As of January 1st 2022, new provisions related to the identification of the Ultimate Beneficial Owner came into force, targeting tax evasion, money laundering and counter-terrorism financing.
What is the new obligation?
Provide information regarding the Ultimate Beneficial Owners of any legal entity, trust, or any other legal structures; as well as adopting reasonable measures to verify their identity; when requested by Mexican Tax Authorities. In order to provide reliable information, gathering, testing, updating and maintaining activities must be implemented.
Who is obligated?
- Legal entities, and, in case of a trust, its trustee(s), its grantor(s), and its Beneficiaries.
- Parties of a contract in case of any other legal structure.
- Public attestors during the incorporation of legal entities, and any person involved in the execution of trusts agreements, contracts, or any other legal structures.
- Financial entities.
Who is the Ultimate Beneficial Owner?
Is the natural person or group of natural persons that:
- Obtain, either directly, through other(s), or any legal action, the benefit of their participation in a legal entity, trust, or any legal structure; or those that exercise the rights of use, benefit, or disposition of a good or service, or on whose behalf a transaction is carried out, even if they do so contingently.
- Exercise, either directly, indirectly, or contingently, the control of the legal entity, trust, or any legal structure, through holding securities, contract or any other legal structure, in the following events:
- Impose directly or indirectly, decisions on general meeting of shareholders, partners, or equivalent bodies, or to appoint or revoke the majority of counsels, administrators, or its equivalents.
- Holding rights that allow directly or indirectly, vote over the 15% of the equity quotas of the legal entity.
- Manage directly or indirectly, the administration, strategy, or principal policies of the legal entity, trust, or any other legal structure.
- For trusts, it is considered as Ultimate Beneficial Owner the trustee(s), appointer, beneficiaries, as well as any other party involved or that can execute, ultimately, the effective control of the trust, even contingently.
When it is not possible to identify any natural person, it should be identified as Ultimate Beneficial Owner the Sole Administrator, or the Board of Directors or the equivalent.
How is reported the Ultimate Beneficial Owner?
The Ultimate Beneficial Owner is reported only when requested by Mexican Tax Authorities.
Which are the applicable fines or sanctions?
Failure to comply with the obligations regarding the identification and reporting the Ultimate Beneficial Owner could trigger the following consequences:
- Not gathering, maintaining, or reporting the information of each Ultimate Beneficial Owner could be penalized with a fine up to 2 million MXN (100K USD).
- Failure to update the information of each Ultimate Beneficial Owner, may be sanction with a fine up to 1 million MXN (50K USD).
- For reporting incomplete, or inaccurate information regarding each Ultimate Beneficial Owner, could be fine with a penalty up to 800 thousand MXN (40K USD).
In addition, the Mexican Tax Authorities could restrict the taxpayers from issuing invoices, and other tax documents such as withholding certificates, payroll receipts, among others.
Note that Ultimate Beneficial Owner obligations are also applicable to foreign legal entities, trusts, and other legal structures.
At Baker Tilly we have a team of experts ready to assist your organization to comply with all the aforementioned regulations.
