Doing Business

Doing Business in Mexico 2015

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59 Doing Business in Mexico 2015 Impact of the Foreign Investment Law and NAFTA on the financial services industry Because of Mexico's commercial opening, some years ago, modifications were made to legislation applicable to the Mexican financial system. The aim of these modifications was principally to allow and regulate the participation of foreigners in the capital of financial entities in Mexico and the establishment in Mexican territory of subsidiaries or subsidiary holding companies of foreign financial institutions resident in countries with which an international agreement or treaty had been executed for this purpose. Participation in the financial system The limit on foreign participation in the financial system is 49% for general deposit warehouses, financial leasing companies, financial factoring companies, mutual insurance companies and institutions, bonding companies, brokerage firms, and retirement fund managers (AFOREs). However, Mexico has entered into commercial treaties with many countries and. we recommend that in each specific case, PwC Mexico should be consulted to determine whether at such time Mexico has a commercial treaty with special provisions allowing a higher percentage of foreign participation in the financial services industry. FATCA's (Foreign Account Tax Compliance Act) Implications for Mexico and Mexican Financial System The Mexican Ministry of Finance and Public Credit (SHCP, for its acronym in Spanish) in conjunction with the Treasury Department and the Internal Revenue Service by the United States, signed on November 19, 2012 an agreement to adopt the automatic and reciprocal exchange of information between the two countries, where U.S. citizens have accounts in another nation. In Mexico, since January 2013, FATCA requires foreign financial institutions to exchange information, through a report to the IRS where the existence and details of accounts of U.S. citizens are integrated. This was done in two stages, first during 2013 as a transition year for the banking and financial institutions to prepare the technological and operational infrastructure necessary to collect information from pre-existing accounts and to transmit it to the IRS. And the second step, which began in 2014, involves the reporting of the new accounts. Financial institutions in Mexico have an obligation to provide information to the Internal Revenue Service (SAT, for its acronym in Spanish) regarding U.S. citizens and residents who hold bank accounts, which together exceed USD 50,000, by the end of each year, so that the Mexican government can automatically report to the authorities of the United States information regarding its citizens (name, address, Federal Tax, average monthly balance and detail of their accounts whether in custody or deposit). Volcker Rule The members of the Mexican Board of Financial Stability System agreed in December 2013 that the latest approved version will have less impact than expected because the regulation accords similar treatment to financial transactions by U.S. institutions and worldwide. 7

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