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Setting Up A Business: Permanent Establishment
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Mexican Branch Another possibility for a foreign company is to operate through branch offices in Mexico. As foreign companies are legally recognized in Mexico, they retain their liability characteristics from abroad. However, to carry out business operations, such branches must be approved by the National Commission of Foreign Investments and the Ministry of Foreign Relations and be registered at the Public Registry of Commerce.
For tax purposes, the foreign company will receive the same treatment as a permanent establishment in Mexico (see Doing Business With Mexico) and will pay taxes on the income generated from such branch offices at the normal corporate tax rate of 35%. However, the foreign company should be careful to avoid the possibility of having the income generated by the foreign company outside of Mexico to become attributable to the operations in Mexico. This possibility is due to the "force of attraction" rules contained in Mexico's tax legislation, which will sometimes require a taxpayer to include in his taxable income, income generated from abroad. Association in ParticipationThe Association in Participation (Asociación en Participación or AP) is another common form of doing business in Mexico. Generally, an AP is an agreement in which one or more partners (asociados) give goods or services to a managing partner (asociante) in exchange for a right to participate in the profits of a commercial operation which is controlled by such managing partner. For commercial purposes, the Association in Participation is not a separate legal entity. However, for tax purposes it is a separate entity and requires registration. Joint Venture AgreementGenerally, a joint venture agreement is an association of persons (individuals or legal entities) for a limited period of time in which such persons jointly undertake a specific business enterprise. Although a joint venture agreement is sometimes mistakenly categorized only as an AP, a joint venture agreement can take many other forms. A joint venture agreement can take any form in which the parties agree to develop their business and agree to provide their respective services and capital contributions or resources to the by-laws of a new independent company. The exact type of business venture undertaken determines the liability and tax treatment of such agreement. This text was provided by Santistevan Abogados S.C. Return to top |
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Business in Mexico: Types of Companies in Mexico
The Ley General de Sociedades Mercantiles (Corporate Law) recognizes as business entities the general partnership (sociedad de nombre colectivo), the limited liability partnership (sociedad en comandita simple), the limited liability company (sociedad de responsabilidad limitada), the stock corporation (sociedad anónima), the limited liability stock partnership (sociedad en comandita por acciones), and the cooperative (sociedad cooperativa). The LGSM regulates the operations of the above-mentioned companies, except for the cooperative which, due to its nature, is governed by a special law.
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| | Invest in Mexico: Neutral Investment
Neutral investment is a mechanism through which foreign investment can participate in certain reserved or specially regulated activities.
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The LIE defines neutral investment as investment in Mexican companies or in authorized trusts that will not be taken into consideration for determining the percentage of foreign investment in the capital stock of Mexican companies.
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| | Economic Activities in Mexico Subject to Restriction
As a general rule, there are no legal restrictions on foreign individuals and entities engaging in economic activities in Mexico, either directly or as partners or shareholders in Mexican companies.
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However, the LIE (Ley de Inversión Extranjera or Foreign Investment Law) specifies certain activities in which foreign investment is not allowed and others in which it is limited.
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Here we will discuss the activities that are reserved or subject to a specific regulation. We will also refer to the concept, regulation, and scope of neutral investment, a mechanism through which foreign investment can participate in certain reserved or specially regulated activities.
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| Canadian Chamber of Commerce in Mexico
The Canadian Chamber of Commerce in Mexico (CCCM) is a non-profit organization founded in 1982 by a prominent group of Canadian and Mexican companies. The mission of the CCCM is to promote and strengthen the commercial, financial and investment relationships between Canada and Mexico. The primary aim of the CCCM is to serve as a home for Canadian businesspersons in Mexico.
| | British Chamber of Commerce in Mexico
The BritCham represents not only British business interests but other European chambers of commerce as well, and is the perfect connection when it comes to facilitating business in Mexico. Their extensive network is also the best way to get into contact with other British and European nationals living, working and doing business in the country. Below we've presented an introduction and information on how to get in touch with the BritCham.
| | Business Practices in Mexico: The Basics
Are you conducting business in Mexico? Are you aware of the most significant cultural differences? Refer to this page for a quick education in Mexican dress code, negotiations and business lunches.
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