Many foreigners decide to establish a commercial corporation in order to acquire property within or outside the restricted zone in Mexico, establishing such corporations for speculative purposes, i.e., being restricted to acquiring real property and then disposing of (selling) or otherwise transferring (conveying title to) of said property when its value increases.
For the most part, such corporations have been set up as Sociedades Anonimas (Corporations) and Sociedades de Responsabilidad Limitada (Limited Liability Companies).
That being said, we have been getting quite a few inquiries regarding the legal obligations for keeping these corporations updated as required by law.
In this article, I will make mention of the most important obligations to be carried out annually and monthly by the shareholders or partners of the above-referenced corporations.
· Sociedades Anonimas: The Ordinary Assembly shall convene at least once a year and within four (4) months following the close of the fiscal year (Article 181 of the General Law of Commercial Corporation (Spanish: Ley General de Sociedades Mercantiles, abbreviated LGSM), in other words, between January and April of each year.
· Sociedades de Responsabilidad Limitada: The Assemblies shall convene at the registered office or principal place of business at least once a year and during the period as set in the Contract (Article 80 of the General Law of Commercial Corporations).
· Foreign corporations having been registered in Mexico: Publish the balance sheet for the business, approved by a certified public accountant (Article 251 of the General Law of Commercial Corporation).
NATIONAL REGISTRY OF FOREIGN INVESTMENTS (Spanish: REGISTRO NACIONAL DE INVERSIONES EXTRANJERAS, abbreviated RNIE)
Renew the RNIE registration record with the Secretariat of Economy (Spanish: Secretaria de Economia, abbreviated SE), by means of submitting an economic-financial survey form to be submitted within the first seven (7) months of the close of the fiscal year, as set forth below:
I. From A to D, during April of each year;
II. From E to J, during May of each year;
III. From K to P, during June of each year; and
IV. From Q to Z, during July of each year.
The period for submitting the renewal with the SE is dependent on the first letter of the name, registered name or corporate name of the person submitting the report (Article 35 of the Foreign Investment Law; Articles 38 and 43 of the Regulations for Foreign Investment).
Likewise, Mexican companies with foreign investment should provide the RNIE with information regarding data pertaining to the value of income and expenditures (economic report) derived from:
1. New contributions or withdrawal of same that do not affect capital stock;
2. Withholding of the last fiscal year profits and drawdown of retained earnings accrued; and
3. Loans payable to or receivable from: subsidiaries residing abroad; the parent company abroad; foreign investors residing abroad who participate as partners or shareholders that are part of the corporate group to which the individual, the foreign legal entity or Mexican corporation submitting the report belongs. (Article 38, Section II of the Regulations for Foreign Investment).
MEXICAN BUSINESS INFORMATION SYSTEM (Spanish: SISTEMA DE INFORMACION EMPRESARIAL MEXICANO, abbreviated SIEM)
Renew the information provided to SIEM within the first two-month period of each year (see http://www.yucatancompass.com/articulo-lo-que-debes-saber/33/registro-en-el-sistema-de-informacion-empresarial-mexicano-siem). Basis: Articles 28, 30, 31 and 32 of the Law on Business Chambers and their Confederations (Ley de Camaras Empresariales y sus Confederaciones in Spanish).
This applies every ten (10) years. The renewal process should begin within six (6) months prior to expiration of the term, or within six (6) months subsequent to termination of said term. Basis: Articles 133 and 134 of the Industrial Property Law.
FISCAL (TAX) OBLIGATIONS.
In reference to Income Tax (Spanish: Impuesto Sobre la Renta), the primary annual obligations are as follows:
A) Annual income tax return for legal entities: Should be filed within the first three (3) months of the fiscal year-end date, i.e. no later than March 31st of each year. Basis: Article 86, Section VI of the Income Tax Law (Spanish: Ley del Impuesto Sobre la Renta).
Note: With the reform of Article 27 of the Regulations for the Federal Tax Code, as of December 7, 2009, legal entitles established on or subsequent to said date may not submit a notice of suspension of activities (operation), i.e. should file the interim and annual tax returns that apply.
B) No later than February 15 of each year, submit information to the tax authorities pertaining to those people who had withholdings effected in the previous calendar year pursuant to the last paragraph of Article 127 of this Law.
C) No later than February 15 of each year, submit the following information to tax authorities, by means of the official form approved by said authorities for such purpose:
a) The outstanding balance at December 31 of the previous year for loans that have been granted or guaranteed by foreign residents; and
b) The type of financing, name of the effective beneficiary (actual recipient) of the interest, type of currency repayable in, the applicable interest rate and the dates on which the principal and the related charges can be demanded for each of the financing transactions referred to in the foregoing subparagraph.
D) No later than February 15 of each year shall submit, using the official form that the tax authorities issue for such purpose, the information for transactions effected the immediately-preceding calendar year with customers and suppliers. For these purposes, taxpayers are not bound to provide information for those clients and suppliers who for the year in question conducted transactions in amounts less than $ 50,000.00, nor even when issuing their digital tax receipts through the Tax Administration Service website (Spanish: Servicio de Administracion Tributaria, similar to the Internal Revenue Service in the United States).
E) No later than February 15 of each year, submit the following:
a) Information regarding those persons who had income tax withheld in the immediately-preceding calendar year, as well as information regarding those residing abroad to whom payments were made in accordance with Title V of this Law .
b) Information regarding those persons to whom donations (or gifts) were given in the immediately-preceding calendar year.
F) No later than February 15 of each year, submit to the authorized offices a statement providing information as to the transactions effected in the previous calendar year through fideicomisos (trusts) whereby business activities they are involved in are realized. Basis: Article 86 of the Income Tax Law.
The Flat Rate Business Tax (Spanish: Impuesto Empresarial a Tasa Unica) shall be calculated on an annual (fiscal year) basis and shall be paid pursuant to a tax return which shall be filed with the authorized offices in the same period of time established for filing the annual income tax return, in other words, within the first three months following the last day of the tax year. Basis: Article 7 of the Law of the Flat Rate Business Tax.
The obligations mentioned in this article are mandatory. Except for the corporate obligations that only have a sanction for corporations that should be the rule for tax purposes, failure to comply with these obligations could have an economic impact on your corporation.
It is important that you seek professional advice on how to properly comply with these obligations, and thus avoid setbacks that can easily be prevented.
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