Num. 2022-3 | Tax New Tax Obligation to Identify The Controlling Beneficiary

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Controlling Beneficiary

New Tax Obligation to Identify The Controlling Beneficiary

The 2022 tax reform included several changes to the Federal Tax Code (“Tax Code”), amongst them, new obligations for taxpayers and other individuals were included, specifically requiring them to identify “Controlling Beneficiary” of legal entities.

In short:

Taxpayers are now required to identify who is the actual individual or group of individuals that are the beneficial owners of their legal entity, trust, or any other legal entity or vehicle, whether it is a national or foreign company, a trust, or other nation or foreign legal vehicle.

Below, please find a summary of the obligations established in the Tax Code.

Who is obligated to identify the Controlling Beneficiary?

  • Legal entities.
  • In the case of trusts, trustees, and trustors.
  • Contracting parties in any other legal vehicle.
  • Public Notaries/brokers and any other person who intervenes in the formation or execution of contracts or legal actions that give rise to the incorporation of legal entities or the celebration of trusts, or any other legal figure
  • Financial entities and members of the financial system.

Who is the Controlling Beneficiary?

According to the Tax Code, the Controlling Beneficiaries are individuals or groups of individuals who, in general terms:

  1. Obtains a Benefit. Directly or indirectly, receives a benefit derived from participating in a legal entity, trust, or other legal vehicles.
  2. Exercises rights. Those who ultimately exercise the rights of use, benefit, or disposal of a good or service, or in whose name a transaction is made.
  3. Control. Those who directly, indirectly, or occasionally exercise control of the legal entity, trust, or any other legal vehicle.

What does it mean to have “control” over a legal entity, trust, or any other legal figure?

  • Impose, directly or indirectly, decisions in a Company, shareholders meetings, partners, or equivalent bodies.
  • Authority to appoint or remove directors, managers, or equivalent.
  • Maintain ownership that allows, directly or indirectly, to exercise a vote of more than 15% of the Company’s capital.
  • Please note that, in our opinion, does not mean that there is no obligation to identify those who have less than 15%, since they may be in some other assumption, such as obtaining an economic benefit.
  • Manage, directly or indirectly, the direction, strategy, or main policies of the legal entity, trust, or any other legal figure.

What happens if you can’t identify the Controlling Beneficiary?

Regarding legal entities, the Controlling Beneficiary will be the sole administrator or equivalent, or each of its members in case of a board of directors.

What other obligations do you have?

Identify, verify, and validate the controlling beneficiaries’ information and keep it up to date.

What information do you have to collect?

A series of personal information is established in several rules issued by the tax authority.

In a corporate structure, a series of information related to the legal entity that is used, such as country or jurisdiction of creation, incorporation or registration, and residence for tax purposes, amongst others.

When do you have to comply?

The information must be provided to the tax authority when it is required.

What happens if you do not comply?

Fines may be imposed ranging from MXN$500,000.00 up to MXN$2,000,000.00, in addition to other sanctions, such as not issuing a favorable opinion for tax purposes, amongst others.

TP Legal can help you to identify and document the Controlling Beneficiary, structure your internal control procedures, and advise you on compliance arising from said obligation.

Alejandro Pedrín   |   apedrin@tplegal.net
Héctor Torres-López   |   htorres@tplegal.net
Leobardo Tenorio-Malof   |   ltenorio@tplegal.net
Mauricio Tortolero   |   mtortolero@tplegal.net
Alejandro Ceballos   |   aceballos@tplegal.net
Elio Sánchez   |   ecsanchez@tplegal.net
Iván Curiel-Villaseñor   |   icuriel@tplegal.net
Raúl Escamilla-Sanromán   |   rescamilla@tplegal.net
Isaac Zatarain-Valenzuela  |  Izatarain@tplegal.net

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