Acquisition of Real Property: Restricted Area Trust

by – Lic. Greta Robledo.

In accordance with article 27, section I, of the Mexican Constitution, Mexican companies with foreign investment may acquire real estate property in any part of the national territory outside of the restricted area. The restricted area is a strip of 100 (one hundred) kilometers wide along the borders and 50 (fifty) kilometers wide along the coasts in which – according to current legislation – foreigners cannot acquire ownership of land and water directly.

Notwithstanding the foregoing, the acquisition of real estate property within the restricted area can be carried out by:

  • If such companies include a clause in their bylaws in which its partners/shareholders agree to be considered as Mexicans, with respect to the rights and obligations arising from the agreements, the shares or quotas, and the assets or interests of which they are business owners, resigning to invoke the protection of their governments under the penalty of losing the property in benefit of the Mexican Government in the event of default.
  • If the real estate property that is purchased is  destined for non-residential purposes, and a notice is filed with the Ministry of Foreign Affairs (MFA) within 60 (sixty) business days following the acquisition of the real property, in terms of article 10, section I, of the Foreign Investment Law (FIL), and article 5 of its Regulation.

The origin of the restricted area trusts is found in the agreement from November 22nd, 1937, executed by President Lázaro Cárdenas, by means of which the national credit institutions were authorized to carry out trust operations and to acquire real estate property in Mexico, allowing their use and enjoyment to the non-Mexican nationals.

The purpose of the restricted area trusts is that the trust institution allows the trustees to use and exploit the assets that are part of the trust without holding the ownership rights. The use and exploitation of the trust assets should be understood as the granting of the rights of use, enjoyment, and exploitation by non-Mexican nationals, including the obtaining of its products, and in general any benefit, during the operation and lucrative exploitation of the real properties.

The special requirements of the restricted zone trust agreements are provided in article 11 of the FIL Regulations which establish certain requirements that must be contained in the trust agreement, also indicating the consequences of establishing it without any of them.
Some of such requirements are the following:

  • Calvo clause. It is the statement made by non-Mexican nationals in which they agree to be considered as Mexicans regarding their rights granted to them as trustees, and their agreement not to invoke, the protection of their governments, under penalty, of losing said rights in benefit of the Mexican Government.
  • Conservation of fiduciary ownership. It means that during the entire term of the trust, the trust institution retains ownership of the trust assets, without, granting ownership rights to the trustees.
  • Information on the fulfillment of the purposes of the trust. The trustees are obliged to inform the trust institution about the fulfillment of the purposes of the trust, and the trust institution is obliged to inform the MFA about the same, when required to do so, if there are grounds that imply that there is a breach regarding the conditions under which the permit to form the trust was granted.
  • New permit in the event of the contribution of new real estate properties, or change of trust purpose. That the trust institution obtains a permit from the MFA in the event that an additional real property is contributed into the trust or there is a change in the purposes of trust;
  • Notice of Termination of Trust. That the trust institution agrees to notify the extinction of the trust to the MFA, within 40 (forty) working days following the date of its termination, and
  • Termination of the trust at the request of the MFA. That the parties in the agreement agree to extinguish the trust at the request of the MFA, within a period of 180 (one hundred and eighty) days from the date of notification of the requirement, in the event of breach or violation of any of the conditions established in the permit that was issued to form the trust.

Restricted zone trusts have a maximum duration of 50 (fifty) years. Such term may be extended at the request of the interested parties – that is, of the trustees – to the MFA, through the institution that acts as a trustor, within the 90 (ninety) business days prior to the expiration of the term.

In the event that the term of the trust ends without requesting the extension of the term, the trust must be extinguished, and the real estate properties in the trust must be transferred to an individual capable of acquiring real property in a restricted area.

Lastly, in terms of article 32 of the FIL, real estate trusts located in a restricted area, whose trustees are foreign individuals or legal entities, or those whose assets are real estate property intended for residential purposes, and a Mexican company with an admission clause for foreigners, must be registered in the National Registry of Foreign Investment.

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |

Trademark Registration- Industrial Property Law

By- Lic. Guadalupe Xoca.

On May 18, 2018, a reform of the Industrial Property Law was published in the Official Gazette of the Federation. This reform came into effect on August 10, 2018.

What is the subject of the reform?

The reform foresees, among other matters, the modification to the concept of trademarks, and introduces new forms that can be registered.  This in addition to the provisions for the registration of certification trademarks.

What is a trademark?

A trademark is a distinctive sign that is perceptible by the senses and capable of being represented in a manner that allows the clear and precise determination of the object in order to be distinguished or to denote quality or ownership of products or services of others of the same class or type in the market.

What are the new trademarks eligible for registration as a result of this reform?

Scent trademarks:

The scent trademarks are those that through the aroma produce an olfactory memory, by means of which they become distinguishable from other products or services of the same class.

In order to obtain the registration of scent trademark, it is necessary that the aroma is reproduced visually, emphasizing that the product or service that will be registered is, in itself, the scent.  Likewise, the scent representation may consist of a written form, in order that it transmits the necessary and the exact information to adequately identify the trademark and not allow confusion.  Scent trademarks have been registered in countries such as The Netherlands and the United Kingdom. Some examples are tennis balls “smelling of freshly cut grass”, tires “with the smell of roses” and darts “with bitter beer smell “.

Sound trademarks:

Sound trademarks are those that through sounds are intended to distinguish themselves from other products or services of the same class. They can be musical sounds, sounds existing in nature or produced by machines or other devices.   When these sounds are heard we automatically associate them with the product or service they represent, even if we do not see them. Some examples are the melodies (ringtones) of some telephone companies, sounds reproduced by computer software or the symphonies (intros) at the opening of some television or radio-communication programs.   To obtain the recording of sound trademarks, it is necessary that the sound that is intended to be protected be represented through musical notes, pentagrams or onomatopoeias.

Trade-dress marks:

Trade-dress marks are those that are intended to protect the identity or design of a product or service.  In order to obtain the recording of a trade-dress mark, it is necessary to submit a detailed description of the visual presentation of the product or service, including forms, presentation, colors, and textures, among others. Trade-dress marks range from wrappers to designs of commercial businesses both inside and outside. An example of this is the Apple stores that are characterized by their design and image, both inside and outside.

Hologram trademarks:

Hologram trademarks are those that use the advanced technique of photography that consists of creating three-dimensional images based on the use of light.  To obtain the registration of holographic trademarks, it must be represented in a model that contains a single view of the image that represents the sign, and a description of the same. Finally, please note that the trademark registration depends on the classification of products or services according to the regulations of Nice Classification (NCL)  relating to the international system used to classify products and services for the registration of trademarks, the same international treaty which Mexico is part of since 2001.

Should you have any questions relating to the above, please do not hesitate to contact us.

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |


Mining in Mexico: Outlook of the proposed reform to the Mining Law

by – Lic. Alejandro Ceballos.

It is well known that Mexico is a prime mining destination. According to the Mexican Bank (“Banco de Mexico”), the mining industry is the fourth source of income of Mexico behind the automotive and petroleum industries, and the remittances of money by Mexicans living abroad.

Considering the above, the new government led by President Andres Manuel Lopez Obrador (“AMLO”), has included the mining industry in the list of top 25 high priority projects. However, the parliament group of the party of AMLO, “MORENA”, is proposing additional regulations relating to concessions in mining activities, considering to authorize the Ministry of Economy (“Secretaría de Economía”) to declare unviable zones for exploitation, thereby making it possible to cancel the concessions.

The proposed reform to the Mining Law, states that the concession shall be terminated in the event of noncompliance with the filing of the annual report with the Mexican Geological Service (“Servicio Geológico Mexicano”), same report that will include the identification, characterization, prediction and valuation of social impact, in addition to the risk mitigation of measures and management plans for the areas subject to such mining concessions and permits.

Furthermore, it provides that the beneficiaries of such mining concessions and permits may be sanctioned in the event that they do not ascertain the implementation of the risk mitigation measures and do not distribute the established minimum capital amounts for human and sustainable development for the corresponding mining communities.

The initiative aims to distribute the industry wealth to the mining regions; raise awareness for equal labor rights and protection of the environment, and the termination of mining concessions in the event of non-compliance.

It is important to mention that currently, the Mining Law establishes that in order to explore and benefit from substances and minerals, the mining companies are required to perform an evaluation of the environmental impact that must be authorized by the Ministry of Environmental and Natural Resources (“Secretaría del Medio Ambiente y Recursos Naturales”), but the social impact is not regulated.

As soon as the news of the proposed reform was made public, taking into consideration that “MORENA” and its allies have the majorities in the Senate and in the House, the value of mining companies shares suffered a loss in the Mexican Stock Exchange (“Bolsa Mexicana de Valores”). In view of this, the new government is working on forming a favorable investment environment that guarantees and improves the development of the industry in order that Mexico continues to offer international competitiveness conditions.

mining concessions and permits may be sanctioned in the event that they do not ascertain the implementation of the risk mitigation measures and for not distributing the established minimum capital amounts for human and sustainable development for the corresponding mining communities.

The initiative aims to distribute the industry wealth to the mining regions; raise awareness for equal labor rights and protection of the environment, and that in the event noncompliance, the mining concessions be terminated.

It is important to mention that currently, the Mining Law establishes that in order to explore and benefit from substances and minerals, the mining companies are required to perform an evaluation of the environmental impact that must be authorized by the Ministry of Environmental and Natural Resources (“Secretaría del Medio Ambiente y Recursos Naturales”). The social impact is not regulated.

As soon as the news of the proposed reform was made public, taking into consideration that “MORENA” and its allies have the majorities in the Senate and the House, the value of   mining companies shares suffered a loss in the Mexican Stock Exchange (“Bolsa Mexicana de Valores”); therefore, the new government is working on forming a favorable investment environment that guarantees and improves the development of the industry, in order that Mexico continues to offer international competitiveness conditions.

For any questions or comments, please do not hesitate to contact us.

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |

Tax Incentives for the Northern Border Region

by – Lic. Leobardo Tenorio,

In short:

  • 20% income tax rate in the Northern Border Region; IMMEX are not beneficiaries of the incentive.
  • 8% value-added tax rate; the rate does not apply to imports, or alienation of immovable or intangible goods, as well as digital commerce.
  • Optional – Assess implementation; assess requirements.
  • It is not for everyone.
  • Valid until 2020.
  • Need to request authorization/file notices in order to receive the benefit.

The President of Mexico, Andrés Manuel Lopez-Obrador, published on December 31, 2018, the “Northern Border Region Tax Incentives Decree” (the “Decree”) that comprise municipalities located in the States of Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon and Tamaulipas (a list of the municipalities that are included in the Northern Border Region can be found in Appendix “A” of this document).

The Decree is valid for the fiscal years 2019 and 2020 (January 1st to December 31st ) it is optional.

Even when there are many questions about the implementation of the Decree, below you will find a summary:

The Decree consists of two incentives related to:

  • Income tax, at a rate to 20%.
  • Value added tax, at a rate of 8%.

Excluded from the Decree

In addition to those who are specifically excluded from the income tax incentive (as noted below), the following taxpayers are excluded from the Decree, that is, from both incentives (the “Excluded Taxpayers ”):

  • Those who have a final tax assessment (that is, that such cannot be challenged).
  • Those who have non-guaranteed tax assessments, even if such tax assessments can be challenged.
  • Those who are considered as “unreachable”.
  • Those who have a conviction for a tax offense.
  • Those whom the tax authorities have forgiven any tax assessment.
  • Those whom the tax authority, including its partners or shareholders, have presumed issue tax invoices without having any assets, personnel, infrastructure or material capacity, or that are unreachable.
  • Those whom the tax authorities have determined conduct operations with the taxpayers described in the preceding paragraph.
  • Those who have improperly transferred tax losses.

Income Tax

(See Appendix “B”)

The Decree establishes a tax incentive equivalent to one-third of the income tax (“IT”) for the year or monthly tax returns related to income earned in the Northern Border Region (the “Border Region”) for certain persons carrying out business activities in the Border Region.  That is, sets a rate of 20% for certain individuals and entities of the Border Region.

It is worth mentioning that the IMMEX companies, among others, are excluded from this tax incentive.

Value Added Tax
(See Appendix “C” )

The Decree establishes a reduction of 50% of the value added tax (“VAT”) in the sale of goods, rendering of services and use or enjoyment of goods when the material delivery of such goods is in the Border Region.

Excluded from the preferential rate of 8% are both imports of goods and services, as well as the sale of real property, intangibles, as well as the supply of digital content.


The application of the benefits of the Decree is optional. Each taxpayer who is eligible must analyze and decide if it applies for the incentive. Non-implementation will result in the loss of the right to apply for it.

The above, in the case of VAT, will result in having suppliers that will apply the 8% rate and others that will apply the 16% rate.


 Appendix “A”


Baja California





Todos los Municipios

/ All Cities

San Luis Río Colorado

Puerto Peñasco

General Plutarco Elías Calles





Santa Cruz



Agua Prieta




Praxedis G. Guerrero


Coyame del Sotol


Manuel Benavides




Nuevo León






Piedras Negras





Nuevo Laredo



Miguel Alemán


Gustavo Díaz Ordaz


Río Bravo

Valle Hermoso


Appendix “B”

Income Tax Incentive

In short:

  • Rate of 20% on IT in the Border Region.
  • Request authorization; annual term.
  • Optional – Assess implementation.
  • Not all are eligible. IMMEX companies were left out

What is the incentive?

It is a tax credit equivalent to one-third of the income tax for the year or monthly tax returns related to income earned in the Border Region. That is, it sets a rate of 20% for certain individuals and entities residing in the Border Region.

It has an annual term.

To whom is the incentive given?

The beneficiaries of the incentive are:

  • For-profit entities.
  • Entities organized by individuals who have opted for the accumulation of income by entities.
  • Individuals with business activity.
  • Residents abroad with a permanent establishment in the Border Region

Who, in addition:

  1. Are domiciled (tax address, branch, agency or establishment) in the Border Region for 18 months or more prior to the date of the filing of the application for the incentive. If approved, the taxpayer will be recorded in a registry of beneficiaries.
  2. Have obtained at least 90% of their total income in the immediately preceding tax year in the Border Region.
  3. Request authorization from the Tax Administration Service (“SAT”) to be recorded in the registry of beneficiaries before March 31st of the corresponding year.
  4. Have the advanced electronic signature.
  5. Have access to tax inbox, and
  6. Participate in SAT’s “real-time verification program”.

To whom was the incentive NOT given?

In addition to the Excluded Taxpayers, the following taxpayers are also excluded from the IT incentive:

  • Those who apply other tax incentives or treatments that grant benefits (not exemplified nor defined in the Decree).
  • Companies operating in the maquila/IMMEX regime.
  • Banking institutions, insurance, surety, general deposit warehouse companies, financial leasing and credit unions.
  • Those who obtain income through professional services.
  • Taxpayers in liquidation.
  • Those who carry out agricultural, livestock, forestry or fisheries activities,
  • Among others.

What income is not included in the incentive?

Revenue for intangibles or deriving from digital commerce.

If we have LESS than 18 months in the border Region or my entity was just formed, would I benefit from the incentive?

Yes, if you prove to have:

  • A tax address (branch, agency or establishment) in the Border Region
  • Economic capacity, assets, and facilities to develop business activities.
  • “New assets of fixed assets”, and
  • Have or estimate that more than 90% of your income will be in the Border Region.

How is the credit calculated?

Income tax credit will be for the amount resulting from multiplying a third part of the tax caused in the tax year or monthly tax returns by the proportion that represents the income earned in the Border Region (excluding income from the alienation of digital commerce and intangible goods) with respect to revenues earned in the year or period that corresponds.

How long can I apply the incentive?

For the fiscal year in which it is approved. If granted in 2019, renewal must be presented for 2020.

If a taxpayer was not eligible for 2019, it may request it in 2020.

Can you lose or forfeit the incentive?

Yes. You can lose the right to apply the inventive due to any of the following events:

  • For not applying the incentive when you have the right to apply it.
  • If the SAT revokes the right.
  • If during the tax year of 2019 at least 90% of the income of the taxpayer ceased to be in the Border Region, therefore making it not eligible for 2020.
  • If the above is considered on Excluded Taxpayer.
  • If consent to participate in the SAT’s “real-time verification program” is not granted.

What if I lose the right to apply the incentive?

All of the benefits will be lost in the fiscal year in which it happens, and the taxpayer must, within the month following the loss of the incentive, file supplementary tax returns by paying the income tax without the incentive updated for inflation purposes and surcharges.

Appendix “C”

VAT tax incentive

In short:

  • A rate of 8% for operations in the Border Region.
  • Does not apply to imports, or alienation of real property or intangibles nor the delivery of digital content.
  • Optional – Assess implementation. Due to this, there will be some suppliers that will apply an 8% rate and others that will apply a 16% rate.

What is the incentive?

Applying an 8% rate to the value of the following acts or activities carried out in the Border Region for:

  • Sale of goods (when the material delivery of them is made in the Border Region). If the material delivery of the goods is made outside the Border Region, the 16% tax rate must be applied.
  • Rendering of services (even though the Decree does define what should be interpreted as services being rendered in the Border Region), and
  • Temporary use or enjoyment of goods.

Each taxpayer will have to decide if it applies or not the 8% rate to its operations.

To what operations does the 8% rate does NOT apply?

The 8% rate does not apply in the following operations:

  • Sale of real property.
  • Sale of intangible goods.
  • Supply of digital content.
  • Importation of goods or services, and
  • Exportation of goods or services (which are taxed at 0%).

What should I do, in order to apply the rate of 8%?

  • File the notice for the incentive of VAT no later than January 30, 2019.
  • Issue electronic invoices applying the reduced rate.

What happens if I lose or I decide not to apply the rate of 8%?

The 16% rate will continue to apply.

Please note that this document is intended to be an alert and for informational purposes only. Thus, this document does not constitute any form of legal opinion or recommendation and should be used as a guide.

For specific questions, please contact us.

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |

12 Legal Reforms of President Andrés Manuel López Obrador

By – Lic. Daniel Gancz.

The current President of Mexico, Andrés Manuel López Obrador, began to promote reforms to numerous laws, with the purpose of initiating a profound change in Mexico. The following is a brief summary of the first 12 reforms that the current President intends to promote:

1. Regulatory Law of Minimum Wages.

This law refers to the initiative of the Federal Law for the Remuneration of Public Servants (hereinafter referred to as the “LFRSP”) published in the Official Gazette of the Federation on November 5, 2018, regulating articles 75 and 123 of the Political Constitution of the United Mexican States (hereinafter referred to as the “CPM”). Said LFRSP establishes that no public servant may receive remuneration or compensation for the performance of their function, position, employment or commission, greater than that received by the President of Mexico.

2. Creation of the Secretariat of Public Safety.

Reforming the Organic Law of the Federal Public Administration, to create the Secretariat of Public Security and Citizen Protection (hereinafter referred to as “SSPC”). It is intended to grant the SSPC functions and powers similar to those currently performed by the Secretariat of the Interior in matters of public safety, such as matters of national security and civil protection in the event of natural disasters. If the proposed reform is approved, the SSPC would be in charge of the Federal Police, investigative faculties, preside over the National Council of Public Security, and be in charge of the National Intelligence Center (currently known as National Investigation and Security Center).

3. Abolition of Political Exemptions and Privileges.

Reforming article 108 and article 111 of the CPM, to abolish the ‘fuero’ and political privileges enjoyed by the President, so that he can be tried for electoral crimes and corruption offenses. Currently, these articles protect the acting President, so that he cannot be tried while he is in office. On the other hand, the President of the Senate, Martí Batres Guadarrama, will propose a reform to put an end to the same privileges and exemptions currently enjoyed by Senators and Members of Congress.

4. Classification of New Felonies.

Reform to article 9 of the CPM and article 167 of the National Code of Criminal Procedures, to consider as major felonies, without the possibility to obtain bail, the following criminal offenses:

  • Sexual abuse or violence against minors;
  • Use of social programs for electoral purposes;
  • Forced disappearance of individuals and disappearance committed by individuals;
  • Crimes relating to hydrocarbons, petroleum or petrochemicals;
  • Crimes with firearms and explosives exclusively used by the Army, the Navy, and the Air Force;
  • Transportation theft in any of its modalities;
  • Crimes relating to corruption (illegal enrichment and abuse of authority)
  • Electoral crimes (purchase of votes, using the budget to favor political parties and candidates, forgery of electoral ballots and certificates, and others);
  •  Issuance of false or apocryphal invoices; and,
  •  Femicide.

5. New programs and projects to be included in the Revenue and Budget Act of 2019.

The draft of the Revenue and Budget Act of 2019 includes, among other matters, aid for several programs that form part of the so-called Wellbeing Plan, such as:

  • Increase in pensions for the elderly;
  • Pensions for people with disabilities;
  • Scholarships for basic level students;
  • Scholarships for high school and college students of $2,400 pesos per month;
  • “Young people building the future” (Jóvenes construyendo el futuro), which consists of training young people to work;
  • “Sowing life” (Sembrado de vida), which aims to create employments for sowing fruit and timber trees;
  • “Maya Train” Project, which aims to build 1,500 kilometers of railway tracks; and,
  • Reactivation of the Oil Industry.

6. Transfer the Presidential Guard to the Secretariat of National Defense.

Stemming from the decision of Andrés Manuel López Obrador to disappear the Presidential Guard, the head of the Secretariat of National Defense (hereinafter referred to as “SEDENA”) and the Chief of the Presidential Guard (hereinafter referred to as “EMP”) made the necessary arrangements so that SEDENA, as of December 1st, 2018, undertook command of all elements that make up the EMP and the Presidential Guard Corps, totaling around 8,000 elements.

7. Reverse Water Privatization Decrees.

There are plans to reverse the 10 water privatization decrees signed by former president Enrique Peña Nieto (hereinafter referred to as “EPN”). These decrees eliminated prohibitions at nearly 300 hydrological basins in the country. Likewise, each decree indicates the percentage of water that can be used and resourced from each basin, through concession titles granted to individuals. The reform aims to establish “water reserve areas for domestic, public, urban and environmental use, or for the ecological conservation of hydrological basins.”

8. Revoking of the Educational Reform.

There are plans to cancel the educational reform instituted by EPN, and instead present a new educational reform derived from a consultation to be conducted nationwide, where teachers, education experts, and parents express their views. Andres Manuel López Obrador argued that “the educational reform seeks for the entire structure to be guided towards a much more equitable situation in Mexico, with more emphasis and efforts for the poorest areas of Mexico, the less developed areas and regions. Make girls, boys, and teenagers the priority, and give them quality. It will be quality education and we will improve in the world ranking.”

9. Modify Article 3° of the CPM.

The reform of article 3 of the CPM consists of public and free education for all at every level, including high school and University. The purpose of this reform is to include higher education as a fundamental human right for all Mexicans.

10. Create the Revocation of Mandate.

It consists of creating the figure of the revocation of a mandate of the President of Mexico before the end of its term, for the following reasons:

  • Loss of trust;
  • Non-compliance with the work plan or campaign commitments;
  • Acts of corruption or violation of laws.

The revocation of the mandated mechanism would be conducted via public consultation, which would be binding and mandatory. At the moment, the details of this procedure are unknown.

11. Reforms on an increase to the minimum wage at the border.

There are plans to apply reforms to the Unique Self-Determination System of the Mexican Social Security Institute, with the purpose of increasing the minimum wage (hereinafter referred to as “SM”) in the States that make up Mexico’s northern border, as of January 1st, 2019 to be set at $176.72 pesos.

12. Adjust the Administration to the austerity plan.

The purpose of this initiative is to carry out changes in laws, regulations, decrees or agreements to adjust the government’s administrative structure to the austerity plan, which would involve merging areas, eliminating undersecretaries, delegations and other agencies in the government offices to reduce public expenses in general.

The items included in the initiative for the Austerity Plan Act are the following:

  • Eliminate retirement pensions for former presidents of Mexico;
  • Avoid the creation of new positions in the public sector;
  • Reduce salaries and benefits for public officials that form part of the Executive, Legislative and Judicial branches;
  • Restrict the use of bodyguards, security forces, private secretaries and advisors;
  • Limit the use of State-owned vehicles;
  • Restrict spending on official propaganda;
  • Incorporate officials into the public social security systems;
  • Restrict private medical and life insurance policies charged to the treasury;
  • The creation of trusts, funds intended to make contributions of any nature that alter the rules of discipline and honest practice of public expenses will be prohibited;
  • Limit the number of official trips abroad for each public servant;
  • Limit room and board expenses for public servants;
  • Limit all operating expenses of government offices.


Please note that this document is intended to be an alert and for informational purposes only. Thus, this document does not constitute any form of legal opinion or recommendation and should be used solely as a guide.

For specific questions, please contact us.

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |

The increase of the Minimum Wage 2019

By – Lic. Alejandro Pedrin.

As of January 1, 2019, the general minimum wage in Mexico will increase in two geographic zones of the country:

  1. The National General Minimum Wage will increase from $88.36 pesos per day to $102.68 pesos per day in the entire country with the exception of the free zone located at the northern border and shared with the U.S.
  2. The General Minimum Wage applicable in the free zone located at the northern border will increase from $88.36 pesos per day to $176.72 pesos per day. That is twice the current minimum wage.

The free zone at the northern border includes the cities located in a strip of land of 25 kilometers of the border with the U.S. (attached you will find the location of the border zone).

It is important to note, that professional minimum wages will increase by 5%, depending on the profession or activity (attached you will find the list of professional minimum wages). 

In addition to the above, deriving from the salary increase, the social cost of the operations of the companies will increase. Some of the concepts that will increase are:

  1. Labor indexed premiums or bonuses;
  2. Social Security premium;
  3. Housing premium;
  4. Savings funds;
  5. Employment benefits, and
  6. Ordinary or extraordinary labor unions premiums or fees.

It is very important that employers take into consideration that the reduction of the salary to an employee or the unilateral elimination of the labor benefits, is prohibited by the Federal Labor Law. Employers should be cautious with the strategies that may be implemented to impact the minimum wage increase, due to the fact that such strategies may result in labor rescission claims, labor inspections or fines that could imply significant costs for the employers.

Our labor law specialists will be glad to assist you and answer any questions that you may have relating to this matter or any other legal aspect that may have any implications for your company or organization.

Truly yours,

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |


Aspects of AMLO’s Government National Plan and Main Public Policies – Part II.

By – Lic. Hector Torres


During the first year of AMLO’s government, it is not anticipated that the Maquila Program (IMMEX) [Mexico’s current export manufacturing program] will undergo significant changes.  However, the renegotiation of NAFTA might bring some changes in the form how supply chain manufacturing is set up in the aerospace and automotive industry.

Among the significant changes that have been negotiated between the US and the Mexican governments is the increase in percentages in the regional content of parts manufactured in Mexico and the US for their incorporation in the automotive industry. Another important feature negotiated is the significant increase in wages to be paid to certain employees in the automotive industry. Other changes in the free trade agreement incorporate modernizing the customs procedures, mutual cooperation in the fostering certain economic sectors (like agricultural exports to the US) and the review of the treaty every 6 years.

Both current president Enrique Peña Nieto (“EPN”) negotiators and AMLO’s transition team have worked closely in the negotiations of NAFTA 2.0.

In a formal letter to Trump, delivered on July 12, 2018, and read aloud by his proposed foreign affairs minister Marcelo Ebrard in a press conference, AMLO confirmed his willingness to work together with the U.S. and Mexican administrations on key topics that of course included bilateral trade. Other areas mentioned by AMLO as essential in the government agenda included sustainable development and security at the borders immigration.

“Prolonging the uncertainty could slow down investments in the medium and long-term”. “I propose to resume negotiations with the participation of representatives from Mexico, Canada, and the United States.”[1]  AMLO wrote in the letter that was posted on his website.

On September, Mexico and the US reached a preliminary agreement that resolved the main bilateral commercial concerns on both sides to continue with a NAFTA 2.0. It is important to note that this was merely a memorandum of understanding and the final drafting is yet to come. After all, Canada has not participated in this preliminary understanding, so further negotiations with the Canadian government may be extended for several weeks.

Mexico and Canada understand the importance of keeping the trilateral free trade agreement (NAFTA) despite the fact that the US government has stated its desire to have bilateral agreements with each county.  It will be necessary to follow the upcoming meetings to know the final decision on the immediate future NAFTA.

In October 2018, the uncertainty came to an end, and the Canadian and US negotiators reached an agreement to replace the North American Free Trade Agreement (NAFTA).

The new treaty will be renamed the United States-Mexico-Canada Agreement (AEUMC) or USMCA for its acronym in English.

After more than a year of negotiations, governments have managed to overcome their differences and give in on a compromise regarding some aspects. In the statement, they celebrated the agreement as a good deal for the citizens of this region, in which 500 million people live, and that moves 1 trillion dollars per year in commerce.


AMLO is planning to develop the “Tren Maya” (Mayan Train) with 1, 500 kilometers in the south-southeast and south areas of Mexico. If correctly planned and executed, this could represent a good opportunity to open tourism to the states of Tabasco, Chiapas, Campeche, Yucatan, Quintana Roo, and the so-called Mayan Route so that tourists can appreciate the Mayan culture, thereby boosting the economy of the said region. It is well known that this project is considered to be part of the developing infrastructure projects with Public-Private Partnership investment. AMLO wishes this project to be inaugurated in 2021-2022, although certain experts consider such date to be too soon due to the complexities and challenges that this project entails.


AMLO is planning to invest more money from the government budget to create new and better agricultural programs to rescue Mexican agricultural land. The agricultural plan is to turn Mexico’s agricultural land into self-sustaining lands in terms of food. In order that said agricultural lands be rescued, it will be necessary to enact public policies that at the very least guarantee stabilization of prices and good payment terms to producers.

The purpose of this agricultural plan is to lower the dependency of Mexico on the purchase of corn, beans, and rice from foreign producers. “The last report regarding these products, showed Mexico buying 40% of its consumed corn, 20% of beans, and 80% of rice from producers abroad. The plan is intended to promote national consumption.”[2]


AMLO has repeated on numerous occasions that he will not seek a constitutional change to reverse the 2014 energy reform and will respect the legitimate contracts signed under said reform. However, he has pointed out that his government will make an extraordinary effort to rejuvenate the state-owned oil company Pemex.

Recently, AMLO further stated that his government would invest US$9.4 billion dollars in the state-owned company, including two new oil refineries and the renovation of six existing ones. Additionally, he wishes to give US$4 billion to Pemex for exploration, and he wishes to boost Pemex production from 1.9 million barrels a day to 2.5 million a day within two years

He also stated that his plan is to modernize six refineries. There has been a reconfiguration and modernization process in the Minatitlan, Cadereyta, and Ciudad Madero refineries. This has been done with an investment of approximately 800 million dollars, but as a result of corruption, such refineries are still not operating and they do not have the capacity to produce gasoline[3].

It is important to state that this is a brief summary of the main points of the AMLO’s National Plan as published. Nevertheless, we consider that the stated items in this memorandum may vary due to the different factors (for example: economic, political, foreign negotiations, etc). We acknowledge that AMLO’s proposals may be adjusted from time to time, as the Federal Government sees fit.

Note: The content of this memorandum was taken from the interview, news, and Mr. Lopez Obrador’s statements.

[1] Andres Manuel Lopez Obrador, page 2, fifth paragraph of the letter to president Donald Trump delivered on July 12, 2018.

[2] Andres Manuel Lopez Obrador, Bulletin 016-06, web page published on August 10, 2017.

[3] Andres Manuel Lopez Obrador at the Woodrow Wilson Center’s Mexico Institute interview in July 2018.

Should you have any questions and/or comments relating to the above, please do not hesitate to contact us.

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |


Aspects of AMLO’s Government National Plan and Main Public Policies- Part I. 

By – Lic. Hector Torres.

The election of Andres Manuel Lopez Obrador, widely known as AMLO, happened in a landslide victory on July 1 as a historic event for Mexico. His election exposes widespread feeling of frustration with the high rates, corruption scandals, and slow uneven economic growth despite the speech of the current government. México has evolved into a sophisticated economy, and although from the macroeconomic perspective, it seems Mexico has stability, there are still many areas of opportunity which the AMLO government is looking to tackle.

Still, there is still a considerable number of questions since the election about how AMLO will govern and what policies he will pursue. We are currently undergoing a transition period and therefore, in following the election, AMLO’s team has worked hard to signal that his administration will not undermine Mexico’s macroeconomic stability or health of the financial markets.

Crucially, AMLO tasked a distinguished group of experts with the preparation of his political party (“MORENA”) the “National Plan 2018-2024”. These experts incorporated reputable academic professionals, prominent entrepreneurs, businessmen, retired public officers, and court members. The plan had been conceptualized and developed over a good number of years, taking into account AMLO’s visits to different regions of Mexico, and that gave him a grasp of the needs and solutions that such regions require to abate the poverty levels and increase sustainable economic development.

It is important to note that the National Plan was published in November 2017 and it foresees economic and social policies that are aimed both to reactivate public and private investment, that averaged an inadequate 23% of GDP under Peña Nieto’s six years’ presidential period, and to make the Mexican economy more competitive and equitable. But beyond that, it also explains how such policies will be financed through reductions in operational costs and in fighting governmental corruption.

AMLO’s National Plan targets job creation, improved and increased salaries, and higher, yet sustainable growth rates. A focus on human development and on-the-job training should also enable the incorporation of new technologies and innovative practices that can improve productivity, particularly in lagging sectors such as agriculture.

Since MORENA (AMLO’s political party) and its allies have majorities in both the Senatorial and the Deputies’ Chambers, conceptually speaking it will be easier for AMLO to carry out its National Plan.

The following is a brief summary of the main points of AMLO’s National Plan as published. One should bear in mind that although unlikely, it is possible that some of the objectives stated below will not reach the desired level of implementation, as this is subject to a number of factors that may be beyond the control or reach of the Mexican government.


Focus on developing industrial and technological sectors to create better-paid jobs, strengthening the domestic market through the integration of productive supply chains, boosting the present low levels of national content of Mexican exports, and implementing industrial and technological policies to engender an environment that rewards innovation and the generation of new ideas, not least through increasing science and technology expenditure to one per cent of GDP. For instance, there is already a decree proposal (that is being discussed in the Mexican Congress) to double the amount of minimum wage in the border areas. Needless to say, even with the possibility of doubling the minimum wage, if the initiative is passed through Congress, very few companies in the border region offer minimum wage to their employees, as the market conditions prevailing in the northern Mexican States are different from those in Central and the South of Mexico.

Focus on a deficit reduction that to be achieved not by increasing taxes or creating new ones as in previous governmental reforms, but rather through the reduction of public expenditure and targeting misuse of public funds. According to AMLO’s team, the resulting savings will allow for increases in public investment, that is today at its lowest rate (relative to GDP) since World War II. This investment will go towards public services and infrastructure in social and productive sectors.

AMLO proposes to change the public expenditure-investment mix through a number of measures:

  • Reduction of the operative cost of federal government;
  • Increase of transparency (and reduction of corruption) while handling federal funds (through the transparency institutes to be created for such purpose);
  • Centralization of government procurement;
  • Consolidation of social programs and administrative government structures, and;
  • Cutting high-ranking civil service posts and reviewing associated benefits.

Such measures are projected to save approximately roughly Mx$400 billion pesos (or 2% of GDP), as there appear to be current expenditures that could be cut. In 2016, expenditure for health, social development, and agriculture came in under budget, but expenditure in the office of the Presidency was 85 percent over budget only in the last year. Sixty percent of these savings will go toward infrastructure and regional impact projects; twenty-six percent toward social projects, including youth and elderly support; and 14 percent toward reducing the fiscal imbalance.

With regards to the economic sector, AMLO is planning not only to work with the different government Secretariats but also by promoting private investment in the so-called Public-Private Partnerships (PPPs) to carry out the infrastructure projects that he plans to implement in the country during his term.

Developing infrastructure projects through PPPs in the south-southeast and south areas of the northern territories of the country is one of the great bets of AMLO to position México as a world-class logistics platform.


AMLO has openly spoken regarding the tax terrorism created by the multitude of tax and accounting audits always performed by the Mexican IRS (SHCP). On more than one occasion he has stated that his government will work to shift the tax audit policy by changing attitude of the federal government to that of granting a vote of confidence to taxpayers rather than not treating them as if they were tax evaders or criminals (which seems to be the current attitude of the SAT). Likewise, he has proposed that in his Mid Term, he would propose a bill to Congress in order that individuals and companies file and pay their taxes through a simplified form and process.

The main points that are being reviewed by AMLO and his economic team are:

AMLO’s government will not increase taxes, and the federal government will not impose new taxes (at least through the initial term). An adjustment will be made to the Federal Income Law that will substantially modify the manner in which public expenditures are made, such being only to create a better distribution of said the governmental expenditures and to increase the support of low-income families in Mexico, through different social programs in various economic sectors.

From a general perspective, AMLO’s economic team seems to be working hard to avoid a significant change in the economic model that started with the enactment of NAFTA. No changes to the tax regime during 2019 are expected, and the Mexican government will seek fiscal discipline by the issuance of a better 2019 Federal Income Law.

As you may also know, the current Mexican government has created a digital environment in which every commercial transaction is tied to an XML and UUID (digital platforms), that includes every purchase, every credit/debit note, every journal entry and every Value Added Tax report. If any link in the digital chain is missing, or if there is any error at any point, an electronic audit from the tax authority (SAT) is inevitable. However, AMLO’s government plans to provide the taxpayer with the trust and simplicity to declare and file their income through a simplified form.

Additionally, the government is planning to terminate the implementation of electronic audits, and instead, only randomize this audit process when companies file their declarations improperly. Despite the fact that this sounds like a better option, they will have to review the reaction of the taxpayers in order to confirm if this new tax procedure works. The Mexican government is planning to apply this process for 1 (one) year in order to determine how things work out, and collect material for a possible tax reform by midterm.

One of the most important of AMLO’s campaign promises was to reduce Value Added Tax (currently rated at 16%) and Federal Income Tax (currently 35% at its highest rate) for the Border areas (comprising the states of Baja California, Sonora, Coahuila, Chihuahua, Nuevo León y Tamaulipas).

On September 4, 2018, a proposed Decree to reduce the percentage of Value Added Tax and Income Tax rates in the Border area was submitted to Congress for discussion. Basically, the proposed Decree seeks to recognize that the northern states across the US/Mexico Border strip area of Mexico have an economy different that of the rest of the country, derived from their geographic location, and because of their direct competition with southern states of the United States of America. Therefore, a dependence on the dollar is caused as it is used in this region as the currency of exchange in many transactions.

Congress members stated that “it is necessary to recognize that current conditions and the current tax system harms the development of economic activities in the northern part of the country, mainly in commercial, industrial, construction, and primary sector matters, and therefore, that brings the need to make a change to achieve the boost of economic competitiveness, development and welfare of inhabitants of the border area and the border region of northern Mexico”[1].

The abovementioned reasons were the main argument for the draft of the proposed Decree. Such Decree promotes that within the border area and region of northern Mexico there be a reduction of the Value Added Tax rate to 8 percent, and of the Federal Income Tax to 20 percent. These tax cuts would contribute to the social, productive, commercial and industrial development of the northern region of Mexico.

The current Mexican Congress seeks principles of proportionality and justice based on a differentiated taxation scheme for border areas. At present, the current Federal Government promotes the economic activity of the country based on policies that provide for macroeconomic results, but that failed to benefit middle and lower class populations. On the contrary, purchasing capacity and purchasing power have been hindered, while companies have increased their costs due to the high-Income Tax and VAT rates, worsening the situation in the regions of the northern US/Mexico border.

Consequently, it is urgent to implement the fiscal cut measures in order to support the productive sector, and particularly workers who live in the northern part of the country.

[1] Parliamentary Gazette, year XXI, number 5106-III, Tuesday, September 4, 2018.

Are your deductions at risk?

By – Lic. Leobardo Tenorio.

The Tax Administration Service (“SAT”) is reviewing, analyzing and, in certain cases, auditing the operations of taxpayers with their suppliers.

With electronic invoicing, SAT can easily cross-check information regarding operations between customers/suppliers. Although SAT is mainly reviewing operations of companies that are considered by SAT to be Simulated Trading Companies, or “EFOS” as they are commonly known, it is also reviewing to ensure that payments to suppliers are justified.

The main characteristics of the “EFOS” are that they do not have the personnel and they do not have infrastructure or assets to carry out the operations for which they invoice, as well as that

  • They have a broad corporate purpose.
  • Issue electronic invoices (or CFDI) for operations, not actually carried out.
  • The income that they receive is disproportionate, taking into consideration is the characteristics of their operation.
  • They open bank accounts and cancel the same after a short period of time.
  • Their tax address is not the same as that indicated in their Federal Taxpayers Registry (RFC).
  • During a certain period of time they can be located by the SAT, but subsequently, they disappear.
  • At the end of the fiscal year, their annual tax return shows that the income and expenses are very similar.
  • They share tax domiciles with other taxpayers.

In operations with possible EFOS or suppliers, the SAT is analyzing, for the first time, the “materiality” and “the business reason” of the purchase of goods or services.

While it is true that “materiality” is not a legally defined term, such must be understood to be supporting documentation for the purchase of goods or services, with the operations having to comply with the principles of economic justification, reliability, accuracy, and verifiability.

On the other hand, “business reason” is understood, to be the genuine reason for which the purchase was carried out, beyond the fiscal implications. That is if an operation is not carried out with the purpose of obtaining a profit, besides the tax benefit, the administrative or judicial authority will not recognize the taxpayer.

Based on these considerations, it is very important that all of the operations carried out to comply with the “materiality” and “business purpose” requirements.

With regard to materiality, it is essential that the operations carried out be supported by contracts, purchase orders, delivery records, progress reports of services, etc.   In the event of services, the form, the temporality and the “deliverables” of such services, and having such documentation available in the event of an inspection.

Failure to comply with the “materiality” and “business reason” requirements could have as a consequence that the expenses are considered by the SAT as “nondeductible”.

For any questions or comments, please do not hesitate to contact us.

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |


By – Lic. Mauricio Tortolero.

The lump sum construction contract, or for fixed price (the “Contract”), is a contract in which a person called “contractor” agrees to execute, under its direction and supervision, and with its own materials, a construction commissioned by another person called “owner“, who in exchange agrees to pay the contractor a fixed price which is determined at the time that the Contract is executed.

The Contract: (i) generates obligations to the contractor and to the owner, (ii) includes benefits and obligations to the parties that participate in the same, (iii) establishes the normal economic result as of its execution allowing the parties to immediately determine if it will produce a profit or a loss, (iv) is carried out over a period of time during which the contractor and the owner perform their obligations, and (v) prohibits the contractor from entrusting to another party the execution of the construction unless there is express agreement to the contrary with the owner.

The most important elements of the Contract are that it must be possible to physically and legally carry out the construction and that the price be fixed and agreed by the parties, usually through the payment of money, or in another way such as the transfer of ownership in favor of the contractor of part of the construction that is being carried out.

The principal obligations of the contractor in the Contract are:

  1. To execute the construction personally.
  2. To perform the construction entirely or in parts, and
  3. To guarantee the construction against construction or workmanship defects, or against the poor quality of the materials used during construction or defects.

The principal obligations of the owner in the Contract are:

  1. To receive the construction, and
  2. To pay the price to the contractor.

In addition to what is agreed by the parties in the Contract, the Civil Code establishes that the Contract will end in the event of:

  • Death of the contractor.
  • Rescission of the Contract by one of the parties in the same, and
  • The decision to stop performing the construction.

The usual terms and conditions included in the Contract are:

  • The determination of the construction work that will be carried out by the contractor through the attachment to the Contract of the specifications, plans, drawings, characteristics of the materials, construction program, payment schedule, and other documents that are required for such purpose.
  • The declaration by the contractor that it has sufficient resources to carry out the construction, such as personnel and equipment, as well that it has the employee/employer registries with the Treasury Department, Social Security Institute and the Federal Housing Institute for Employees.
  • The acknowledgment that the contractor knows the site where the construction will take place and that it has carried out an inspection in order to ensure that the construction entrusted by the owner may be carried out.
  • The term for the execution of the construction, the penalties for non-compliance, and the prizes to be awarded in favor of the contractor in the event of early termination.
  • The form of the payment of the price, the inspections to be carried out by the owner, and the total or partial acceptance of the work carried out by the contractor.
  • The modifications of the constructions to be carried out through the execution of change orders.
  • The events in which the construction work can be suspended or terminated early.
  • The insurance policies (civil liability) and bond policies (advance payment, fulfillment of obligations, and guarantee) to be delivered by the contractor, as well as the reserve fund that will be formed with the percentage of payments that the owner will periodically make to the contractor in order to serve as an additional guarantee to the owner in the event that the contractor fails to comply with its obligations.
  • The responsibility for obtaining the permits and licenses that are required for the performance of the construction and the compliance with the legal provisions, and
  • Breach by the contractor and the causes of termination of the Contract.

In the event that you would like to receive further information relating to lump sum construction contracts, please contact one of the following attorneys:

Leobardo Tenorio-Malof   |
Héctor Torres-López   |
Alejandro Pedrín   |
Mauricio Tortolero   |
Daniel Gancz-Kahan   |
Alejandro Ceballos   |

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