MEXICO Trends and Developments Contributed by: Christian Lippert, Gabriela Pellón, Cecilia Díaz-de-Rivera and Fabiola Jiménez, Galicia Abogados, S.C.
residence for treaty purposes. This mechanism can be effective in situations of dual residency, where only two countries are involved, and helps avoid overlap - ping claims over a person’s worldwide income. However, these treaties are bilateral in nature and may fall short when a person is simultaneously considered a resident in more than two jurisdictions. In multiple tax residency cases, tie-breaker rules alone may not provide full relief. Additional planning strategies may need to be considered – such as relinquishing a per - manent home in one country, reducing the number of days spent in a particular jurisdiction or, in the case of US citizens, even evaluating the implications of renouncing US nationality. Practical Recommendations As explored throughout this article, individuals with dual or multiple tax residencies face unique challenges in estate planning, including the risk of losing invest - ment protection and of double taxation, conflicting legal regimes and complex cross-border asset man - agement. The following practical recommendations are designed to help navigate these complexities, ensuring that estate plans remain effective, compli - ant, and aligned with personal and family objectives. • Be proactive and have a plan. It is essential to have an estate plan in place, even if circumstances may change in the future. Tools such as wills and fideicomisos can be updated as needed, but the absence of a plan can lead to legal disputes, tax inefficiencies and unintended outcomes. Early planning provides a solid foundation for asset pro - tection and succession. • Seek multi-jurisdictional advice. Remember that the tax consequences of estate transfers depend significantly on the tax regime or regimes applica - ble to both the individual and their beneficiaries. To avoid losing investment protection and/or being subject to double taxation, as well as to ensure compliance, seek professional advice in all relevant jurisdictions and facilitate clear communication among advisers in each country involved. This co- ordination helps prevent conflicting strategies and overlooked obligations. • Laws and circumstances change. Allow for flex - ible structures. Periodically review your estate
planning structures to ensure they remain effective and reflect current legal requirements and fam - ily situations. Regular updates help maintain the integrity and efficiency of your estate plan. Conclusions The increasing mobility of individuals and the globali - sation of families and assets have made estate plan - ning significantly more complex, particularly for those with dual or multiple tax residencies. As this article has explained, each country applies its own domestic cri - teria to determine tax residency, and in many cases, a single individual may be considered a full tax resident in more than one jurisdiction. This can lead to expo - sure to worldwide taxation in multiple countries, often without co-ordination between tax systems. In addition to conflicting residency rules, the types of taxes applicable to wealth – from income and capital gains taxes to estate, inheritance, gift and property taxes – vary from one country to another. These taxes may apply simultaneously and may make it easy for well-intentioned structures to generate unintended tax liabilities or reporting mismatches. In Mexico, estate planning tools such as wills, fideico - misos and donation agreements (among others) can provide effective mechanisms to protect and transfer assets from generation to generation. However, when dealing with international elements – such as foreign beneficiaries, assets abroad or multinational family structures – local solutions may fall short if foreign tax rules and legal frameworks are not also considered. While tax treaties can offer meaningful relief in certain cases, their applicability must be carefully assessed on a case-by-case basis. These instruments may pro - vide important protections – such as residency tie- breakers or exemptions from specific taxes – but they were not designed as estate planning tools per se. As such, their benefits may be limited or insufficient in more complex scenarios, particularly those involving multiple residencies or jurisdictions that do not have a treaty in force. Strategic reliance on a treaty should therefore be approached with caution and comple - mented by broader, personalised planning measures.
393 CHAMBERS.COM
Powered by FlippingBook