MEXICO Law and Practice Contributed by: Edgar Klee and Joel Gonzalez Lopez, Haynes and Boone, S.C.
3.3 Restrictions on Retention of Earnings by Closely Held Corporations There are no specific rules that prevent closely held local corporations from accumulating earnings for investment purposes. 3.4 Taxation of Individuals on Shares in Closely Held Corporations Capital gains are taxable by subtracting the tax basis adjusted by inflation from the purchase price and reducing it with certain adjustments that consider net retained earnings. There are certain variations on how to calculate the basis if the shares have been owned for less than 12 months. Dividends are taxable for individuals at the applicable tax rate (maximum of 35%). The corporate tax rate paid (30%) at the level of the entity can be credited. An extra 10% has to be withheld by the entity paying the dividend. 3.5 Taxation of Individuals on Shares in Public Corporations A 10% on the net gain is applicable for the sale of shares in the Mexican Stock Exchange and other simi - lar publicly traded markets. 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes Mexican entities that make payments to foreign enti - ties or individuals are required to withhold and pay the tax before the tax authorities on behalf of the recipient. Dividend Distribution for a Mexican Subsidiary If the dividend is paid to foreign residents it will be subject to an additional 10% withholding rate. Capital Gains The eventual sale of the shares of a Mexican subsidi - ary will trigger a tax of 25% on the gross amount or 35% on the net profit if the non-resident has a rep - resentative in Mexico. A tax return related to the sale must be filed and a fiscal opinion obtained from a Mexican public accountant certifying that the reported profit has been calculated correctly.
the atmosphere. Local governments often determine the taxable emissions threshold and applicable rates, aligning their regulations with broader environmen - tal policies and international commitments. Compli - ance with these local tax obligations typically requires entities to register their emissions and fulfil reporting requirements to ensure proper enforcement. 2.9 Other Notable Taxes Refer to the answer in 2.8 Other Taxes . 3. Corporations and Non-Corporate Businesses 3.1 Form of Closely Held Local Businesses Closely held local businesses owned by individuals normally operate in a corporate form. In certain trans - actions, the use of a non-corporate form such as the Mexican trust or fideicomiso is common. The fideico - miso is particularly useful in cases involving foreign ownership restrictions, estate planning, asset protec - tion, or structured financing arrangements. For exam - ple, in the real estate sector, foreign investors often acquire property in restricted zones through a fide - icomis o to comply with Mexican legal requirements. Similarly, business owners may use a fideicomiso to manage assets, facilitate succession planning, or structure investment vehicles in a tax-efficient manner. Additionally, closely held businesses may also con - sider hybrid structures, such as joint ventures or con - tractual arrangements, to achieve specific commer - cial or regulatory objectives. The choice of structure depends on factors like tax implications, liability con - cerns, governance preferences, and the nature of the business activities. 3.2 Individual and Corporate Rates The corporate rate is 30% plus 10% for employee profit-sharing. Individual professionals will be taxed at a maximum 35% tax rate (in certain cases a 2.5% special regime applies for individuals, if their annual profits are lower than MXN3 million). Any dividend dis - tribution will be subject to an extra 10%.
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