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Mexico’s Tax Authority Enforces Beneficial Ownership Disclosure Rules
Enhancing Transparency and Combating Money Laundering
As of January 1, 2022, Mexico’s Federal Tax Code (FTC) requires legal entities and trusts to disclose their beneficial owners as part of their accounting information. This new obligation aims to enhance transparency and combat money laundering.
What is a Beneficial Owner?
The FTC defines a beneficial owner as an individual or group that directly or indirectly derives benefits from a legal entity, trust, or other legal figure. It also includes individuals or groups that exercise control over a legal entity or trust through voting rights, board appointments, or strategic direction.
Compliance Requirements
To comply with the new rules, obligated parties must:
- Implement internal control systems to identify and verify beneficial owners
- Maintain accurate records of ownership structures
- Grant access to tax authorities upon request
Failure to comply can result in fines ranging from MXP 500,000 to MXP 2,000,000 (approximately $25,000 to $100,000).
Consequences of Non-Compliance
Non-compliance can also lead to a negative opinion regarding the entity’s compliance with tax provisions, effectively limiting its ability to participate in public biddings and contracting with government entities.
Importance of Compliance
As Ángel Escalante Carpio, founding partner at Escalante & Asociados, notes: “It is crucial for obligated parties to stay up-to-date with these obligations and maintain a specific file related to the beneficial owner.”
Companies that engage in vulnerable activities under anti-money laundering regulations may already have systems in place to identify and store information about their clients’ beneficial owners. These entities can leverage this existing infrastructure to integrate a comprehensive compliance program.
Conclusion
As the tax authority continues to enforce these new rules, it is essential for legal entities and trusts to prioritize transparency and compliance to avoid severe penalties.