MEXICO Law and Practice Contributed by: Christian Lippert, Gabriela Pellón, Fabiola Jiménez and Cecilia Díaz de Rivera, Galicia Abogados
Mexican Residents With Foreign Assets For Mexican tax residents, foreign assets generally form part of the individual’s worldwide estate from a civil law perspective. Accordingly, succession plan- ning must consider how the transfer of such assets will be recognised and administered in the jurisdiction where the assets are located. In practice, this often requires analysing whether a Mexican will can be rec- ognised abroad or whether local estate procedures (such as probate proceedings) or additional testamen- tary instruments should be implemented. From a tax perspective, inheritances and legacies received by Mexican residents are generally exempt from Mexican income tax. However, any income sub- sequently generated by the inherited assets will be taxable in Mexico in the hands of the heir. Where heirs reside in other jurisdictions, co-ordinated planning is typically required to address potential tax exposure in both countries. It should also be noted that inheritances received by Mexican residents through certain entities or invest- ment vehicles may not qualify for the same tax treat- ment as a direct inheritance. In particular, Mexican tax legislation does not generally recognise the tax transparency of many foreign vehicles. Instead, where such entities are not controlled by a Mexican resi- dent, the Mexican Income Tax Law may treat them as opaque, which can result in income being taxed under rules applicable to foreign entities rather than under the inheritance exemption. Certain Mexican tax rules may also affect cross-bor- der estate structures, including the rules applicable to trusts ( fideicomisos ), controlled foreign entities and tax-transparent vehicles, which may trigger anti- deferral regimes or reporting obligations in Mexico. Non-Residents With Mexican Assets Where a non-resident holds assets located in Mexico (particularly Mexican real estate or shares of Mexican companies), local tax implications may arise upon the transfer or subsequent disposal of such assets. For example, transfers of Mexican real estate may be sub- ject to local real estate acquisition tax (ISAI), and any subsequent sale may trigger Mexican capital gains tax.
gives rise to succession and maintenance rights com- parable to those of marriage, may not be recognised in foreign jurisdictions that do not grant legal effects to de facto unions, or vice versa. Similarly, Mexico is not a party to the Hague Con- vention on the Law Applicable to Succession to the Estates of Deceased Persons, and therefore the rec- ognition of Mexican succession rulings abroad – and vice versa – is determined on a case-by-case basis, in accordance with the private international law rules of each jurisdiction. Mechanisms for Resolving Such Conflicts Internal conflicts between states are primarily resolved through the rules of jurisdiction based on the domicile of the deceased and through the application of the binding precedent of the Supreme Court of Justice of the Nation, which ensures uniformity in the inter- pretation of fundamental rights such as equality and non-discrimination. At the international level, Mexico has entered into bilateral and multilateral treaties on judicial co-opera- tion and maintains private international law provisions in its civil codes and in the National Code of Civil and Family Procedures, which set forth rules for the rec- ognition and enforcement of foreign judgments. It is also advisable for families with interests in multiple jurisdictions to execute separate wills in each coun- try where they hold significant assets, and to ensure that their succession planning takes into account the differences in the tax and legal treatment of family relationships in each relevant jurisdiction. 12. Cross-Border Succession Planning 12.1 Taxation of Cross-Border Estates and Transfers Cross-Border Succession and Tax Considerations Cross-border succession planning involving Mexican residents or Mexican assets requires careful co-ordi- nation between the relevant jurisdictions. Although Mexico does not impose estate or inheritance taxes, Mexican tax and reporting rules may still affect the structuring of cross-border wealth transfers.
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