MEXICO Trends and Developments Contributed by: Christian Lippert, Gabriela Pellón, Cecilia Díaz-de-Rivera and Fabiola Jiménez, Galicia Abogados, S.C.
A to document E/C.18/2024/CRP.2) has summarised these into three main categories: • Capital income taxes , which apply to income generated by assets such as interest, dividends and capital gains (eg, Mexican income tax or the UK capital gains tax); • Taxes on the transfer of wealth , such as estate taxes, inheritance taxes and gift taxes, which can vary depending on whether the tax is triggered at the level of the donor or the recipient (eg, the US federal estate tax and state-level inheritance taxes); and • Taxes on the stock of wealth , which are levied on the ownership of property or other assets, often on a recurrent basis (eg, property taxes or net wealth taxes). These taxes may apply individually or in combina - tion, and they often operate under very different rules across jurisdictions, creating complex overlaps that require strategic estate planning. These kinds of overlaps between tax systems are not merely theoretical; they have real financial conse - quences, particularly for individuals with international lives and global wealth. When designing an estate plan, failing to consider how multiple tax residencies (or even nationalities) interact can lead to unnecessary tax burdens, dou - ble taxation at death, or compliance issues across jurisdictions. For individuals with ties to Mexico, it is therefore essential to approach estate planning not just through a local lens, but with a clear understand - ing of Mexico’s tax rules and how they interact with foreign regimes. The next section outlines the key estate planning fundamentals under Mexican law and highlights the aspects that become especially relevant when navigating cross-border situations. Estate planning fundamentals in Mexico A good estate plan begins with identifying the assets owned by an individual and where those assets are located, as well as understanding the tax obliga - tions that apply to such person and their beneficiar - ies. Assets of relevance commonly fall into one of three categories: real estate, equity interests (such as
shares in a company), or cash or cash equivalents. Since tax obligations usually (but not always) depend on the individual’s tax residence(s), the best plan will vary based on where such assets are held and which taxes apply to such person and their beneficiaries. For instance, real estate properties located abroad cannot be easily contributed to foreign vehicles. When a Mexican tax resident owns real estate located in the USA, contributing that property to a Mexican fide - icomiso may not be the most effective strategy, as it typically does not provide protection against US estate tax. In such cases, it may be more appropriate to hold the property through a foreign entity or struc - ture that is specifically designed to offer estate tax protection under US law while being compliant with Mexican legislation. After mapping out an individual’s assets, the next step is to design and create a plan that meets such per - son’s goals while addressing their current and poten - tial future tax obligations (and those of their benefi - ciaries). In Mexico, the most common estate-planning tools include wills, fideicomisos (most commonly translated as “trusts”) and donation agreements, since there is no inheritance tax or tax on donations when such donations are made between spouses and/or between parents and children. Under Mexican law, a will is a personal, revocable and voluntary document through which a legally capable person sets out instructions about how to handle their assets, rights and sometimes obligations after death. As in many other countries, in Mexico the will is the backbone of estate planning, since it is the legally binding document for individuals to determine how their estate will be distributed, appoint heirs, legatees and executors, and address other matters related to their succession such as the appointment of legal guardians and supervisors for minor children. Two points are especially important when setting up a will: (1) wills have universal effects (that is, a will grant - ed in one country should be recognised by another country) and (2) generally speaking, a subsequent will revokes any prior wills. Therefore, a will granted in one country will revoke any prior wills granted anywhere
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