Doing Business

Doing Business in Mexico 2015

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176 Tax and Legal Services - PwC Mexico The Sociedad de Responsabilidad Limitada (often termed "S de RL" ) is similar to limited liability companies in foreign countries and has the same tax treatment as corporations in Mexico. There is no conduit entity in Mexico although certain trusts conducting business activities are considered flow-through entities for Mexican tax purposes. (See Chapter 21). Joint ventures Entity or conduit An unincorporated joint venture or Asociación en Participación (A. en P.), described in Chapter 9 under "Joint venture contract," was previously a conduit and not a separate taxpayer. A. en P. are now subject to the same tax treatment as regular companies when the A. en P. is used to carry out business activity in Mexico. In this case, the active partner does not combine the taxable income or loss of the A. en P. with its other taxable income or losses even though it is conducted as a division of the legal entity acting as the managing active partner (asociante). The Federal Fiscal Code defines the A. en P. as group of persons or entities that carry out business activity pursuant to a contract so long as the persons participate in the profit and loss of the business in accordance with a legal provision or the contract itself. In accordance with the general provisions of the income tax law, the managing active partner (asociante) of an A. en P. joint venture contract is required to pay the taxes arising from the A. en P., including estimated payments of income tax, and to comply with all of the tax requirements pertaining to the activities carried out by the A. en P., which is now treated as a separate taxpayer in most situations. Profit distributions are subject to the treatment applicable to dividends, and when the A. en P. agreement is cancelled or terminated, the capital reduction rules apply. Goods contributed by the active and passive partners are considered to be sold to the joint venture at a value equivalent to the inflation –adjusted net tax basis of the investment. Depreciation may only be claimed by the A. en P. after assets have been contributed to the joint venture. The passive partners of an A. en P. are jointly liable for taxes pertaining to the activities carried out by the active partner through the A. en P. to the extent of any assessment not covered by the assets of the joint venture and for the amount of the contribution of the passive partners to the joint venture.

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