2013 was a year full of changes in the business environment in Mexico. Perhaps the most significant one is derived from the changes made to the Mexican legal framework. Between 2013 and 2014 new legal provisions have been and will be enacted that will have great impact on the way we do business in Mexico.
Appoint a “compliance officer”
This is mainly for the purposes of the Ley Federal para la Prevención y e Identificacion de Operaciones con Recursos de Procedencia Ilícita (the Federal Law for the Prevention and Identification of Funds from Illegal Sources, which is also known as the Anti-Money Laundering Law). When it comes to complying with legal obligations, businesses commonly think of appointing a high-rank executive officer within their organization and who is 'trustworthy'. However, in order to properly comply with the obligations set forth by this Law, a third ingredient is required: deep knowledge of the law and a close follow-up of transactions. For example, this Law prohibits certain transactions or imposes reporting obligations. Non-compliance may result in several penalties, including criminal charges or fines ranging from 12,000 to just over 4m Pesos (Mexican Currency). This Law requires appointing a compliance officer, and the liability resulting from any failure to do it will fall upon the administrative director or the board of directors.
Review the corporate and asset structure
Some of the changes made to the Federal Fiscal Code include the requirement that in certain cases, shareholders are joint obligators of tax liabilities in proportion to the percentage of shares of the company that they hold. This means that shareholders will have to pay out from their assets any tax liability for the portion of such liability that exceeds the value of the company.
Analyze the dividends policy
One of the changes made to the Income Tax Law is that, overall legal entities will pay an additional 10% on the dividends allotted among the shareholders. This tax will be payable by companies on any profits earned from 2014 and may not be credited by the individual receiving such profits.
Perform a thorough analysis of the tax regime
Many industries will be affected by the amendments to the law that will be enacted in 2014. For example, small taxpayers also known as “repecos” (small-taxpayer regime) will cease to exist as well as the simplified regime for carriers, in which case those that operate under the IMMEX Decree must get a certification, the process of which is yet to be known, so that they are less affected by payment of importation taxes, among others.
This group of taxpayers have been severely affected, because the tax rate may now reach 35% and personal deductions have been severely limited. In the case of employees, we should keep in mind that social welfare (which is a tax-free income for the employee) will no longer be fully deductible for the employer, which will most likely lead to some employers chosing remuneration options that are fully deductible.