Foreign investors who need help in setting up a company in Mexico can get in touch with one of our local company registration agents. Our team of incorporation agents in Mexico can handle the entire process of company formation and can also provide clients with other business related services such as: assistance for obtaining business permits and licenses, virtual offices services, shelf companies.
For those who are seeking an attractive business destination located in another country than their own, Mexico can become a suitable market. With various investment opportunities and a national law open to foreign investments, foreign businessmen can benefit from the right of having full ownership on the company they will register here. Just like in other countries, foreign businessmen will need to follow certain rules when opening a company in Mexico, as well as to comply with various laws. Our article includes the most important steps needed to open a new business and the regulations for company taxation and reporting in Mexico.
Doing business in Mexico
Mexico is a country with a liberal economy and some of its main trading relations are established with the United States of America (USA). The country has taken steps to encourage foreign investments and there are no general restrictions or limitations on foreign ownership. Investments are allowed in almost all business fields, except for some sectors where there is a limitation on participation, such as activities performed exclusively by the State, broadcasting or domestic passenger transportation. It is possible to open a company in Mexicoin broadcasting for example; however, foreign ownership will be limited to 49%.
| Quick Facts | |
|---|---|
| Types of companies |
Sociedad Anónima (S.A.) – Sociedad de Responsabilidad Limitada Sociedad en Nombre Colectivo (SNC) – General Partnership Sociedad en Comandita Simple (SCS) – Limited Partnership Branch Office/ Representative Office |
|
Minimum share capital for LTD Company |
MXN 3,000 |
|
Minimum number of shareholders for Limited Company |
2 |
| Time frame for the incorporation |
minimum 4 weeks, maximum 8 weeks |
| Corporate tax rate | 30% |
| Dividend tax rate |
10% |
| VAT Rate |
The standard VAT is of 16%; reduced rates are available, at 8% and 0%. |
| Number of double taxation treaties | 60 |
| Do you supply a Registered Address/Virtual Office? | Yes |
| Local Director Required | No, but there can appear certain limitations. |
| Annual Meeting Required | Yes |
| Electronic Signature | Yes |
| Is Accounting/Annual Return Required? | Accounting and annual tax returns are both required. |
| Foreign-Ownership Allowed | Yes, but restrictions can appear in certain sectors. |
| Any tax exemptions available? | Yes – foreign tax credit relief, VAT and import duty exemptions for Maquiladora regime companies, exemption on the withholding tax applicable to permanent establishments and local companies. |
| Any tax incentives | Yes – investments in R&D, employment incentives, incentives for theatre and movie industries, real estate incentives. |
| Corporate bank account requirements |
– documents attesting the company registration in Mexico, – documents regarding the person appointed as a representative, – the company’s tax identification number, – documents attesting the address of the company in Mexico, – other documents can be required depending on the bank of choice. |
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Documents for company registration |
Investors interested in how to set up a company in Mexico must prepare the following documents: – the incorporation documents, signed (the articles of association), – the certificate attesting the company’s trading name, – the company’s tax identification number – Registro Federal de Contribuyentes (RFC), – documents attesting the setup of the bank account issued in the name of the company, – documents that attest the company’s registration with all the competent institutions. |
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Visa requirements for businessmen |
Foreign nationals can arrive in Mexico without applying for a business visa if they stay in this country for maximum 180 days (differences can appear based on the nationality, with regards to immigration formalities and documents to complete). Those who will stay longer than 180 days must apply for a Temporary Resident Visa. |
| Foreign investment programs available in Mexico |
One of the investment programs available here is the Maquiladoras, created in partnership with the United States, the country’s main investor. The maquiladoras refer to manufacturing units located in Mexico, but set up by American investors, who have their administration in the US. The advantage of the program is that the US company can sent to Mexico various goods (supplies, machinery, equipment) without paying import duties. |
| Institution in charge with the registration |
– the Ministry of Foreign Relations – Secretaría de Relaciones Exteriores, – the Public Registry of Property and Commerce – Registro Público de la Propiedad y Comercio. |
| Tax identification number for businesses |
Companies must apply for a tax identification number, known as Registro Federal de Contribuyentes. The tax number contains 12 digit alphanumeric code, unique for each legal entity, and it is used for all its tax formalities. |
| Institution in charge with the tax registration procedures |
The Tax Administration Service – Servicio de Administración Tributaria. |
| Possibility to hire foreign workforce (yes/no) |
Yes |
| Obligation to be present for the incorporation formalities (yes/no) |
No |
| Duration of the corporate bank account setup | Minimum 6 weeks. |
| Minimum salary in Mexico |
MXN $207,44 (in 2023). |
| How to obtain legal representation |
The law on how to set up a company in Mexico grants the right to legal representation, which implies that the investors do not have to be present during the registration formalities, through the power of attorney. |
| Institution in charge with immigration formalities |
The National Institute of Migration. |
| Purchasing a shelf company (yes/no) |
Yes |
| Minimum requirements for appointing directors |
The basic requirements on how to set up a company in Mexico impose certain conditions for the directors of the legal entity. These are: – have an age of minimum 18 years old, – have a clean criminal record, – are not bankrupt, are not brokers. |
What is the maquiladora regime in Mexico?
Mexico applies a regime named “maquiladora”, which is established with the purpose of attracting investments on the local market from investors residing in the United States of America. The maquiladora companies are owned by U.S. corporations and the products manufactured by the maquiladora are imported into the United States in preferential export conditions.
The foreign U.S. company (which becomes the shelter company for the maquiladora) provides for the machinery and the equipment needed for its Mexican factory, obtains the necessary permits, hires the employees and it is also in charge with the maquiladora tax aspects (tax liabilities included). Among some of the top advantages of outsourcing factories in Mexico, we can include reduced labor costs, skilled employees, and other logistical advantages.
This regime is accessible to many American manufacturing companies, including small to medium-sized firms. However, first-time investors who are not accustomed to the Mexican laws and the maquiladora regime are advised to seek professional help for establishing this type of factory in the country. One of our Mexico company registration agents can give you more information on the maquiladora regime.
Maquiladora represents a regime which has been maintained since the 1960s between Mexico and the United States of America (USA); maquiladoras in Mexico can generally be found at the Mexican-American border and they are factories which assemble various products for the purpose of being exported to the USA.
Those who are interested in this type of business endeavor have to know that maquiladoras can manufacture multiple types of goods, from clothing to car parts and consumer electronics. The program aims at hiring the Mexican workforce, which is available and plentiful, and for the American part, it provides considerable tax advantages not only in employment terms (American workforce is much more costly compared to the Mexican one), but also in special tariff regimes created for US investors.
Back in the 1960s, the program was created with the purpose of reducing the high unemployment rate that was registered in Mexico, but at that moment, tariffs were still applicable, a regime which was continued up until 1990s. Tariffs were ended under the North American Free Trade Agreement, which had a great impact on the number of maquiladoras, as more and more American investors opted to start the process of company formation in Mexico.
What are the main company types in Mexico?
Foreign investors can open a company in Mexico as one of the legal entities prescribed by the national legislation. If you are not sure which is the most suitable company type for your business, we invite you to request in-depth advice from our team of consultants in company registration in Mexico. Below, we will present the main legal entities in Mexico:
- stock corporation – a common way to open a company in Mexico, which requires a capital investment of $2,700 (or MXN$50,000);
- limited liability company – a legal entity that is suitable for small and medium-sized companies, and which can be founded with a capital of $160 (or MXN$3,000);
- simplified shares company – a type of company that can generally be found in Latin America countries and which gained popularity in 2016, after the reform on the General Law on Commercial Companies;
- cooperative society – it does not require investors to subscribe a minimum share capital, but one has to create a reserve fund which accounts for 10% to 20% of the company’s income (measured at the level of a financial year);
- the stock corporation and the limited liability company have numerous similarities, but while the latter can be incorporated by maximum 50 members, the first company type does not have a limit in this sense.
Below, you can watch a short presentation on how to register a Mexican company:
What are the main characteristics of a Mexican limited liability company?
Given the fact that the limited liability company in Mexico is a common way to set up a business, we will present here some of its characteristics, so that foreign investors will learn more about this very popular company type. Those who want to set up a company in Mexico under this legal entity should be aware of the following:
- the process for company incorporation in Mexico and the registration with the Public Registry of Commerce can take up to 12 weeks;
- opening a corporate bank account, a compulsory registration procedure, can take approximately 8 weeks;
- in order to properly function, the company will need to have at least 1 director;
- the minimum number of shareholders that are required for this company type is of 2 (and maximum 50, as said above);
- the company is liable to paying various taxes, including the corporate tax, which is currently charged at a rate of 30%.
With regards to its incorporation, investors must know that this company type can be registered with 100% foreign capital and that the need to be present in Mexico at the moment of incorporation is not required, as long as the shareholders are represented by local specialists in the relation with the local registration authorities. Here, our team of consultants in company formation in Mexico can help you.
The Mexican limited liability company can also be founded by investors who are other corporate entities. With regards to the taxation and accounting requirements, the Mexican law obligates such companies to submit annual financial statements with the local tax authorities; a statutory audit is also necessary and it has to be completed by persons who are specialized in this accounting branch.
The accounting standards in Mexico are set up by specific institutions which are granted with this right in accordance with the Article 5 of the Mexican Constitution.
The main accounting authority is the Instituto Mexicano de Contadores Publicos – the Mexican Institute of Public Accountants, which is also in charge with setting up the professional standards for accountants in Mexico.
Mexico company formation process
The procedure on company formation in Mexico is comprised of several steps and legal requirements that must be met by the investors, but certain regulations may differ based on the company type that was selected for registration. The first step is to obtain permission to use the chosen company name.
This is done with the Ministry of Foreign Relations and there are requirements to submit at least three alternative names. The articles of association and the memorandum of the company are to be drafted according to the Commercial Companies Law and the Securities Market Law. The incorporation deed is executed before a public faith officer.
Can foreign investors open branch offices in Mexico?
Yes, foreign businessmen have the possibility of opening a company in Mexico through a branch office. A branch office is a suitable vehicle when a foreign company wants to implement the same business model in all countries where it has business activities and when the company’s policy is to hold the ownership of all foreign operations (that implies that the foreign company will also impose the directions the local companies will follow).
Given that the branch office is not a legal entity with a legal personality, and that the parent company is fully responsible for the said branch, this can be ideal if the parent company is interested in following the above mentioned. The branch can also have lower incorporation costs and with regards to tax liability, it will be liable for taxation in Mexico only in extend to its business operations in Mexico.
For the purpose of company formation in Mexico, the parent company has to prepare a large number of registration documents; the parent company must present its incorporation documents and other certificates issued in its home country, documents that will be used when registering the branch in Mexico.
Although having full responsibility of the branch in Mexico can be seen as a disadvantage, this can depend based on the long-term plans of the parent company. For instance, the branch can be selected for incorporation if the parent company wants to set up its operations in Mexico as soon as possible, as the branch benefits from a simpler incorporation, which is completed much faster compared to the registration procedure applicable to other company types.
This structure is suitable for all foreign companies that want to have a greater control on their overseas activities. This is why having full responsibility for the branch may not be seen as a disadvantage in this case, as the parent company will equally have full rights on the decisions regarding the activities developed here.
Investors should take into consideration that the process of company formation in Mexico for a branch office can be completed only as long as the parent company is able to appoint a local representative, who can be a Mexican citizen or a foreigner who has received his or her residency in this country.
Register a Mexican subsidiary
Foreign companies can also expand their operations in Mexico through a subsidiary. The subsidiary will act similarly with the branch office, but there are a set of important differences between the two. First of all, the subsidiary is a structure that requires being incorporated under one of the corporate structures prescribed by the Mexican commercial law.
This means that the subsidiary can take the form of a limited liability company, for instance. This also implies that the parent company and the subsidiary will be two separate, distinct entities. Then, there is an important difference when we refer to the rights and obligations of the parent company towards the subsidiary.
In this particular case, the parent company will have limited liability, limited to the shares it holds in the company; this also means that the subsidiary will have its own managerial powers and the ability to make its own decisions without the approval of the parent company.
This legal option is more suitable for foreign companies that want to carry business operations in more jurisdictions and that will allow their local units to be more autonomous and to establish their own business decisions based on the conditions of the market. When starting the process of setting up a company in Mexico as a subsidiary, investors will have to prepare and sign a power of attorney.
This document will allow local specialists, such as our team of consultants in company registration in Mexico, to represent the foreign company in all the incorporation steps. The power of attorney will stipulate the rights granted to lawyers and to company formation specialists.
Then, the parent company’s documents are also necessary, translated into Spanish by an official translator. The personal identity documents of the persons who will act as company representative, shareholders and directors have to be added to the registration file.
The subsidiary gains legal recognition after the company’s articles of association are signed and notarized in front of a public notary in Mexico. Investors have to open a corporate bank account, to select the company’s business activities and a suitable company name.
The documents, including information about the company’s shareholders, are submitted to the Public Registry of Commerce. It is also necessary to receive a tax identification number and to register with the relevant institutions – for instance, with the Foreign Investment Registry. You can rely on our team of specialists in company formation in Mexico for assistance on the requirements that must be fulfilled for each step presented here. We can provide you with detailed information on the requirements for companies and the laws for investment. Contact us if you need assistance for setting up a company in Mexico.