Foreigners Doing Business in Mexico
Doing business in Mexico may be just what your company needs to prosper, with lower wages for skilled workers and lower transportation costs since Mexico is situated closer to the US and Canada, than, China or India for example. Location also ensures faster production turnaround time, not to mention ease of communication, and similar time zones.
Since, Mexico is a part of The North American Free Trade Agreement NAFTA, between Mexico, Canada and the United States there are many benefits to doing business in Mexico. NAFTA eliminates tariffs between the countries and has built in agreements and legal processes, with international rights for business investors.
Foreigners can own 100% of a Mexican corporation and open their business in Mexico. Mexico’s legal system and tax laws for businesses do not discriminate between foreigner business or Mexican National owned businesses.
Owning a business in Mexico can be a lucrative initiative, but make sure you have a Mexican law firm to represent you and your company, they will help you setup your business in Mexico, a law firm like MexLaw can provide important guidance through, creating a corporation, advising you on Mexican labor law, Mexico’s tax laws, and all red tape that goes along with doing business in Mexico.
Anyone who has begun the process of opening a business in Mexico can not stress enough the importance of using a lawyer, you will need to deal with all business aspects, zoning and building permits, taxes, environmental regulations, and even your own immigration status.
Business entity options are similar to the rest of North American including, Public Limited Company or Corporation (Sociedad Anonima (S.A.) which either have fixed or variable capital. This entity will have at least 2 board members and an unlimited amount of shareholders. This type of company is required to have an accounting firm that will ensure the proper management and legal aspects are taken care of.
Limited Liability Company (Sociedad de Responsabilidad Limitadada (S.de R.L.) either fixed or variable capital. This entity must have at least 2 partners, but no more than 50. It is not required to have an accountant.
Sole Trader (Persona Física con actividad empresarial) An individual with a business using their own name for the business and tax purposes. You are only one shareholder and solely liable.
Professional Service (Sociedad Civil (S.C.) consultants, translators, lawyers or accountants type of business. No minimum capital is required.
NonProfit (Asociacion Civil (A.C.) charities and organizations
The most common being corporations and limited liability companies, a professional legal team can help you assess which option is best for your business and which will give you the most operational benefits.
Mexico’s Labor Law
It is important to familiarize yourself with Mexico’s labour laws. Foreigners doing business in Mexico need to be cautious of their hiring practices and the labour laws of Mexico. Mexico has strict labour laws in place to protect the employees, but a Mexican law firm can help you make sense of the labor laws of Mexico.
As an employer, it is in your best interest to hire a Mexican law firm, such as MexLaw to learn your rights as an employer, to develop employee contracts (which is your best defense if you end up in litigation with an employee) and learn your best practices for hiring and dismissing staff. You will receive advice on what is legally expected from you as an employer to ensure you have happy, productive staff and avoid having issues with the labor board.
All conditions and expectations must be documented in an employment contract between the worker and the employer. Any disagreement between the two will result in the employer being required to prove his case against the employee.
Labor laws can change with each state and update without notice.
As in Canada and the US, there are many labor laws involving, child labor, discrimination, harassment, maternity leave, profit sharing, overtime, yearly wage negotiation, vacation days, and union regulations if applicable.
MEXLAW can help you manage the hiring of your employees, assisting your company with the reconciliation of labor disputes and guide you through the Mexican labor laws and the proper employee administration.
There will be a lot to learn about Mexico’s tax laws, it is important that you have a reliable accountant in Mexico to help you deal with the different taxes and make sure you take advantage of tax breaks and deductibles.
Depending on the business you open, you may be required to pay corporate tax, tax on dividends, asset tax, value added tax, and payroll taxes. MexLaw can provide accounting services for your business to help you get the most from your investment.
Good To Know
- Mexico has a strong tax treaty with the US and Canada, which provides relief from double tax on all income
- If you are not a permanent resident in Mexico and you want to do business in Mexico you are required to make a declaration to the Mexican Institute for Foreign Investment.
- Always negotiate your sales contracts and the credit terms carefully, using a qualified lawyer, and purchase receivables insurance to protect yourself against possible non-payment loss.
- Terminating an employee can be very complicated and costly in Mexico, it is important to have a lawyer layout all the labor laws and regulations to avoid an ex-employee appealing their dismissal to the labor review board.
- By forming a Mexican corporation you are able to purchase property in a restricted zone without a fideicomiso.