Doing Business

Doing Business in Mexico 2015

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175 Doing Business in Mexico 2015 Chapter 19 Partnerships and joint ventures Investor considerations • Commercial partnerships, as well as professional partnerships organized under civil law, are taxed as corporate entities. Partners in a commercial partnership are taxed in the same manner as shareholders. • Periodic distributions of professional partnerships are treated as salaries. • A joint venture was previously a conduit and not a separate taxpayer. Currently these are treated as a separate taxpayer under similar rules as corporations. Each venturer is taxed in the same manner as a shareholder of a corporation. Partnerships Entity or conduit Partnerships are taxed in the same manner as corporations, as described in Chapter 15. The partners, whether individuals, corporations or other entities, either domestic or resident abroad, are subject to dividend tax on distributions of after-tax profits and dividend withholding tax. In addition, as discussed in Chapter 17, the paying entity is required to pay tax on a grossed-up basis on the distributions that exceed the balance of the entity's after-tax earnings account (CUFIN). Professional partnerships organized under civil law (Sociedad Civil, shown as "S.C." at the end of the legal name of the Mexican entity) are also generally taxed in the same manner as corporate entities, and the individual partners are taxed as recipients of salary income with respect to income distributed currently (which is treated as a deductible salary expense by the partnership) and in the same manner as dividends are taxed to regular shareholders with respect to actual distributions of retained earnings to the partners. The Sociedad en Nombre Colectivo (often termed "SNC"), is a general partnership and is treated the same as a regular corporation for Mexican income tax purposes. In addition, the Sociedad en Comandita, (often termed "S en C") is a limited partnership and is treated the same as a regular corporation for Mexican income tax purposes. 19

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