Mexican law is based on a civil law, which derives from Roman law.

The Political Constitution of the United Mexican States (Constitución Política de los Estados Unidos Mexicanos “CPEUM“) has established a regime in which, in accordance with the principle of the distribution of powers, the power to regulate matters that are not expressly conferred to the federal level, will be understood to be reserved for the local/state level.

Mexican regulation allows you to carry out business in the national territory via:

Incorporation of a Mexican commercial company

These companies, and their corporate regimes, are regulated by the Mexican General Law of Commercial Companies (Ley General de Sociedades Mercantiles, which is referred to as “LGSM”).

1. Company in collective name;
2. Limited partnership;
3. Limited liability company;
4. Stock Corporation;
5. Partnership limited by shares;
6. Cooperative companies; and
7. Simplified stock company.

Investors tend to choose to incorporate a Mexican limited liability company or a stock corporation as these types of companies adjust better to their needs.

The LGSM also regulates the modality of “Variable Capital”.  All corporate regimes can adopt this modality, and it allows an addition to the capital stock of a “variable part“ which, according to the law and the bylaws of each entity, requires less formalities for its increase or decrease (as it only requires such change to be approved by ordinary meeting) compared to the formalities required for the change of the fixed part of the capital which requires an amendment to the bylaws and may therefore only be resolved and approved by an extraordinary meeting.

Other modalities of the corporate regimes are included into other Laws, for example, an investment promotion stock corporation or a public stock corporation, which are regulated by the Mexican Securities Market Law (Ley del Mercado de Valores – also referred to as “LMV”).

Opening of a branch

The opening of a branch does not require the incorporation of a new company (“newCo“) in Mexico. Instead, a foreign entity will require authorisation from the foreign investment authorities to carry out business/commercial transactions in Mexico.This allows investors to have presence in the national territory without the need to open a newCo.

As branches are regulated by the Mexican Foreign Investment Law (Ley de Inversión Extranjera, – referred to as “LIE”), it is required that each new branch needs to obtain authorisation from the Ministry of Economy, which is obtained by submitting the applicable documentation to the Ministry. An alternative and simplified process may apply if there is an International or bilateral treaty between Mexico and the country of origin of the investment.

Mexican joint venture

A Mexican joint venture or association is regulated in Chapter XIII of the LGSM. This involves an agreement between the parties who agree to  provide goods or services and share in the profits and losses of the commercial business or several commercial operations.

As it is an agreement, a Mexican joint venture does not have legal personality, nor does it have a minimum of contributions.  It is sufficient that the agreement is in writing and that it stipulates the terms, proportions of interest, and other applicable conditions.

In Mexican joint ventures, there is no legal relationship between the third parties, the partners (who provide the goods and services), and the partner acting on his or her own behalf.

Regarding the ownership of the assets, vis-à-vis third parties, they will be the property of the associate. This means that he/she/it will be able to dispose of or transfer the assets freely, except for those that require additional formalities or that are stipulated in the agreement within the association contract.

For the distribution of profits or losses, the generalities applicable to commercial companies apply, that is, it will be proportional to their contribution and, for the associated partners, the losses that correspond to them may not exceed the value of the goods or services they contributed.

Finally, in the event that the agreement does not stipulate it, the Mexican joint ventures will operate and be liquidated in accordance with the corporate regime of “Company in Collective Name” (Sociedad en Nombre Colectivo), which, broadly speaking, implies that, unless otherwise agreed, the association will automatically be dissolved due to the death, incapacity, exclusion, or retirement of any of the associates.

Individuals

Individuals may be considered as merchants and carry out commercial transactions, requiring their registration as such before the Mexican authorities.

Yes, via opening a branch of a foreign company in the national territory which will be recognized as a legal entity once it complies with the formalities stipulated in the LIE.

It is not possible to proceed with the opening of a permanent establishment in Mexico of a company whose corporate purpose is regulated or restricted to Mexican individuals or companies fully owned by Mexican investors according to the LIE. Such corporate purposes include transportation, port services, fuel supply, broadcasting, regular and non-scheduled national air transport service, among others.

For a branch, there is no minimum capital requirements. However, for Mexican companies, the minimum, at least from a practical stand, would be MXN$1.00 per partner/shareholder.

Some specific permits or licenses may require a specific capital requirement, however this would be determined on a case by case basis according to the business the investor intends to carry out.

• Incorporation of a newCo. When incorporating a newCo you will need to obtain authorisation for the corporate name, and the partners/shareholders of the newCo are required to appear before a Notary Public or Commercial Notary Public to grant the incorporation deed and the registration of such deed before the Public Registry of Commerce (prior to the payment of the applicable duties).

Some additional steps may be required if the partners/shareholders are foreign nationals, such as the granting of a power of attorney for a legal representative to appear and execute the incorporation deed.

It should be noted that the commercial companies which are most commonly chosen by investors (due to their similarities to regimes regulated in other countries) are the Mexican limited liability company and Mexican stock corporation.

• Permanent establishment/branch. The establishment of a branch requires the submission of the relevant apostilled and translated application documentation before the Ministry of Economy, and if applicable, the payment of the governmental duties. Once the authorisation is issued, such document must be notarized and later registered before the Public Registry of Commerce.

The authority, for these purposes, requires that the branch has a legal representative and a domicile in Mexico to hear and receive notifications, as well as to present the incorporation documentation of the foreign company in its country of origin, such as articles of incorporation, bylaws, amendment to the bylaws, certificate of good standing, document that proves its tax ID, among others. Such documents must be apostilled or legalised (as applicable) and translated into Spanish by an expert translator duly authorised by the Mexican courts.

• Joint venture. A joint venture requires the execution of an agreement and is not subject to registration. However, from a tax perspective, usually joint ventures are registered as Mexican entities.

For the case of newCo’s, these are managed by a sole director or a board of directors. The only requirement is that the agenda of the applicable meeting (for the case of a Board) contains all the items to be discussed and the decisions to be made by the majority of the members of the Board.

Additional requirements and formalities can be stipulated into the bylaws and some modalities may require a specific number of members or qualifications, for example investment promotion stock companies or public stock companies have to have a board (that may or may not need the appointment of independent members).

For the partners/shareholders

All Mexican companies (except the simplified stock company), require a minimum of 2 partners/shareholders. In the case of the simplified stock companies, the Law provides that it can be incorporated by one or more individuals, provided that such individuals are not majority or control shareholders/partners in other Mexican companies.

For a limited liability company, there is a maximum of 50 partners.

As mentioned before, some activities may have restrictions for the foreign investment percentage of participation.  Other than that, they are open to any kind of investment.

Legal representatives/directors

There is no minimum or maximum requirement of legal representatives or directors to be appointed except for investment promotion stock companies or public stock companies which have specific board requirements.

Although there are no requirements or limitations regarding the nationality of the officers or directors, it is advisable to appoint at least one representative or director who has a Mexican tax ID, as it is necessary to carry out the procedures before the tax authorities (this also applies to permanent establishments).

Yes, Mexican joint ventures (or any other agreement) may allow foreign investors to carry out business in Mexico, but they may not carry out business directly (the only way for the foreign investor to carry out commercial activities in Mexico is with the opening of the branch), but instead by means of a broker or agents.

Starting from the principle of autonomy of will, most of the terms and conditions of agreements (except those that specifically stipulate otherwise) can be determined freely by agreement between the parties.

There are no mandatory codes, however, some associations (such as the Business Coordinating Council also known as Consejo Coordinador Empresarial) usually issue some codes of best business practices and corporate governance, advising on how to choose independent directors/managers, the minimum or maximum number of directors required, or the need for legal representatives, among others.

• Increase of stock capital (fixed or variable).
• Contributions for future capital increases.
• Intercompany or third-party loans.
• Establishment of reserve funds for these purposes, among others.

Dividend distribution

In the event that the company has profits (and provided that there are no losses pending compensation, the legal reserve fund is considered and the financial statements that reflect said profit have been approved), it can proceed with the decree and payment of dividends to the partners or shareholders in the proportion of their shareholding by means of an ordinary meeting, unless there is a specific agreement between shareholders in this regard or in the bylaws (only where the corporate regime allows it).

All decrees must be approved directly at a meeting of partners/shareholders.

Capital decrease

In the event of a capital decrease, the shareholders/partners may decree any applicable amount of their shareholding decreased or such decrease can be actioned in proportion to their participation in the capital stock.

This process requires approval via an ordinary or extraordinary meeting, according to the part of the capital to be decreased (fixed or variable), but the company must have, at all times, at least 2 partners/shareholders.

Decrees must be approved directly at a  meeting of partners/shareholders.

Loans

For third-party or intercompany loans, the return of proceedings is usually carried out according to the specific terms and conditions set forth in the applicable agreement.

In general terms, shares/partnership interest have full voting rights, unless there is a specific series issued with limited or non-voting rights (provided the corporate regime allows it).

Under this, any amendment to the bylaws will require approval by means of an extraordinary meeting, which requires a higher calling and voting quorum, but any other decision (unless otherwise stated into the bylaws) can be resolved via ordinary meeting.

Yes, the meeting is the supreme organ of a Mexican entity, and therefore all of the instructions that it issues to the directors are mandatory to them. In case the Directors/officers decide to not comply, civil, administrative or even criminal actions may apply.

Minimum wage

• General minimum wage MXN$278.80 daily.
• Free north border zone minimum wage MXN$419.88 daily.

The minimum wage can vary according to the specific profession/job/occupation.

Holidays

Workers with more than 1 year of service are entitled to a minimum period of 12 working days of paid annual leave per year, which will be increased by 2 working days, up to 20 working days, for each subsequent year of service. Subsequently, the vacation period will be increased by 2 working days for every 6 years of service.

Workers who provide discontinuous and seasonal services have the right to an annual vacation period in proportion to the amount of workdays in the year.

Of the total period that corresponds to the worker, at least 12 days of vacation must be continuous (distributable according to the worker’s decision).

Vacations cannot be compensated with remuneration.

Working hours

The maximum duration of the working day will be: 8 hours during the daytime, 7 hours during the  night-time and 7.5 hours during the mixed workday.

The worker shall be granted at least a half hour break outside of the workplace (at the discretion of the worker).

For every six days of work, the worker shall enjoy at least one day of rest with full salary paid.

In jobs that requires continuous work, the workers and the employer shall establish by mutual agreement the days on which the workers shall enjoy the weekly rest days.

As part of the amends carried out in 2024 to the Federal Labor Law (Ley Federal del Trabajo, – referred to as “LFT”), labor exploitation was typified as a crime. Although labor exploitation was already criminalised, as part of this amend a section was incorporated, adding as labor exploitation subjecting a person to work hours above the limits stipulated by the LFT.

Labor conditions of the workplace

According to the LFT, all workplaces must comply with all the hygiene and civil protection regulations and conditions for the employees to carry out their activities.

In the case of workers that have more than 40% of their working hours at home or the address they have chosen for such purposes (teleworking or home office), the employers must, among others, provide, install and maintain the equipment necessary for teleworking. For example: computer equipment, ergonomic chairs, printers, assume the costs derived from such work modality (as the payment of internet or telecommunication services or electricity), among others.

In addition, the Congress approved some other relevant amends in the matter, including the right of workers to have (and thus, the obligation of the employers to provide) adequate and enough chairs and seats with backrests in service, commerce and similar workplaces for the execution of their jobs or periodic rest.

Maternity/paternity leave

During the period of pregnancy, pregnant woman will not carry out work that requires considerable effort and poses a danger to their health in relation to the pregnancy, such as lifting, pulling or pushing heavy weights, that causes trepidation, standing for a long time or other work that may alter their mental and nervous state. Pregnant women will enjoy a rest period of 6 weeks before and 6 weeks after childbirth.

In the case of adoption of an infant, they will enjoy a six-week break with pay after the day they receive the child.

During the breastfeeding period, for up to a maximum of 6 months, they will have two extraordinary breaks per day (half an hour each) to feed their children.

For paternity leave, Mexican Labor Law establishes a leave entitlement of 5 working days with pay for working men for the birth of their children and likewise in the case of the adoption of an infant.

Discrimination

No worker in Mexico may be the object of discrimination in the workplace, based on ethnic or national origin, gender, age, disability, social status, health conditions, religion, immigration status, opinions, sexual preferences, marital status or any other cause that violates human dignity.

Unfair dismissal

Unjustified dismissal is the termination of the labor relationship by the unilateral will of the employer, without verifying any of the causes for termination provided for in the LFT. The employee who has been unjustifiably dismissed will be entitled to:

Indemnification/severance consisting of the amount of three months’ salary, plus

• 20-days salary per year worked;
• 12-days salary per year worked limited to two times the minimum wage;
• The proportional part of the annual statutory bonus;
• The proportional part of vacation;
• The proportional part of the vacation bonus; and
• Other benefits included in the employment agreement or in the conditions that regulate the relationship with the company or employer, such as bonuses, commissions, savings fund, and utilities, among others.

Delivery or workers of digital applications.

At the end of last year, another amend to the LFT was published, in order to regulate and recognise the digital platform workers their labor and social security rights and establish the necessary conditions to formalize the employment relationship with companies. For example, the worker will have the right to determine the time they work by digital apps, they salary will be set by task or service provided considering the proportion of the weekly rest day, vacation, vacation bonus and Christmas bonus.

Any employee can be dismissed at any time. However, the main difference will be whether it is under a justified reason or if there is responsibility of the employer. The principal consequence of there being no justified reason is the calculation of the severance payment.

According to the LFT exists justified reason in the following cases:

• Use of false documentation or capabilities to obtain employment;
• Dishonest or violent behavior at work or against co-workers, clients, providers or the employer;
• Threatening or abusing the employer or his/her family, except in self-defense; Intentionally damaging property;
• Causing serious damage to the employer’s property through negligence;
• Threatening safety in the workplace;
• Failure to comply with safety instructions in the workplace;
• Behaving immorally in the workplace or harassing any person in the workplace;
• Reveal any industrial secret or know-how of the employer’s business in damage of the employer;
• Disobey the employer’s instructions regarding the work to be carried out without justified cause;
• Appear under the influence of alcohol or any narcotic or drugs to his/her work;
• Have a sentence that imposes prison as a sanction;
• More than three unexcused absences in a 30-day period, among others.

In this case, the employer must provide a letter of termination indicating the applicable cause and the applicable settlement, with the amounts owed to the employee for outstanding salaries, pending holidays, among others and such documentation must be signed by the worker in the presence of a legal representative.

If the employer is not able to provide the causes of dismissal, he/she/it must pay the worker full severance plus back pay. For indefinite term agreements, the severance payment is three full months’ salary plus 20 days of integrated salary for each year of service.

A different process applies to collective dismissals. The company must initiate a consultation period with the workers’ representatives with a term not exceeding 30 calendar days (or in the event that the company has less than fifty employees, the period will be 15 days) the parties must negotiate in good faith and bring it to the attention of the labor authority. The labor authority is in charge of transferring the matter to the entity managing the unemployment benefits and will request, as mandatory, a report from the Labor and Social Security Inspectorate on the development of the consultation period and the ends of the communication.

Yes. LFT establishes that all workplaces must have mixed commissions, being mandatory to have the following:

• Joint Productivity, Training and Training Commission.
• Joint Committee of safety and hygiene.
• Joint Commission for Workers’ Profit Sharing.
• Joint Commission for the preparation of the General Table of Antiquities.
• Joint Commission for the preparation of the Internal Labor Regulations.

These commissions must be integrated by an equal number of employee’s representatives and employer’s representatives and each one, within the scope of their powers, will resolve various issues in relation to the workplace and working conditions.

General Law on the National Anticorruption System

Defines how the institutions in charge of fighting corruption will coordinate and collaborate and how they will function as a system. Establishes a coordinating committee that determines and evaluates anti-corruption policies as well as the mechanisms for citizen participation.

General Law of Administrative Responsibilities (“Ley 3 de 3”)

The above law establishes obligations that all public servants must comply with. It establishes the types of corruption, as well as the procedures for detection, investigation and sanction. It must be clear to avoid interpretations and facilitate the work of judges. Since it is a “General Law”, all states of Mexico must base their laws on it.

Organic Law of the Federal Court of Administrative Justice

The above law determines the integration, organisation, attributions and operation of the tribunal in charge of judging possible acts of corruption investigated by the authorities. This law guarantees that an autonomous body will oversee the judging of serious administrative misconduct.

Organic Law of the Federal Public Administration

The above law reverses the disbanding of the Ministry of Public Administration (“SFP”) and maintains it as the governing body in charge of the internal control of the Federal Public Administration. It will also be one of the bodies in charge of the investigation of serious administrative liabilities. It will be responsible for resolving non-serious administrative misconduct (serious misconduct will be judged by the Federal Court of Administrative Justice). In this way, it is guaranteed that those who decide on acts of corruption will not be subordinates of the accused.

Federal Auditing and Accountability Law

The above law provides the Federal Superior Audit Office (“ASF”) with greater powers and investigation tools that allow for a real time audit of federal resources and allows for state participations to be audited.

Law of the Attorney General’s Office of the Republic

In order to criminally prosecute acts of corruption, the above law makes it necessary to create a Specialised Prosecutor’s Office for Corruption Crimes with technical and budgetary autonomy, and with all the necessary investigative powers and tools. This guarantees an autonomous investigation of corruption crimes.

Judicial power amends

As a result of the judicial power amend carried out in 2024, the restructure of all courts will be made. In this sense, the Supreme Court will be granted the power to appoint or revoke its employees and officers and the procedure to investigate and sanction public officers that commit corruption acts is amended.

Federal Law for the Prevention and Identification of Operations with Resources of Illicit Origin

This  law regulates some activities considered as “vulnerable” for money laundering purposes in Mexico, such as: fintech companies, financial system, donations, some provision of services, loans (even intercompany loans), among others.

This law, per se, doesn’t have extraterritorial reach, however depending on the specific matter a joint investigation/sanction with other jurisdictions may apply.

The Federal Criminal Code establishes the different crimes that may be committed by legal entities, i.e. influence peddling, obstruction of justice, fraud, tax fraud, money laundering, securities violations and bribery.

The penalties which may be imposed consider the daily earnings of the company as a proportional measure to the prison sentence that a natural person would have been sentenced to for the same offense.

At the constitutional level, it is a power of the Congress of the Union to issue laws on the matter through section XXI of article 73, which provides for the regulation of organised crime and such law provides the basis through which the Public Prosecutor’s Office will coordinate with the Mexican Treasury «Secretaría de Hacienda y Crédito Público, known as “SHCP”) to carry out investigations.

The crimes of operations with resources of illicit origin and terrorism and its financing are typified in the Federal Criminal Code in the following articles:

• Operations with resources of illicit origin – Money laundering – Articles 400 Bis and 400 Bis 1.
• Terrorism – Articles 139, 139 Bis and 139 Ter.
• Financing of Terrorism – Articles 139 Quater and 139 Quinqui.
• International Terrorism – Articles 148 Bis, 148 Ter and 148 Quater.

However, there is also the “Federal Law for the Prevention and Identification of Operations with Resources of Illicit Origin” (“Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita”) (AML Law)

The purpose of this  law is to protect the financial system and the national economy, establishing measures and procedures to prevent and detect acts or operations involving resources of illicit origin through inter-institutional coordination with the purpose of gathering useful elements to investigate and prosecute the crimes of operations with resources of illicit origin, those related to the latter, the financial structures of criminal organisations and to avoid the use of resources for their financing. Such AML Law provides additional reporting obligations to the “obliged subjects”, including the appointment of a compliance officer.

In this sense, all financial institutions, within their respective law, include also some AML obligations, including also the reporting and appointment of such compliance officer, as well as the draft of their internal AML guidelines, which must be approved by the authority.

Mexico does not have a specific local regulation for these matters. However it has signed international treaties such as the C029 – Forced Labor Convention, 1930 (No. 29), and it has different provisions signed with the United Nations such as ILO C. 138, Minimum Age, ILO C. 182, Worst Forms of Child Labor, UN CRC, UN CRC Optional Protocol on Armed Conflict, UN CRC Optional Protocol on the Sale of Children, Child Prostitution and Child Pornography, and the Palermo Protocol on Trafficking in Persons.

In accordance with the LGSM, corporations are obliged to prepare financial statements on an annual basis and they must be approved no later than April of the following year.

The Mexican Federal Tax Code establishes the obligation to submit audited financial statements prepared by an authorised public accountant (as long as the taxpayers have taxable income, assets and number of employeesaccording to the thresholds published by the authorities). If the company is a public company listed in the Mexican exchange market, the financial statements must be audited and submitted no later than the 30^th of May of the following year.

Otherwise, the audit of the financial statements is optional.

Annual general shareholders/partners meeting

Within the first four months of each year a company must hold an annual shareholders’/partners’ meeting to approve the financial statements and the reports of the directors, and to ratify, revoke or appoint its directors and statutory auditor.

Foreign investment

Mexican legal entities with foreign investment and foreign entities with permanent establishments in Mexico are required to comply within certain reporting obligations to the Foreign Investment National Registry, this includes: (i) registration; (ii) annual economic report; (iii) quarterly notices and/or (iv) cancellation of registration.

There must be a prior call of the shareholders by the sole administrator/sole manager or board of directors/managers, or the statutory auditors, which must be published by means of a notice in the electronic system of the Ministry of Economy with the anticipation established in the bylaws, or otherwise, 15 days prior to the date of such meeting. Such call will not be mandatory in case all of the partners/ shareholders/directors appear at the meeting or the resolutions are adopted in unanimous written documents adopted outside a meeting.

However, it is always advisable to review if the bylaws state additional provisions on the matter, such as other publication means in addition to the Ministry of Economy portal, additional notice term, electronic notification, among others. Considering that, in case there is doubt whether the company must comply with the bylaws or the LGSM, ideally both provisions will be met.

Once the meeting is duly called, all annual meetings must resolve:

1. The approval of the financial statements and the reports generated by the board of directors and statutory auditor regarding the principles and operation of the company in the fiscal year.
2. The ratification, appointment or revocation of the members of the board of directors and statutory auditor (when applicable).

This, of course, is the minumum, however, shareholders or partners can discuss and approve additional matters in the annual meeting, as the granting of powers, appointment or officers, among others.

Legal entities, and fiduciaries (among others) must, as part of their accounting, keep the reliable, complete and updated information of their controlling beneficiaries up to the level of individuals (if this is not feasible, the information of the directors of the last UBO company must be provided).

This information may be required by the authority at any given moment, without prior notification and the company will have a 15-day term of to provide such information plus the supporting documentation.

The UBO file may also be mandatory for AML purposes for obliged subjects when carrying out any vulnerable activity.

The main federal taxes in Mexico for taxpayers are:

• Income Tax (Impuesto Sobre la Renta). For a 30% of the tax profit in companies or entities; and for individuals the specific percentage to apply is linked to the income received.
• Value Added Tax (Impuesto al Valor Agregado). For a 16% or 0% rate, considering that some activities are exempt of such tax.
• Special Tax on Production and Services (“Impuesto Especial sobre Producción y Servicios”), which applies for the manufacture and selling of gasoline, alcohol, beer and tobacco, among other specific products. The specific rate applicable to each product varies from 3% to 160%
• General Import Tax on Foreign Trade (“Impuesto General de Importación al Comercio Exterior”). The rate is calculated based on the tariff fraction in which the imported merchandise is classified.

There are some additional special taxes applicable to specific industries, for example, the hydrocarbon exploration and extraction or mining, among others.

When a business distributes profits, there are two options: a) if the company has enough CUFIN¹ balance, there is no need to pay any additional tax, or b) if the company does not have enough CUFIN balance 30% tax must be paid, applying a gross-up ratio of 1.4286 prior to the 30% tax.

On the other hand, for the receiver of the profits, we have the following scenarios: a) if the receiver is a corporation which is Mexican resident, there is no withholding tax b) if the receiver of the profit is an individual residing for tax purposes in Mexico, a 10% of WHT must be applied, and c) if the receiver is a foreign resident for tax purposes, a 10% WHT must be applied or it must be analyzed to determine whether it is possible to claim the benefits of a Double Tax Treaty to avoid double taxation in order to decrease the WHT to 5% or whether the participation exemption regime applies.

Footnote(s):

¹ CUFIN is the Net Tax Profit Account, it means, profits that have paid the tax before.

According to the specific business and localisation of the company, some incentives can apply.

For example, in the case of maquiladoras and service exportation, there is a Manufacturing, Maquila and Export Services Industry Program (“IMMEX”), which allows the business to carry out temporal imports of products with a productive process and/or services for export of goods or export services, deferring the payment of the general import tax, the value added tax and, if applicable of compensatory fees of the goods that are necessary for such industrial process or a service process intended for the production, transformation or repair of goods of foreign origin temporarily imported for export or for the provision of export services.

Another example of a tax incentive is the denominated “Plan México”, which entered into force in January of this year. Such incentive consists in giving the taxpayer the option to make the immediate deduction of the investment in new fixed assets acquired by taxpayers from the date of entry in force of the decree that contains this incentive and until the end of September, 2030, deducting in the fiscal year in which the investment is made the applicable amount that results from applying to the original amount the percentage that corresponds according the specific category of fixed assets (i.e. for property considered as archeological monuments, a deduction of 72% for 2025 and 2026 will apply and 67% for 2027 to 2030). This incentive also provides an additional deduction of 25% of the increase in the expense incurred for training of each employee in the fiscal year or the expenses related to innovation.

In addition, some local incentives exist in each state for specific industries. For the north border of Mexico, there are some regional incentives, as the case of the “Decree of tax incentives for the northern border region”, that applies for taxpayers with tax address, establishment or branches (registered before the tax authorities) within the northern border region. This tax incentive is also applicable to the southern border region, and both allow certain taxpayers to apply an income tax credit and a value-added tax reduction.

When a company undertakes/distributes a capital redemption it must perform two computations. Firstly, it needs to make a comparison between the contributions made and the amount of the capital redemption, if the contribution is higher, there is not additional implications but if the capital redemption is greater than the contributions, a tax profit must be raised and a corporate tax must be computed provided the company does not have a CUFIN balance. In terms of withholding taxes the same comments as noted at question 25 are applicable.  Secondly, it is necessary to make a comparison between the equity and contributions, if the first one is higher, a tax profit must be raised and the same comments above are applicable as well as the responses to question 25.

We have a local tax that is triggered by means of the transfer of real estate. Such real estate acquisition tax (“ISABI”) is a contribution on the purchase of a land, house or apartment and is withheld by the notary public at the time of formalization of the specific legal act from which the acquisition derives (purchase, donation, etc.). The specific percentage is determined by each State.

The ISABI does not except the acquirer or the seller to pay any other applicable taxes, such as Income Taxes.

There are some provisions into the LMV and general rules and circulars of the Banking National Commission that contain several rules in case of a takeover of a public company. For example, such regulation states rules regarding the offer, the limitation to pay a prize or surcharge on the amount of the offer, in favor of a person or group of people linked to the recipient of the offer, among others.

For a “normal” merger (i.e. when a group decides to merge their service and core business entities), there is no specific control regime. However, if two or more economic agents in terms of the Federal Antitrust Law (Ley Federal de Competencia Económica – also referred as “LFCE”) might require previous authorization from the Federal Antitrust Commission (Comisión Federal de Competencia Económica – also referred as “COFECE”), prior any M&A transaction. This applies under the “concentration” concept, defined as “the merger, acquisition of control or any act by virtue of which companies, associations, shares, equity interest, trusts or assets in general are united and that are made between competitors, suppliers, clients or anyone economic agents […]”. To determine whether there is a concentration that requires authorization from the COFECE, there are economic thresholds to consider.

In addition, some specific rules will apply to entities that belong to the financial system, as some previous authorisations and documentation must be provided.

In Mexico, according to the Federal Civil Code (Código Civil Federal – also referred as “CCF”), good faith is presumed and in order to demonstrate that it is not the case, the party that argues bad faith must provide proof of it.

In this sense, the CCF contains various provisions in benefit and protection of the party that acts in good faith. For example, in case a creditor accepts in good faith an undue payment of a certain and determined asset, will only be liable for the damages or losses of such asset and its accessories in proportion of the enrichment that he/she had. If the assets were sold, then he/she will only have the obligation to reimburse the price or assign the action to claim it.

Currently, employees do not have a specific right to be consulted prior to an M&A transaction. However, if the business is being acquired in full by another entity, the labor substitution might apply for the transfer of the employees from one company to another. In such case, the transferred employee will have the right to keep its working conditions.

As previously indicated above, the LIE provides for various limits on participation in the following activities:

Activity	Foreign Participation Limit
Cooperative Production Companies	10%
Manufacture and marketing of explosives, firearms, cartridges, ammunition and fireworks, not including the acquisition and use of explosives for industrial and extractive activities, or the manufacture of explosive mixtures for consumption in such activities	Up to 49%
Printing and publication of newspapers for exclusive circulation in the national territory	Up to 49%
Series “T” shares of companies owning agricultural, livestock and forestry land	Up to 49%
Freshwater, coastal and exclusive economic zone fisheries, excluding aquaculture	Up to 49%
Comprehensive port management	Up to 49%
Port pilotage services for vessels to carry out inland navigation operations under the terms of the Law on the subject	Up to 49%
Shipping companies engaged in the commercial operation of vessels for inland navigation and cabotage, with the exception of tourist cruises and the operation of dredgers and naval devices for the construction, maintenance and operation of ports	Up to 49%
Supply of fuels and lubricants for ships and aircraft and railway equipment	Up to 49%
Broadcasting. Within this maximum of foreign investment, the reciprocity that exists in the country in which the investor or the economic agent that ultimately controls it, directly or indirectly, is incorporated	Up to 49%
Scheduled and non-scheduled domestic air transport service; non-scheduled international air transport service in the form of air taxis; and, specialized air transport service	Up to 49%
Domestic land transport of passengers, tourism and cargo, not including courier and parcel services	Reserved for Mexicans or Mexican companies with a foreigner’s exclusion clause
Development banking institutions, under the terms of the relevant law	Reserved for Mexicans or Mexican companies with a foreigner’s exclusion clause
The provision of professional and technical services expressly indicated in the applicable legal provisions	Reserved for Mexicans or Mexican companies with a foreigner’s exclusion clause

In case a foreigner intends to invest in any of such industries (which would be only permitted in those not strictly reserved to Mexicans or the Mexican state), they can apply for “neutral investment”. Such neutral investment implies, among other, that they can economically participate within the business but the corporate control and decisions of it must be in charge of the Mexican investment at all times.

There is a limit on the amount of foreign currency that foreigners can exchange for Mexican pesos in financial institutions in cash (this is linked to the AML provisions). However, this does not apply for transactions in credit or debit cards or the amount in MXN that foreigners can withdraw from ATMs.

For Mexican entities

The liquidation process is composed by two main steps:

1. Dissolution, when the start of the liquidation process, the revocation of the administration and surveillance body and the appointment of the liquidator or liquidators are approved.
2. Liquidation, when the formal closure of the company, the final balance and the distribution of the company’s remaining assets are approved.

For both steps, the company is required to hold an extraordinary meeting or unanimous resolutions in lieu of a meeting, request the notarization of such meeting and the registration of the public deed.

In addition, the company must publish, in the Ministry of Economy’s portal, the final balance to give creditors the opportunity to oppose to such liquidation process.

Finally, the company will also have to request the cancellation of the company’s commercial folio before the Public Registry of Commerce as well as its Tax ID and Foreign Investmenet Registration. However, additional steps might be required according the business of the company.

For permanent establishments (branches)

In case a foreign entity has a branch in Mexico in terms of the LIE, in order to proceed with its closure, they have to submit a notice before the Ministry of Economy and then proceed with the cancellation of its registration before the Public Registry of Commerce and the Foreign Investment National Registry.