Doing Business in Mexico - PwC

1 Guide prepared for the assistance of those interested in Doing Business in Mexico January 2015 Doing Business in Guide has been prepared for the assistance of those interested in Doing Business in Mexico . It is not intended to cover exhaustively the subjects it highlights, but rather to answer some of the important, broad questions that may arise. When specific questions occur in practice, it will often be necessary to refer to the laws, regulations and decisions of the country and obtain appropriate Business , accounting and legal advice. The material contained in this Guide was assembled in January 2015 and, unless otherwise indicated, is based on information available at that time.

2 We trust that this latest printed edition of our Doing Business in Mexico will be a useful tool to assist the Business executive when seeking information from a general reference guide. The Guide has been structured in a way that we believe will make it easier for you to obtain the basic relevant information you require when considering a direct or indirect investment in is currently one of the countries with the largest network of tax and information exchange treaties and trade agreements, which brings it into the list of the largest and most open economies in the world, with only a handful of strategic sectors or industries not yet open to private has kept its fiscal and monetary policies under strict discipline.

3 A situation that has maintained the country with an adequate macro-economic position and suitable for an investment from that perspective, as well as maintaining an investment grade from the international financial community. For 2014, Mexico is forecasting an economic growth rate between 2% and 3%. Nevertheless, the very significant cross-border commercial and investment interaction with the rest of the economies in the current globalized environment may also allow significant opportunities to invest or trade with Mexico . This optimistic view is further enhanced by the current commitment of the Mexican Executive and Legislative branches to reform and modernize all aspects of the economy and government, to promote employment and economic development.

4 Consistent with its fiscal and economic policies, Mexico has opened its doors to foreign investment, providing incentives for the creation of jobs and most of the 32 states offer local investment incentives in their jurisdictions. PwC has presence in the most important cities of Mexico , covering the country s entire geography. Our professionals from the 21 offices listed in this Guide will be happy to assist or refer you to the appropriate specialist who can help you navigate the challenges of Doing Business in Mexico , in the context of a best practices approach, using a single point of contact and service delivery, offered consistently through our wide range of services and specialist areas, as you have come to expect from the PwC Network throughout the of us in the Firm are very excited and committed to bringing you the PwC experience and values.

5 As further discussed in the chapter entitled Introduction to PwC . So, rest assured that in this Guide we have done our utmost to bring to you a truly valuable tool to plan your investment into Mexico . Si ncerely,Carlos MendezTerritory Senior PartnerIntroductionPwC in MexicoTable of ContentsInvestment Climate chapter 1 Mexico A profile Investor considerations 1 Geography and climate 2 History 2 Political system 3 Legal system 3 Population and social patterns 3 The Economy 5 Hints for the Business visitor 13 chapter 2 Business environment Investor considerations 15 Industrial climate 15 Framework of industry 15 Focus of government policy 16 Public/private sector cooperation 17 Labor/management relations 17 Overseas trade relations 18 chapter 3 Foreign investment and trade opportunities Investor

6 Considerations 19 Investment climate 20 Special investment opportunities 21 chapter 4 Investment incentives Investor considerations 23 Investment policy 23 Tax concessions 23 Regional incentives 24 Industry incentives 24In- bond processing industry (Maquiladora industry) 26 Industrial parks 26 Free trade agreement 27 international financial center operations 27 Export incentives 27 Ministry of the Economy (SE) export programs are as follows 27 Incentives to invest in other countries 30 Incentives and foreign investment strategy 30 chapter 5 Restrictions on foreign investment and investors Investor considerations 31 Regulatory climate 32 Liberalization of foreign investment restrictions 33 Exchange controls 33 Restrictions on foreign investment 34 Policy trends 39 chapter 6 Regulatory environment Investor considerations 41 Regulation of Business 42 Competition Policy 42 Price controls 42 Mergers and acquisitions 43 Securities markets (stock exchange)

7 43 Requirements for Securities Commission approval 43 Mexican Stock Exchange 43 Brokers and broker-dealers 44 Imports and exports 44 Consumer protection 44 Data Protection 44 Imports 46 Food and drugs 46 Environmental provisions 46 Electronic Contracting: Private use and public trend; online consumer protection 47 Special industries 47 Insurance and banking 47 Patents and trademarks 49 Patents 49 Trademarks 49 Copyright protection against video and audio piracy 49 chapter 7 Banking and finance Investor s considerations 51 General note 52 Banking system 52 Specialized financial institutions 54 Non-Bank financial entities 54 Investment institutions 55 Retirement fund managers (AFOREs)

8 55 Financial markets 56 international financial market 57 Sources of funds 57 Impact of the Foreign Investment Law and NAFTA on the financial services industry 59 FATCA s (Foreign Account Tax Compliance Act) Implications for Mexico and Mexican Financial System 59 chapter 8 Exporting to Mexico Tips for exporters 61 Import restrictions 62 Import duties 62 Other taxes 63 Documentation procedures and technical barriers to trade 64 Customs and storage 64 Port of entry and inland transport 65Re-exports 65 Local representation 66 Sources of information 67 chapter 9 Business entities Guide to Doing Business entities 69 Forms of Business enterprise 70 Stock Corporation with variable capital 77 Other considerations 77 Partnership 79 Civil partnership 79 Joint venture contract 79 Branch of a

9 Foreign corporation 80 Sole proprietorship 81 Non-profit organizations 81 chapter 10 Labor relations and social security Investor considerations 83 Labor relations 84 Working conditions 86 Social security 91 Housing 93 chapter 11 Audit requirements and practices Investor considerations 95 Statutory requirements 95 chapter 12 Accounting principles and practices Investor considerations 101 Form and content of financial statements 102 Revelant aspects in Financial Reporting 104 Footnote disclosure 108 Recording of income 108 Book and tax differences 108 Foreign investors 108 chapter 13 Tax system Investor considerations 111 Principal taxes 111 Legislative framework 112 Income tax 113 Classes of taxpayer 114 Taxable income 115 Tax year 115 Tax-free zones 115 Tax holidays 115 Capital taxation 116 international aspects 116 chapter 14 Tax administration Investor tax considerations 117 Principal taxes 117 Administration of the tax system 118 Corporate taxpayers 118 Individual taxpayers 122 Partnerships and joint ventures 125 chapter 15 Taxation of corporations Investor considerations 127 Corporate tax system 128 Taxable entities 128 Gross income 129 Business profits 130

10 Capital gains 132 Deductions 137 Tax computation 147 Other taxes 149 Branch versus subsidiary 150 Special industries 150 chapter 16 Taxation of foreign corporations Investor considerations 153 Tax concepts 154 Imports 154 Branch operations 155 Income from subsidiaries 158 Fees paid to foreign corporations 163 Portfolio investments 163 Taxes other than income tax 163 Regional administrative offices 163 chapter 17 Taxation of shareholders Investor considerations 165 Domestic shareholders 166 Foreign shareholders 167 Reorganizations 167 chapter 18 Taxation of foreign operations Investor considerations 171 Taxation of foreign income 172 Double taxation relief 173 chapter 19 Partnerships and joint ventures Investor considerations 175 Partnerships 175 Joint ventures 176 chapter 20 Taxation of individuals Tax planning for expatriates 177 Territoriality and residence 178 Gains on the sale of shares through stock exchange 182 Deductions 186 Double taxation relief 187 Tax computation 187 Other taxes 188 chapter 21 Taxation of trusts and estates Investor considerations 189 Trusts 190 Estate and gift taxes 192 chapter 22 Value-Added Tax (VAT)