Doing Business

Doing Business in Mexico 2015

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190 Tax and Legal Services - PwC Mexico Trusts Types of trusts The organization of trusts (fideicomisos) in Mexico is governed by the banking law (Ley de Instituciones de Crédito) and the Law of Credit Instruments and Operations (Ley General de Títulos y Operaciones de Crédito). Trusts are not legal entities. Therefore, they cannot own property and cannot open bank accounts in their own names. However, a taxpayer identification number is usually obtained. Trusts established by entities other than banks (insurance, bonding and brokerage companies can now create trusts for specified purposes) are governed by their applicable regulatory body laws. The trustee can generally only be a banking institution authorized to carry out fiduciary operations. With that exception and the fact that beneficiaries may only be individuals or corporate entities living or in existence at the time a trust is created, the rules applicable to trusts are quite flexible, and they can be organized for any lawful purpose. All trusts are of the same basic type, and their terms can be as complicated or as simple as required by the purposes for which they are created. When a trust is formed to hold title to real property, the trust instrument must be notarized and entered in the general property register of the locality. Trusts may be revocable or not. Taxation of trusts Generally, trusts are not considered taxpayers. However, when they are created to carry out business activities in Mexico; they are treated as conduits of income to beneficiaries (taxpayers) or, if these have not been named, to the trustor (grantor). Trusts set up to maintain the assets of approved funds have no tax obligations, if certain requirements as to their income are satisfied. Taxation of beneficiaries Where business activities are carried out through a trust the trustee is responsible for making advance payments of income tax on such activities and for determining the annual adjusted taxable income (utilidad fiscal) in accordance with the procedures applicable to corporations. Although the taxable income is attributable to the trustee, these duties are usually carried out by the management committee or principal beneficiary of the trust. Corporate beneficiaries should include their proportion of such tax profits in their own annual income tax returns and treat their proportion of the advance payments made by the trust as advance payments on account of their annual income tax liability. The losses, if any, cannot be transferred to beneficiaries until the trust is liquidated. Individuals who are beneficiaries must treat their proportion of the profits and advance payments as arising from business activities of unincorporated enterprises, as discussed in Chapter 20.

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