Mexico company registration
Healy Consultants Group PLC
31 March, 2014
In recent years, Mexico's rising economy has becoming more appealing to manufacturers all over the world. According to the World Bank, Mexico has "a huge potential for accelerating economic growth" and the country had a stable and strong growth of 3.9% in 2012, which was also supported by a solid expansion in the service industry. Mexico's rising economy and credit rating could be attributed to education reforms and monopoly breakups, which increased the country's appeal to foreign investors. There are significant advantages to Mexico company setup, including:
· A Mexico LLC can be incorporated within three weeks with only 1 director and 2 shareholders, who can be of any nationality.
· The minimum paid up share capital required for Mexico company formation is only US$1.
· Foreign entrepreneurs can hold all their company's capital in US dollars rather than Mexican peso.
· An LLC is not mandated to appoint a statutory auditor to oversee the administration of the company.
· Average monthly utilities costs for a medium-sized office in Mexico is just US$60.
· Mexico is an excellent place to setup a manufacturing and distribution company. The country boasts 107 export processing zones (EPZ) which offers benefits including i) no import/export tax ii) no corporate tax iii) no VAT.
· Mexico's NAFTA membership offers resident firms i) 100% custom duty exemption on imports and exports and ii) withholding tax exemption. Consequently, it allows firms a profitable gateway into the US and Canadian consumer markets.
· Mexico is ranked 1st in the world for labour productivity growth and number of hours worked annually. Plus, labour is cheaply available as average monthly wage for skilled and unskilled workers is US$320 and US$110 respectively.
In order to efficiently manage business in Mexico, global investors should be aware of the following accounting and tax considerations:
· The corporate tax rate in Mexico is 29% on annual profits. In 2015, the rate will be reduced to 28%.
· All companies must file their VAT returns monthly. The standard VAT rate in Mexico is 16%.
· Profits from foreign entities will be taxed if the tax paid abroad is less than 75% of the total tax calculated in accordance with Mexican system.
· Dividends from one Mexico resident company to another are 100% tax exempt. However, dividends from foreign companies are subject to corporate tax of 29%.
· The withholding tax on interests is 30%. However, the rate is reduced to 4.9 if the payments are made to foreign banks which are resident in Mexico and tax treaty countries.
· Resident companies can carry forward losses for 10 years, subject to inflationary adjustments.
· Personal taxes are progressive varying between 0% and 29%.
· All Mexican companies must contribute 2% of the annual payroll to employee retirement fund and 5% to employee housing fund.
· All companies must get their financial statements audited if i) more than 300 people are employed or ii) gross income exceeds US$2.6m or iii) assets exceed US$5.3m.
Mexico has become a competition for China in terms of manufacturing wage as Chinese manufacturing wages increase and access limitation to skilled workers grow. Thus the country is becoming a more attractive jurisdiction for global investors.
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