MEXICO Law and Practice Contributed by: Christian Lippert, Gabriela Pellón, Fabiola Jiménez and Cecilia Díaz de Rivera, Galicia Abogados
planning around inter vivos transfers or testamentary dispositions, knowing that the Mexican tax system generally allows such transfers to occur in a tax-effi- cient manner when they take place within the immedi- ate family. Mexican corporate and business entity laws may also play a role in estate planning strategies. Assets are frequently held through Mexican companies or other legal entities, which can facilitate the orderly transfer of ownership interests to heirs or beneficiaries. This can allow families to maintain continuity in the man- agement and control of family businesses while also facilitating succession planning. However, when planning involves cross-border ele- ments, additional considerations arise. Even though Mexico does not impose inheritance or gift taxes, other jurisdictions may impose such taxes based on the citizenship, domicile or tax residency of the ben- eficiaries or the deceased. In summary, Mexico’s legal and tax framework – char- acterised by the absence of federal estate and inher- itance taxes and the availability of exemptions for donations within close family relationships – makes it an attractive jurisdiction for succession and wealth planning. Nevertheless, careful planning remains important, particularly where foreign beneficiaries, cross-border assets or local taxes (such as real estate acquisition taxes) may affect the overall tax outcome of the strategy. 9. Trusts, Foundations and Related Entities 9.1 Choice of Planning Vehicle Fideicomisos Fideicomisos are commercial agreements by means of which a settlor (the person who constitutes the trust and transfers the property) transfers certain rights or assets to a trustee to be administered for the ben - efit of one or more beneficiaries (persons determined by the settlor to be the ultimate beneficiaries of such assets and rights).
According to Mexican laws, there are two types of trusts: administration and security trusts. Administra- tion trusts are the ones used for succession planning purposes. Fideicomisos can also be revocable or irrevocable. A distinctive feature of Mexican fideicomisos is that only certain financial institutions (mainly banks) authorised by the Comisión Nacional Bancaria y de Valores (CNBV) can act as trustees. Private individuals and non-financial entities may not serve as trustees. Non-Profit Structures In Mexico, philanthropic objectives are typically pur- sued through asociaciones civiles and fundaciones . If asociaciones civiles and fundaciones comply with cer- tain legal requirements, they can qualify as donatarias autorizadas , which allows them to receive donations that are deductible for income tax purposes. 9.2 Recent Developments Affecting Planning Vehicles Increased SAT Scrutiny The Mexican tax authority (SAT) has intensified its scrutiny of different types of taxpayers (including family companies and fideicomisos ), particularly fol- lowing amendments to the MITL and the introduction of the business purpose rule under Article 5-A of the Federal Tax Code ( Código Fiscal de la Federación ). Structures that lack genuine economic substance or that are designed primarily to defer or avoid tax obli- gations are at risk of being recharacterised. Anti-Money Laundering Laws Recent amendments to the Anti-Money Laundering Laws have significantly strengthened the Mexican beneficial ownership framework. In this regard, com- mercial entities (such as SAPIs and other corporate types) are required to: • identify and maintain information regarding their beneficial owners; • register certain information of their beneficial own- ers in an electronic system to be operated by the Ministry of Economy and file notices regarding transfers of ownership or the creation of rights over shares or equity interests; and
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