Doing Business

Doing Business in Mexico 2015

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189 Doing Business in Mexico 2015 Chapter 21 Taxation of trusts and estates Investor considerations • Mexican trusts generally may only be created with domestic banks as trustees. In addition, insurance, bonding and brokerage companies can create trusts for specified purposes. • Generally, trusts are not taxable entities; they are conduits of income to beneficiaries. • Trusts have frequently been used to hold real property in the border zones and coastlines, where ownership by foreigners has been prohibited or otherwise limited. However, the foreign investment law now permits direct foreign investment in non-residential property if certain requirements are met, making trust vehicles unnecessary. • When business activities of a non-resident are carried out through a trust, a permanent establishment is deemed to exist for tax purposes, although applicable tax treaty provisions should be reviewed to determine if this rule is overridden. • There are certain tax incentives for trustees and beneficiaries who participate in Mexico through Real Estate Investment Trusts. 21

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