MEXICO Law and Practice Contributed by: Javier Díaz de León, Monica Ramos and Martín Cortina, Díaz de León Abogados
• transactions carried out by transparent entities. Additionally, the Federal Tax Code adopted the con - cept of “reportable schemes” inspired in the BEPS Plan and EU DAC 6, requiring that taxpayers and advisers (legal, tax, accounting and banking advisers), comply by reporting “listed transactions” involving tax advantages such as non-taxation, reduced or deferred taxation, tax treaty abuse, and asymmetry in account - ing and tax recognition, among others. FATCA and CRS Mexico adopted FATCA, CRS and the OECD Exchange of Information standards, which make it possible to exchange financial and tax information of taxpayers with other tax authorities around the globe. The Mexican Supreme Court of Justice stated that the exchange of tax information does not infringe any constitutional rights against taxpayers or international treaties, including human rights. As a result, the tax administration is expected to conduct audits in the private wealth segment with more frequency in the near future. UBO Register The “effective beneficiary” register and records are another effective measure adopted by Mexico in recent years to avoid hidden structures, agency arrangements and nominee contracts. The effective beneficiary information helps identify the real person having “mind and management” behind any Mexi - can company, similar to the UBO reports required in Europe or the KYC questionnaires managed by major banks around the world. Much of this information will remain private; nevertheless, the tax administration may obtain it during the course of an audit. 2. Succession 2.1 Cultural Considerations in Succession Planning Mexico is a Latam country where successive control, management preservation and confidentiality are the general rule. More than 90% of existing companies in Mexico are private, which implies that many of them continue to operate under a grandfathering culture that is passed on by generations without adopting real
changes: for example, by (i) a shareholder’s agree - ment, (ii) the implementation of an independent board, or (iii) a real audit policy in the financial statements of the Mexican business unit. Sophisticated families are starting to form family offices whereby they receive professional guidance on multiple factors including: • succession;
• compensation; • liquidity events; • buyouts; • hostile take overs; and • other similar events.
In a business context, the more professionally pre - pared the family members are, the more efficient the family-run company handed down to new generations in Mexico. 2.2 International Planning Multinational families increasingly require more tech - nical tax, immigration and legal advice with respect to the management, administration and transfer of family-owned assets. Multiple factors are considered, such as dual citizenship and tax residency, golden visa programmes offered by other countries, the sex preference of family members, as well as non-profita - ble interests of new generations who see art and col - lections as the most effective way to transcend in life. Family offices often rely on domestic or foreign estate taxes imposed on family assets, which may have an impact on the family members depending on the applicable jurisdiction. Secrecy concerning the estate value continues to be a cornerstone mainly for Latam families, given the perception of the rule of law and security in their country of residence. The possibility of isolating foreign currency risks or exchange controls constitutes another relevant factor driving families to conduct operations outside Mexico in US dollars, Euro or Libor investments. 2.3 Forced Heirship Laws Testators are free to provide the terms and conditions for the transfer of their own assets to any designated heirs and legatees regardless of whether or not they are family members. Nevertheless, the Federal Civil
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