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business in mexico

The Executive Branch is the President of Mexico, he serves a 6 year term. (The current President is Enrique Peña Nieto.)

The Legislative Branch is the chamber of Senators comprised by 129 senators who serve a 6 year term and the chamber of Deputies comprised by 500 members who serve a 3 year term.

The Judicial Branch it is The Supreme Court comprised by 11 members and more than 1000 Districts Judges

Currency

Mexican Currency is the Mexican PESO.

GOVERNMENT LEVELS AND LAWS

There are Federal Laws, State Laws, and Municipality Laws.

The Federal Level laws apply all over the country.

The State Level laws apply in each one of the 31 states "Estados". The Municipality Level laws apply only in the city and its vicinity.

Each State "Estado" of Mexico has its own Executive Branch, (State Governor), Legislative Branch and Court.

POLITICAL PARTIES

The most important Political Parties in Mexico are:
PAN Party (Partido Accion Nacional)
PRI Party (Partido Revolucionario Institucional)
PRD Party (Partido de la Revolucion Democratica)

The Federal Government of Mexico is ruled by PRI.
Mexico City is ruled by PRD.
The States of Yucatan and Quintana Roo is ruled by PRI.

Laws

There are federal and state laws.

Currency

Mexican Currency is the Mexican PESO.

LANGUAGE

The official language of Mexico is Spanish, so, all of the legal documents are written in Spanish.

BUSINESS

Domestics and Foreigners may run business as natural persons (individuals) or incorporated. Both have similar laws obligations.

The law treats corporations like an individual. The Corp. can buy and sell its own assets, can sign its own contracts, can sue and be sued. The corporation is distinct from the individual owners. (shareholders)

The laws govern business transactions in the broadest sense of the term, including not only trade and commerce, but practically every form of commercial and industrial activities where the purpose of the organization is pecuniary profit.

The "Ley General de Sociedades Mercantiles", rules the type of Corporation, the most important are:

"C" Corporation (Sociedad Anonima) and
2.- Limited Liability Company (Sociedad de Responsabilidad limitada).

Both types of corporations have the same liability profile; the shareholder's only obligation is to show the value of the shares. The differences are the corporate structure, and the amount of the initial capital. "C" Corporation (Sociedad Anonima) has a more flexible structure.

CIVIL CORPORATIONS

Civil Corporations are called "corporation Non for profits"; usually comprised of a group of people who has the same area of activity. The primary objective for this kind of corporation is to provide personal services, as opposed to selling or manufacturing goods. Lawyers and accountants usually establish this kind of corporation.

Any kind of corporation requires the involvement of a Notary.

THE MEXICAN NOTARY

The Mexican Notary is not an escrow service. He is a duly qualified attorney and is appointed for life by the State Governor after presenting due examination

He is a quasi Governmental official who reviews most documents of importance with respect to the corporation.The Corporate By-laws and the Articles of Incorporation have to be reviewed by a Notary and notarized, as well as also any minutes or records of shareholders meeting.

REAL ESTATE

The Mexican Constitution of 1917 (specifically Article 27 thereof) expressly restricts foreigners from holding direct legal title to real property 50 kilometres inland from the coasts of Mexico and 100 kilometres from any Mexican border.

It, however, has been possible under Mexican federal law for foreigners to legally own or hold the exclusive use and enjoyment of Real Estate property in the so-called "restricted or prohibited zone" by two different ways:

1. A Trust, or 2. A Mexican Corporation.

TRUST

The exclusive use a Real Estate Property by an individual may be set up by purchasing the beneficial interest through a trust mechanism, similar to the common law trusts originating in England and subsequently adopted by Canada and the USA.

The title to the property is held in trust by a Mexican banking institution, duly authorized to act as trustee with the buyers who are designated as the beneficiaries of the trust. Such trusts are to terms of fifty (50) years and are renewable for similar periods.

The trust bank is obliged to deal with the property only in accordance with the instructions of the foreign owner and the owner's interest may be passed on by will or inheritance, or may be used as collateral for a loan.

A MEXICAN CORPORATION

Holding a Real Estate property also may be accomplished by setting up a Mexican corporation.
In this case, foreigners become the shareholders and the Directors of the Mexican corporation, which will be the owner of the land in "the restricted or prohibited zone".

The Mexican Corp. owner of the real estate property in the restricted zone may be means of a 100% foreign owned corporate entity.

The corporation itself is as if it is a Mexican Person, (legally) separate and different from the shareholders.

The corporation can own its assets and goods, including the real state properties.

The directors have all the powers over the entire corporate assets, including land.

NOTARY. (REAL ESTATE TRANSACTION).

Any real estate transaction also has to be done before a Notary; he reviews the documents for the closing operation, and collects the corresponding taxes and dues.

PUBLIC PROPERTY AND COMMERCE REGISTER:

Mexican Foreign Investment law establishes restrictions for some Foreign Investment areas, other activities are reserved for the Mexican Government only, such restricted activities are described in NAFTA Annex III.

MMIGRATION LAW

Foreigners with business in Mexico also must comply with legal immigration status:
FM-T: visa for tourist only.
FM-3: visa for temporary residents.
FM-2: visa for permanent residents.

TAXES

As other countries, Mexico has several taxes, the most important ones are:

Sales Tax. "Impuesto al valor agregado".
(10% in Quintana Roo and 15% in Yucatan).

Capital Gain Tax, Capital Stock Tax, and Income Tax, in Mexico are the same taxes called "Impuesto sobre la renta", up to 29%.

Real Estate Tax, "Impuesto sobre adquisicion de inmuebles" 2% payable with the Purchase. Just once.

Inheritance Tax, there is no Inheritance Tax in Mexico.

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