As part of major reforms introduced by the executive branch of Mexico's federal government, important national sectors which in the past seemed 'unchangeable' are facing an ongoing shifting process derived from such reforms.
Mexico, member of the OECD since 1994, and one of the world's most important emerging market economies, plays an important role and has become an attractive destination for international investments within the Latin American region, which has led to the existence of an important number of wealthy individuals within an environment of unequal distribution of wealth.
Since the second half of the 1990 decade, Mexico has taken a more active approach to becoming an attractive investment spot by broadening its double taxation treaty network.
Taxation in Mexico is founded on a series of laws and regulations that are in constant flux. The major tax reform of 2014, which derived in the enactment of a new Income Tax Law, had an important impact on individuals, by incorporating new tax brackets up to a 35 per cent tax rate from the previous limit of 30 per cent and imposing taxation to gains obtained from the sale of publicly traded shares (until 2013 these were generally tax-exempt) and dividends received from both national and international companies at a rate of 10 per cent.
Inequality of income has been a historical problem for Mexican society. The authorities have constantly focused on developing policies for establishing additional taxes to the already captive taxpayers while the informal economy keeps growing as a response to the lack of formal employment that could provide the means of support for a significant number of Mexican households. Such inequality derives from the existence of a very big number of high net worth individuals in Mexico who hold investments abroad.
A major concern of wealthy individuals, not only in Mexico but worldwide, is the current trend of tax administrations to execute information-exchange agreements intended to provide additional elements for exercising audit faculties with respect to capital placed in investment structures abroad. Mexican tax authorities along with foreign tax administrations are playing an active role in response to the US Foreign Account Tax Compliance Act regulations, the Organisation for Economic Co-Operation and Development (OECD) BEPS (Base Erosion and Profit Shifting) action plan and the Common Reporting Standard of the OECD.
An outcome of the 2014 tax reform was the elimination of the option for income tax payment on a no-name basis. This payment alternative was applicable to Mexican resident individuals for income obtained from investments held overseas and represented a secure method of tax compliance under a confidentiality scheme.
Tax authorities are likewise focusing on gathering information with respect to inbound transactions conducted by taxpayers. Recently enacted provisions oblige individuals and corporations to constantly inform of specific transactions targeted as part of aggressive tax planning or with the intention of detecting money laundering.
Owing to the regulations that have recently been enacted, additional...