The first article in this series addressed the strategic question of why Mexico deserves attention in 2026 as a neutral jurisdiction for international business. This second article moves to practicalities: how to structure a presence in Mexico to minimize legal, tax, and compliance risks.
For businesses from EAEU countries, corporate structuring in Mexico involves additional complexities. The absence of double tax treaties (DTTs) between Mexico and Kazakhstan or Uzbekistan; heightened bank scrutiny of capital from high-risk jurisdictions; and the specifics of Mexican labor and tax law all demand thorough legal groundwork before a company is even registered. Russia benefits from a bilateral DTT with Mexico that has been in force since 2008, which is addressed in detail below.
Legal Entity Forms: A Choice with Consequences
In practice, foreign investors in Mexico most commonly use three corporate forms, each with its own rationale and scope of application.
S.A. de C.V. (Sociedad Anónima de Capital Variable)
The equivalent of a variable-capital stock corporation. This is the most common form for manufacturing and large-scale investment projects. The minimum number of shareholders is two. Capital is divided into a fixed and a variable portion: the variable portion can be increased or decreased without amending the bylaws, providing flexibility when bringing in new investors.
The company is managed by a board of directors (Consejo de Administración) or a sole administrator (Administrador Único). The appointment of a statutory auditor (Comisario) is mandatory – an independent person who oversees the company’s financial activities.
Practical relevance: S.A. de C.V. is well suited for projects involving multiple investors, fundraising plans, and a potential exit through share sale. Appropriate for manufacturing sites, logistics hubs, and joint ventures.
S. de R.L. de C.V. (Sociedad de Responsabilidad Limitada de Capital Variable)
A model similar to a limited liability company. The maximum number of members is 50. Transfer of equity interests requires the consent of the other members, allowing tight control over ownership composition. Appointment of a statutory auditor is not mandatory unless specified in the bylaws.
The company is managed by one or more managers (Gerentes). The structure is simpler, and the administrative burden is lower.
Practical relevance: S. de R.L. is suitable for holding structures, closed projects with a controlled membership, and subsidiaries where restricting third-party entry is a priority.
SAPI (Sociedad Anónima Promotora de Inversión)
A form specifically designed for investment projects. It allows the use of instruments unavailable in standard S.A. structures: shareholder agreements with enhanced rights (tag-along, drag-along), options, share transfer restrictions, and deadlock resolution mechanisms.
SAPI is widely used in venture financing and private equity transactions. Upon meeting certain conditions, it can be converted into an S.A.B. (publicly traded company).
Practical relevance: SAPI is advisable for projects involving complex investment agreements, staged capital raising, and carefully designed exit mechanisms.
How to Choose: Key Criteria
| Criterion | S.A. de C.V. | S. de R.L. de C.V. | SAPI |
| Shareholder / member limit | No cap (min. 2) | Max. 50 | No cap (min. 2) |
| Best suited for | Manufacturing, JVs, large projects | Holdings, closed structures | VC / PE, complex exits |
| Statutory auditor | Mandatory | Optional | Optional |
| Share transfer | Freely transferable | Requires member consent | Restricted by agreement |
| Convertible to public co. | No (directly) | No | Yes (→ S.A.B.) |
Real Economic Activity: SAT Requirements
Mexico has been consistently tightening substance requirements for the presence of foreign companies. The Tax Administration Service (Servicio de Administración Tributaria, SAT) assesses not just formal registration but the actual substance of a company’s operations during audits.
In practice, SAT examines the following indicators:
- Physical office or production facility at the registered address (on-site inspections are conducted).
- Employees registered with the social security system (IMSS).
- Transactions supported by electronic tax documents (CFDI).
- Alignment between the declared economic activity (Actividad Económica) and actual operations.
- Banking activity commensurate with declared turnover.
Failure to meet substance requirements carries serious consequences: cancellation of the electronic signature (e.firma), blocking of the tax identification number (RFC), refusal of banking services, and in some cases, reclassification of transactions and additional tax assessments.
For EAEU businesses this is particularly critical: banks automatically apply Enhanced Due Diligence to companies with beneficial owners from higher-risk jurisdictions. Without real substance, obtaining banking services becomes substantially more difficult in practice and may be materially constrained by compliance requirements.
Tax System: Key Parameters for Foreign Investors
Base Rates
The corporate income tax rate (ISR) is 30%. This rate has remained unchanged since 2014 and is maintained for 2026. Companies must file annual returns by 31 March and make monthly advance payments by the 17th of each month.
Value-added tax (IVA) is 16%. In the northern border zone (45 municipalities), a preferential rate of 8% applies – an important consideration when choosing a location.
A 10% withholding tax applies to dividends paid to non-residents. This rate may be reduced where an applicable double tax treaty (DTT) is in force.
Double Tax Treaties with EAEU Countries: Clarifying the Landscape
Mexico’s treaty network includes Russia but does not extend to Kazakhstan or Uzbekistan.
Mexico-Russia DTT. A bilateral double tax treaty between Mexico and the Russian Federation was signed on 7 June 2004 and entered into force on 2 April 2008 following the exchange of ratification instruments. Its provisions generally apply to taxes withheld at source from 1 January of the year following its entry into force. Under the treaty, dividends paid by a company resident in one Contracting State to a resident of the other Contracting State are subject to a maximum withholding tax rate of 10 percent. Interest and royalty payments may also benefit from reduced treaty rates, subject to the specific provisions of the treaty.
Practical note on geopolitical risk. While the Mexico – Russia DTT remains formally in force, the practical ability to obtain reduced withholding rates in cross-border structures involving Russian entities may be affected by sanctions-related banking compliance, enhanced due diligence and payment-processing restrictions. Investors should verify, on a case-by-case basis, the current operability of treaty relief with qualified tax counsel and the servicing bank before relying on treaty benefits.
Kazakhstan and Uzbekistan. Because these countries do not have treaties with Mexico, dividends, interest, and royalties paid to their residents are subject to domestic Mexican withholding rates (10-35%). Investors should also analyse the treaty-shopping rules introduced by the Multilateral Instrument (MLI), effective in Mexico from 1 January 2024. The Principal Purpose Test (PPT) can deny treaty benefits if the structure lacks commercial substance.
Using an intermediate holding company in a jurisdiction with a DTT with Mexico can reduce withholding and facilitate safe-harbor pricing under the IMMEX program, but only if the holding company has genuine economic substance and satisfies treaty anti-abuse limitations.
PTU: Mandatory Employee Profit Sharing
One of the most distinctive features of Mexican law is PTU (Participación de los Trabajadores en las Utilidades). This is a constitutional right entitling employees to 10% of the company’s taxable profits from the preceding fiscal year.
PTU must be distributed within 60 days of filing the annual tax return – i.e., no later than 30 May each year. Following the 2021 reform, a cap has been introduced: a maximum of three months’ salary per employee or the average PTU amount over the past three years (whichever is more favorable to the employee).
PTU often comes as a surprise to foreign investors. It is not a voluntary program but a mandatory obligation; non-compliance results in administrative penalties and litigation. PTU must be budgeted as a separate cost item in financial planning.
Transfer Pricing and Thin Capitalization
Mexican tax legislation contains well-developed transfer pricing rules aligned with OECD guidelines. Companies with cross-border transactions are required to document the arm’s-length nature of intercompany pricing.
Thin capitalization rules limit the deductibility of interest expenses where the debt-to-equity ratio exceeds 3:1 for related parties. SAT pays close attention to financing from foreign affiliates.
Since 1 January 2022, Mexican legal entities and trusts have been required to maintain information on their ultimate beneficial owners and provide such information to SAT upon request (see Compliance section below).
2026 Tax Reform: Key Changes
The 2026 tax package, published in the Official Gazette on 7 November 2025, includes several significant changes:
- Capital repatriation program: individuals and legal entities (including foreign investors with a presence in Mexico) may repatriate funds held abroad as of 8 September 2025, by paying a final income tax of 15% with no deductions.
- Strengthened oversight of digital platforms: SAT gains real-time access to operational data (effective 1 April 2026).
- Expanded SAT powers in audit and enforcement proceedings: extended statutes of limitation and broader authority to access financial data from domestic financial institutions and foreign counterparts through information exchange channels.
Labor Law: Essential Parameters for Manufacturing Projects
Mexican labor law contains a number of provisions that significantly affect cost structures and workforce management models. For manufacturing projects, these factors are critical.
Social Security Contributions
Employers are required to register all employees with the following systems:
- IMSS (Instituto Mexicano del Seguro Social) – mandatory social insurance covering healthcare, pensions, and occupational accident insurance.
- Infonavit (Instituto del Fondo Nacional de la Vivienda para los Trabajadores) – mandatory contributions to the workers’ housing fund.
- SAR (Sistema de Ahorro para el Retiro) – a defined-contribution pension savings system.
The total employer burden from social contributions can reach 30-35% of the payroll (depending on salary levels and occupational risk classification).
Restrictions on Outsourcing: The 2021 Reform
The labor law reform that took effect on 23 April 2021 fundamentally changed subcontracting rules:
- Personnel subcontracting (outsourcing) is completely prohibited. Companies may not hire workers through intermediaries if those workers perform the company’s core business activities.
- Only the subcontracting of specialized services not related to the company’s core activity (cleaning, IT support, accounting) is permitted, provided the service provider is registered with the Ministry of Labor (STPS).
- Expenses for illegal subcontracting are not tax-deductible and VAT on such services is not creditable.
- Violations may result in substantial administrative fines calculated in UMA (Unidad de Medida y Actualización), which is indexed annually, as well as potential criminal liability in cases involving tax fraud.
This reform is particularly important for investors planning to use shelter companies (IMMEX program operators). The structure of the relationship with a shelter operator must be carefully designed from both labor and tax law perspectives.
Payroll Tax (ISN)
In addition to federal obligations, employers pay a state-level payroll tax (ISN – Impuesto Sobre Nóminas). Rates vary by state and, based on 2026 legislation, range from approximately 2% to 4%, making this an additional factor in the choice of location. In major industrial states (Nuevo León, Jalisco, Querétaro), rates typically fall in the 2-3% range; Ciudad de México increased its rate to 4% from 2025.
The IMMEX Program: A Manufacturing Regime with Tax Advantages
For export-oriented manufacturing projects, the IMMEX program (Industria Manufacturera, Maquiladora y de Servicios de Exportación) is a key tool for cost reduction.
Key IMMEX Benefits
- Duty-free temporary importation of raw materials, components, and equipment for producing export goods.
- Exemption from VAT (16%) on temporary imports where CIVA certification (the VAT and IEPS modality of the RECE scheme) has been obtained.
- Simplified customs procedures.
Participation Requirements and Timeframes
Annual exports of at least USD 500,000 or at least 10% of total sales. Temporarily imported raw materials and components must be exported as part of finished goods within up to 18 months (the standard timeframe under Article 108 of the Customs Law and Article 4 of the IMMEX Decree). Extended periods may apply to certain categories of goods and for companies operating under advanced certification schemes – the applicable timeframe should be verified against current SAT rules and Annex 24 requirements at the time of structuring.
Transfer Pricing Under IMMEX
Under the IMMEX program, a foreign company that qualifies as a “pure maquiladora” may determine its taxable income using the safe harbor method or based on an advance pricing agreement (APA) with SAT. However, in practice, eligibility for these mechanisms may depend on the treaty status of the asset owner’s jurisdiction and should be analysed on a case-by-case basis, particularly where cross-border structures are involved.
Structuring Through an Intermediate Holding Company
For an EAEU investor, direct ownership of a Mexican company creates a number of tax and operational challenges: double taxation for investors from Kazakhstan and Uzbekistan, inability to apply safe harbor rules under IMMEX, and heightened compliance risks in banking.
The standard approach involves using an intermediate holding company in a jurisdiction that has a DTT with Mexico.
Common Intermediate Jurisdictions
| Jurisdiction | DTT with Mexico | Dividend WHT (standard / reduced) | Notes |
| Spain | Yes | 0% (≥10% holding) / 10% (other) | Protocol in force Sep 2017; MLI PPT applies |
| Netherlands | Yes | 10% / 5% (≥10% holding, 6 months) | MLI PPT applies |
| Singapore | Yes | 10% / 5% (≥10% holding) | Strong substance rules required |
| UAE | Yes (in force 2014) | 0% on dividends | Signed 2012; LOB clause applies; genuine substance required |
| Luxembourg | Yes | 10% / 5% (≥10% holding) | MLI PPT applies; holding regimes available |
WHT rates shown are indicative and depend on specific conditions for applying the DTT, including beneficial ownership tests, LOB clauses, and MLI provisions. Individual analysis is required for each structure.
Limitations and Risks
Using an intermediate holding company is not an automatic solution. The following must be considered:
- MLI (Multilateral Instrument) rules, which entered into force for Mexico on 1 July 2023 and modify most bilateral tax treaties from 1 January 2024. The MLI introduces the Principal Purpose Test (PPT), which allows treaty benefits to be denied where the structure lacks economic substance.
- CFC (Controlled Foreign Company) rules in the country of residence of the ultimate beneficiary. In Russia, for example, undistributed CFC profits are subject to taxation.
- Currency controls: for Russian residents, transactions with foreign companies are regulated by Federal Law No. 173-FZ; for residents of Kazakhstan and Uzbekistan, the applicable foreign exchange legislation applies.
- Anti-avoidance provisions under Mexican law: SAT may challenge transactions whose primary purpose is to obtain a tax benefit.
Typical Structure: EAEU Investor → Mexico
Investor (Russia / Kazakhstan / Uzbekistan) → Intermediate holding (jurisdiction with a DTT with Mexico, e.g., Spain) → Operating company in Mexico (S.A. de C.V. / S. de R.L.)
At each level, the following must be ensured:
- Intermediate holding: real substance (office, personnel, decision-making), compliance with the PPT, proper application of the DTT.
- Mexican company: genuine economic activity, SAT registration, compliance with transfer pricing rules.
- Beneficiary level: CFC compliance, income reporting, currency controls.
Mechanically replicating structures used in the UAE, Hong Kong, or Singapore does not work in the Mexican context. Mexico’s MLI implementation, the absence of territorial exemptions for passive income, and sector-specific IMMEX requirements make each structure uniquely dependent on the investor’s industry, home jurisdiction, and operational model. Each jurisdictional chain requires bespoke analysis based on the specific circumstances of the project.
Choosing a Region: The State as a Strategic Element
Mexico is a federation of 32 entities (31 states and a federal district). Business conditions differ significantly by region.
Key Industrial Regions
- Nuevo León (Monterrey): the largest industrial hub in the north, specializing in automotive, steel, and mechanical engineering. Well-developed infrastructure, proximity to the US border. The highest concentration of IMMEX companies.
- Jalisco (Guadalajara): Mexico’s “Silicon Valley” – a center for electronics and IT. A strong supplier ecosystem and pool of skilled professionals.
- Bajío (Querétaro, Guanajuato, Aguascalientes): a fast-growing industrial region attracting automotive and aerospace manufacturers. Competitive operating costs.
- Northern Border Zone: 45 municipalities, including all municipalities of Baja California. Preferential VAT rate of 8% (instead of 16%). Advantages for logistics and US-bound exports.
Selection Factors
When choosing a state for location, consider:
- Payroll tax rate (ISN): varies by state, approximately 2-4% for 2026; confirm the applicable rate for the target state before finalizing the location decision.
- Eligibility for the VAT incentive (border zone only).
- Availability of industrial parks with ready-made infrastructure.
- Logistics accessibility: ports, customs crossings, transport hubs.
- Availability of skilled labor in the target industry.
- Security levels: indicators vary significantly between states and municipalities.
Compliance in Corporate Structuring
Beneficial Ownership Register
Since 1 January 2022, Mexican legal entities, trusts and other legal vehicles are required to collect, maintain and, upon request, provide detailed information on their ultimate beneficial owners to the Tax Administration Service (SAT). This obligation applies on an ongoing basis and forms part of Mexico’s broader transparency and anti-abuse framework.
Non-compliance may result in significant administrative fines under the Federal Tax Code, as well as practical consequences for the company’s operations. These may include adverse tax compliance status, restrictions affecting the issuance of digital tax receipts (CFDI), and increased scrutiny from financial institutions during banking and compliance reviews.
Given the enforcement focus in recent years, beneficial ownership documentation should be prepared and internally verified at the structuring stage, rather than after incorporation or during a tax audit.
Relevant obligations and sanctions are addressed in Articles 84-M and 84-N of the Federal Tax Code (CFF).
MLI and Anti-Abuse Rules
Mexico ratified the OECD Multilateral Instrument (MLI), which entered into force for Mexico on 1 July 2023 and modifies most of its bilateral tax treaties from 1 January 2024. The MLI introduces anti-abuse measures such as the Principal Purpose Test. Structures designed primarily to obtain treaty benefits without economic substance may be challenged by tax authorities.
What Banks Assess
In 2026, a corporate structure is treated by banks and regulators as the primary indicator of risk level. For EAEU businesses, the quality of the structure directly determines whether banking services can be obtained. Banks assess:
- Transparency of the ownership chain down to the ultimate beneficial owner.
- Economic rationale for intermediate entities.
- Origins of initial investment capital and supporting documentation tracing the source of funds.
- Compliance track record in other jurisdictions.
Electronic Documentation
All company transactions must be documented through the CFDI electronic invoicing system (Comprobantes Fiscales Digitales por Internet). Accounting records are maintained in Mexican pesos and in Spanish. For a foreign investor, this means local accounting and legal support must be engaged from day one.
Corporate structuring in Mexico is not a routine registration procedure but a strategic phase that determines the resilience of the entire project. For an EAEU investor, the key priorities are:
- Choosing the right legal entity form based on the investment strategy and planned exit.
- Ensuring real substance that satisfies both SAT and banking requirements.
- A well-designed holding structure that accounts for the DTT landscape and MLI rules.
- Incorporating PTU, social contributions, and outsourcing restrictions into the financial model.
- Regional selection as part of the tax and operational strategy.
* This article is for informational purposes only and does not constitute legal advice. Professional consultation should be obtained before making any decisions.
** This material was prepared by Andrei Gusev Senior Partner at Nordic Star Law Offices and Ulisse Utzeri, Attorney-at-Law (Mexico).