Legal Agility in Mexico's Shifting Regulatory Landscape

Q: What are some of the key policy changes or developments that your firm is monitoring in Mexico?

A: Nearshoring is undoubtedly promising, especially in light of the ongoing trade conflicts between the US and China. Mexico, due to its proximity to the US, presents a significant opportunity for companies. Mexico also boasts one of the highest numbers of trade agreements in the world, making it an ideal location for investment.

This favorable outlook has increased investment flow into the industrial north, and businesses are seeking on-the-ground intelligence on the tax system, compliance standards and other legal frameworks. Despite a lack of federal incentives, several states have taken action to promote investment on various subjects including sustainability, payroll and property taxes.

Chevez Ruiz Zamarripa recognizes the challenges that companies face in navigating the Mexican legal system and tax landscape, and we stand ready to support these new ventures. We have already established a strong network of contacts in this space. We believe that there are two different situations to consider – those who are already here and those who are looking to establish themselves. With our expertise, we are confident that we can provide valuable assistance to these businesses. 

Q: What are some of the key challenges that companies face in avoiding double taxation through repatriation and how is your firm addressing these challenges?

A: Mexico has an advantage in the form of numerous  bilateral tax treaties. Most of these treaties alleviate or reduce the burden of taxation upon repatriation, but despite them, companies still face significant challenges to find mechanisms to avoid double taxation.

Our firm has an experienced international committee with extensive knowledge in the application of these treaties. We also actively participate in international forums, such as the International Fiscal Association (IFA). The IFA holds a global event that brings together about 2,000-2,500 tax experts from around the world and this year's event is scheduled to take place in October in Cancun. Our firm has the privilege of not only being a major sponsor of this annual congress, but also of leading the development of the technical agenda. This event presents a unique opportunity to network with advisors, academics and taxing authorities from all over the world. We believe this will be a solid platform to discuss interesting themes, such as tax developments, challenges and opportunities in cross border investments, and Mexico’s role in a shifting global framework. 

Q: Can you expand on what themes you will be delving into during your sponsored IFA event?

A: The OECD has launched several initiatives to address the practice of multinational corporations locating businesses in jurisdictions with low regulatory oversight, by which they can avoid paying taxes in higher-tax countries. These initiatives are focused on addressing tax base erosion and profit-shifting (BEPS), which refers to the practice of moving profits to low-tax jurisdictions to reduce the overall tax liability of a company. The OECD's project has resulted in the development of a series of action plans that countries can implement to prevent BEPS, including measures to improve transparency, prevent treaty abuse and address transfer pricing.

In addition to BEPS’ work, there is also a growing need for a coherent digital tax framework to address companies operating outside their own borders without a physical presence. This is particularly relevant for companies like Amazon and Mercado Libre, which conduct business in Mexico without a physical presence. The issue of digital taxation has become increasingly important as more businesses become digital, and it is an area that requires international cooperation to ensure that taxes are properly paid and distributed. The OECD has been working on a proposal for a digital services tax, which would apply to revenues generated by certain digital businesses. However, there are challenges to implementing such a tax, including determining which companies would be subject to it and how to allocate the tax revenues among different countries.

Q: What are some of the key intellectual property considerations that companies should keep in mind when expanding to Mexico?

A: The importance of intellectual property is on the rise, and we take it seriously at our firm. We established a dedicated practice specifically for this purpose. Fortunately, Mexico has made significant strides in terms of regulations around intellectual property, including trademark and patent registrations. However, the challenge for companies is understanding the legal framework so they can protect their intangible assets, such as their brands and processes.

In this era of globalization, numerous multinationals have shifted their focus away from tangible assets like machinery to intangible assets, which are becoming increasingly important. It is crucial for companies to review their status and take proactive steps to safeguard their intellectual property, which has significant and long-lasting implications for their success.

Q: What are your firm's near-term strategic priorities and how do you plan to achieve them?

A: Our company aligns its strategic priorities with broader industry trends and policy changes to ensure that we stay ahead of the curve. Although we are a 100% Mexican firm, we have always embraced internationalization and globalization. In Mexico, we have offices in Mexico City, Monterrey and Querétaro, and count with offices in Houston, Texas and in Madrid, Spain. We are used to competing with international firms, firms that have a presence or interest in Mexico. 

Participating in international organizations is a critical component of our approach and we dedicate considerable time to this task. We bring both the expertise of Mexico and a global vision to the table. We collaborate with like-minded international firms and we promote teamwork, enabling us to jointly advise on projects and add significant value to our clients.

Chevez Ruiz Zamarripa is a tax advisory, legal and consulting firm distinguished for providing high level personalized services to its clients.