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Inhouse bookkeeping vs. outsourcing with an accounting firm for your foreign subsidiary in Mexico

A common question we get asked by foreign clients who want to incorporate a company in Mexico is whether it is more convenient for it to hire and employ its own accounting department or else, engage an accounting firm and outsource this work. In general, the answer is the same for any company, regardless of the source of the capital or the nationality of the shareholders. When companies are starting their operations, they want to keep costs at a minimum and maintain themselves lean and agile. With few operations at the beginning, companies probably don’t need a big structure and...

Operational risks for your business in Mexico

When operating a subsidiary in Mexico, foreign businessmen, especially those from developed countries, should expect a different level of efficiency and performance vis-à-vis their operation at home. For many things Mexico can be considered a modern country for doing business but for many others, we still trail other more developed countries. Here, we list a few examples of situations that foreign investors must be aware of to avoid unpleasant surprises. CORRUPTION Unfortunately, corruption is very common in Mexico. It is probably one of the biggest obstacles towards development. For decades, Mexican citizens and government employees have learned and got used...

Preventing fraud, theft and embezzlement in your foreign subsidiary in Mexico

Companies require a solid internal control structure in order to achieve their objectives, improve the efficiency of their operations, obtain adequate financial information, safeguard their assets and make sure they are complying with laws and regulations. This structure must be continually challenged and assessed to verify it is properly working. When operations change within a company, the structure must be adapted to those changes. As you can infer, this is no easy task for companies’ management. But it is even more difficult when management is far from the entity to be controlled, as when having a foreign subsidiary. Internal control...

Corporate and legal implications of doing business in Mexico

All countries have different requirements to open a business. Here are the basic facts to take into consideration when trying to do business in Mexico.   Type of Legal Entity Companies doing commercial activities can incorporate different types of legal entities. The most common is a “Sociedad Anónima”, which requires a minimum of two shareholders with no minimum of capital stock issued. Shareholders will mostly limit their responsibility up to their capital contribution (as long as the company complies with its basic tax obligations). Many foreign investors chose a different type of legal entity, a “Sociedad de Responsabilidad Limitada” (equivalent...

Mexican Tax Authority and Accounting Requirements

For several years now, the Mexican tax authority (known as SAT for its name in Spanish) has been investing important sums to modernize its structure and develop tools to better monitor taxpayers doing business in Mexico. Probably its most important tool has been its investment in information technology. Today, taxpayers are controlled by the expenses they make, the revenue they record, their bank accounts, and their credit cards with just a few clicks in a computer. Electronic filing.- Since 2017, companies had to file their initial chart of accounts adjusted to a catalog defined by the SAT. Then, on a...

What are the tax obligations when doing business in Mexico?

Corporations in Mexico are subject to multiple obligations regarding tax laws. The Mexican tax system, while not as broad as that in the US, does include plenty of reporting formats and issues to consider. Regardless of the type of business or industry, companies must observe its obligations regarding two taxes: 1) Income tax Companies must pay a 30% tax on its profits, determined from the difference between the taxable income and the authorized deductions. There are several limitations on deductions as well as specific requirements to observe in order to deduct some concepts; for example, in order to deduct the...