or consumers.
• Limited Partnerships: they can be constituted in two ways. One of these is when the collective partners that have management in the company and have unlimited responsibility. On the other hand, limited partners, who do not participate in the management of the company and have limited liability.
• Anonymous Society (A.S): they have a limited liability to the assets they contribute, and the owners are those who participate with the capital, shares or titles.
• Limited liability company (S.R.L.): it is a type of company, where the partners only respond with the capital they contributed for the creation of the company, and not with their personal assets.
Classification according to its size:
• Small company.
• Medium company.
• Big company.
Classification in consideration of your economic activity:
• Primary sector.
• Secondary sector.
• Third sector.
Classification based on the origin of capital:
An interesting fact that I want to share with you is that Mexican legislation does not require a minimum amount of money for the constitution of the company, but it is important that you can establish the number of shares per partner, the equivalent percentage and the amount in pesos.
• Partner 1: 50 shares, 50%, 5,000.00 pesos.
• Partner 2: 30 shares, 30%, 3,000.00 pesos.
• Partner 3: 20 shares, 20%, 2,000.00 pesos.
Steps to open a company in Mexico:
To establish a company in Mexican territory, you must perform the following steps consistently and in an organized manner:
1) Write a document (draft). In which you will place the name that you want to put to your business, the capital, the partners and their data, location, economic activity that your company will exercise in Mexico.
2) Search and fill in a reservation request form for company name (business name). This format is searched in the Ministry of Foreign Affairs, you must fill it out, after a few days this body will approve or reject the name of the company. If the name is rejected, this secretary will give you five options of names available to choose from. You choose it and some business days later they approve it.
3) Hire a Mexican lawyer to prepare the company’s charter. This constitutive act will carry all the data of your company.
4) Bring the charter to the Ministry of Economy. Which will grant permission for the constitution of that company.
5) You must register the investment you are going to make when opening your company. The amount of the investment is registered in the National Registry of Foreign Investments, attached to the General Directorate of Foreign Investment. For this you have to request in the offices of this registry, a format and fill it out properly, attaching the bank supports or invoices of goods that support the investment that you are going to make in Mexico.
6) Enroll the company in the Tax Administration Service of the Ministry of Finance and Public Credit (SAT). This body grants the certificate of registration in the Federal Taxpayers Registry.
7) Perform the registration of the company before the Public Registry of Property and Commerce (RPPC). This registry is located in any city in Mexico, of course you must register the company in this registry according to its location. This body provides legal certainty and publicity to certain legal acts that involve a commercial company.
8) Enroll the company in the Mexican Social Security Institute (IMSS). When registering the company in this institute, it will be registered in:
– National Institute for Workers’ Housing.
– Retirement savings system.
– Work risk insurance.
It should be noted that these organizations ensure the social security of workers, once you have employees. In addition to these institutions, employer contributions must be made, some of which will be deducted from your monthly payroll and must be accounted for.
Another fact that I want to share with you is that Mexico is currently implementing a System for Rapid Opening of Companies (SARE), attached to the Federal Commission for Regulatory Improvement (COFEMER).
If your company is considered a low-risk public society (some agricultural, industrial, trade and services) by the Ministry of Foreign Affairs. You can register your company through this system, through which your company will be partially opened, on a business day, so the business can perform minimum operations, while you carry out the other procedures, in which you finish all the procedures will be fully constituted.
Taxation in Mexico.
First, I want to tell you that Mexico is one of the countries in Latin America with the highest amount of taxes.
In spite of this, the tax declaration and payment system is quite automated, because almost all the procedures are carried out online through the web platform of the Tax Administration Department of the Treasury and Public Credit (SAT).
This system also allows you to declare your accounting and give you personalized tax attention. Although you should always have your media printed in case of any review.
I also commented that since April 2018, the Tax Administration Service (SAT) began to perform the first electronic audits, with prior notification to the tax mailbox. Which is very innovative
On the other hand, Mexican legislation divides taxpayers into:
• Individuals (Individuals).
• Legal entities (companies).
- Residents in Mexico. (with Mexican address).
- Residents abroad. (foreign companies with branches in Mexico).
Types of taxes
• Income Tax (IT). It should be noted that this tax is applicable to both companies and individuals, it is considered as the corporate tax (as is known in other latitudes), and is calculated based on the profits obtained in the fiscal year.
• Value Added Tax (VAT). It is worth noting that this tax is applicable to individuals and companies.
• Special Tax on Cash Production.
• IDE. Cash Deposit Tax.
• IETU. Business Tax at the Single Rate.
• Vehicle Tenure Payment.
• ISN. Payroll Tax.
• Tax on Entertainment and Public Entertainment.
• Tax for the Provision of Hosting Services.
• Property tax.
• Property Acquisition Tax and Transfer or Transfer of Domain.
• Tax for Sports and Educational Development.
• Tax for Tourist Promotion, Integral Development of the Family and Promotion of Culture.
• Tax on Assistance to Permitted Games and Public Shows.
• Tax for the Maintenance and Conservation of Public Roads.
• Public Lighting Tax.
Duties of the companies in the matter of taxes:
• Enroll in the Federal Taxpayers Registry or Tax Administration Service Secretary of the Treasury and Public Credit (SAT).
• Issue tax receipts.
• Perform accounting.
• Submit tax returns with their respective monthly payments, and annual return (VAT and ISR).
• Present the informative declaration of operations with third parties (commercial operations).
• Make annual informative returns.
• Withhold taxes, as well as issue the corresponding tax receipt, which is considered as proof of withholding.
• Keep inventory control (Accounting).
• Prepare a statement of financial position and inventory of inventories (Accounting).
• Determine fiscal utility and profit sharing or OCT every year (Financial Statements).
• Notify for loans and contributions for future capital increases in the company.
Business tax rates:
– The Icome Tax IT rate varies from 1.92% to 35%, of the lower annual income limit. The stipulation table is found here in Income Tax.
– The rate corresponding to Value Added Tax VAT, for certain primary economic activities or services is 0%, to know these activities visit Value Added Tax VAT. There is also a 16% VAT that taxes the activities of:
- Disposal of assets.
- Provision of independent services (natural persons).
- Dación (give) in use or temporary enjoyment of goods to third parties.
- Import of goods and services.
– There are fiscal stimulations on the northern border of the country, where the IT rate is 20% and VAT is 8%.
– The surcharge rate according to the new tax law in Mexico is 1.47%.
– The tax incorporation regime (RIF): any company in the country that joins this regime can deduct their taxes 100% only the first year of incorporation, only when they have income with an amount of more than 300 thousand pesos annual
– The rates of other taxes are determined by the relevant agencies and according to the jurisdiction of the company.
Finally, we recommend you get advice from the competent agencies in Mexico through its different portals, institutions and consulates, so that you can invest effectively, since this article is a kind of general guide.
I hope it has been very useful for you.
Atte .: Mariajosé.
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