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Mexico Implements Beneficial Ownership Disclosure Rules

Effective January 1, 2022, Mexico has joined the growing list of countries requiring companies and financial institutions to disclose beneficial ownership information. The new rules are broad in scope but unclear in their application, leaving many entities wondering how to comply.

What are the New Regulations?

Under the new regulations, all legal entities, trusts, and other vehicles in Mexico must gather and maintain extensive information on controlling beneficiaries, including personal details such as:

• Name
• Date of birth
• Contact information

This information must be updated within 15 days if there are any changes to the controlling beneficiary’s identity or participation.

Who is Affected?

The rules also apply to public notaries and others involved in the formation of legal entities and financial institutions, which must obtain information on controlling beneficiaries and provide it to Mexico’s Tax Administration Service (SAT) upon request.

Determining Controlling Beneficiaries

Determining who is a controlling beneficiary can be complex, as individuals may exercise control indirectly through other legal instruments or contracts. The Financial Action Task Force and the Global Forum on Transparency and Exchange of Information for Tax Purposes have issued guidelines that can be used to interpret these provisions, but Mexico’s regulations are not consistent with international recommendations.

Consequences of Non-Compliance

Failure to comply with the new rules can result in significant penalties, ranging from 500,000 to 2,000,000 Mexican pesos (approximately $25,000-100,000 USD) per controlling beneficiary and potentially even suspending or canceling a non-compliant entity’s digital seals, which could severely impact its operations.

Compliance Requirements

To determine who are the controlling beneficiaries, entities must:

• Review their corporate structure and documents
• Gather all required information on controlling beneficiaries, including the chain of control if applicable
• Document it properly

Designing and implementing internal control procedures to obtain, maintain, and update information on controlling beneficiaries is also crucial. With the extensive information required and potential sensitivity of some data, entities should start the process as soon as possible.

Conclusion

While compliance may be challenging, there are no exceptions under the new rules, and the Tax Administration Service is unlikely to show sympathy to non-compliant entities regardless of the reasons. It is essential for Mexican legal entities to take immediate action to comply with these new requirements.