HSBC Doing business in Mexico

More documents

Recommendations

Info

22 VAT Other Taxes Income from the sale of goods or the lease of real estate other than residential property is subject to value-added tax. Hotels and hostels, as well as furnished rental property, are also subject to value added tax. Individuals or business entities making payments to parties resident abroad for services used in Mexico and for leased tangible and intangible assets, among others, are deemed to be importers, and are required to pay the respective value added tax. The standard VAT rate is 16% (reduced to 11% in border regions). Flat Tax Flat tax is calculated on a cash flow basis, with the tax base determined by subtracting specific deductions from taxable revenue. Interest, salary and royalty payments are not deductible, with some narrow exceptions (e.g. royalties paid to independent third parties). Under the flat tax rules, investments and inventory are fully deductible when purchased and paid for, rather than being deducted under the depreciation or cost of goods sold rules. The corporate flat tax rate is 17.5% from 2010 onwards. Cash Deposit Tax Individuals and legal entities must pay this tax with regard to all deposits in cash in foreign or Mexican currency made into any nominative account in institutions of the Mexican financial system. This tax is applied to amounts exceeding 15,000 pesos in cash deposits made into institutions of the financial system, whether for one deposit or the sum of several deposits per month. This tax is calculated by multiplying the amount exceeding 15,000 pesos by the 3% rate. Deposits for individuals or business entities made via internet transfers are not considered to be cash deposits; neither are account transfers, credit titles or any other document or system agreed with institutions of the financial system according to the applicable laws, even though such deposits are charged to the same entity that receives them.
24 Audit and accountancy Companies listed on the Mexican Stock Exchange, government-owned companies and companies in the finance sector regulated by The National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores or CNBV), the National Commission for the Protection and Defence of Users of Financial Services (CONDUSEF) or the National Insurance and Bonding Commission, such as banks and brokerage firms, are required to have independent auditors perform annual audits of their financial statements. In addition, companies meeting any of the following threshold requirements must have independent auditors conduct annual audits and file a tax report. The following bases are currently valid: • Annual revenues of at least Mex$34,803,950; • Total assets of at least Mex$69,607,920; or • Three hundred employees or more in each month of the preceding year. Annual audits are required in the year after a company reaches any of the above conditions. Audited financial statements are presented at the annual shareholders’ meeting, to the tax authorities, and if the company is publicly held, to the CNBV. Audits of financial statements prepared under Mexican GAAP are conducted under Mexican Generally Accepted Auditing Standards (GAAS). These financial statements must also be filed with the tax authorities along with a tax compliance report. These reports are filed electronically with the tax authorities via the internet. When a company has lost two-thirds of its capital stock, a going-concern paragraph must be attached to the report, because it is considered a technical bankruptcy. In a worstcase scenario, the audit opinion may be modified. The CNBV and the National Insurance and Bonding Commission (CNSF) are statutorily authorised to issue accounting and reporting standards for the companies they regulate. Banking, stock brokerage houses, investment funds, financial leasing, factoring and other financial institutions are subject to regulations issued by the CNBV. Insurance and bonding companies are subject to regulations issued by the CNSF. The primary differences between the accounting practices established by the CNBV and the IMCP (Mexican Institute of Public Accountants) refer to the valuation of repurchase transactions (repos) and non-consolidation of non-financial subsidiaries. The accounting practices issued by the CNSF differ from Mexican GAAP primarily in the following areas: partial recognition of inflationary effects and deferred taxes; certain capital reserves shown as liabilities; the equity method used for investments instead of consolidation; and the assumptions used for determining employee compensation at retirement. Local GAAP The financial statements must be presented at the annual shareholders’ meeting and approved by the shareholders. All companies under a S.A. form of organisation must have a statutory auditor (comisario) appointed by the shareholders. Because of the statutory auditor’s functions and responsibilities, he is usually an independent public accountant, and generally a representative of the company’s independent auditing firm. The statutory auditor may not be an employee or executive of the company. Each year, the statutory auditor issues a report stating whether the financial statements have been prepared in accordance with Mexican GAAP. The statutory auditor also determines whether the company’s board of directors has informed the shareholders of all significant matters. Professional auditing standards require that a public accountant acting as a statutory auditor rely on an annual examination conducted in accordance with generally accepted auditing standards. All Mexican corporations must maintain detailed accounting records in Spanish using Mexican pesos and in accordance with Mexican GAAP. Mexican companies must maintain the following: • a general ledger; • a general journal; • an 'inventories and trial balances' record; • historical minutes of board of directors’ and shareholders’ meetings; • a record of investments in shares; • a record of debts held in foreign currency, credits and cash; and • a record of registered shares. The principal books and records, together with all supporting documentation, must generally be maintained at the official domicile of the business and remain available for 10 years. The Mexican Corporations Act and the Income Tax Law only include general accounting requirements and do not specify the form or content of the books and accounts that a company must maintain. Each company is required to keep the records necessary to support the amount of gross income, deductions and tax credits contained in the taxpayer’s Mexican income tax return on an accrual basis. Management determines the exact form of the records.
Page 1 and 2: This publication is a joint project
Page 3 and 4: 4 Executive summary Mexico offers a
Page 5 and 6: 8 Introduction Doing business in Me
Page 7 and 8: 12 Conducting business in Mexico Fo
Page 9 and 10: 16 5% of a corporation’s annual n
Page 11: 20 Transfer Pricing Mexican transfe
Page 15 and 16: 28 Maximum working hours The maximu
Page 17 and 18: 32 Banking in Mexico The National B
Page 19 and 20: 36 Country overview Capital city Ar

HSBC Doing business in Mexico

Create successful ePaper yourself

Delete template?

Save as template?