October 9, 2025
Mexico offers a targeted income tax incentive to promote private sector investment in research and development (R&D). Designed to encourage technological innovation and scientific advancement, the programme provides a tax credit of up to 30% on qualifying R&D expenses that exceed the taxpayer’s average R&D spend over the past three fiscal years.
April 30, 2025
The Mexican government has launched Plan Mexico, an ambitious economic strategy aimed at attracting foreign investment, modernising infrastructure, and promoting sustainable business practices. Published in the Official Gazette of the Federation, the plan introduces significant fiscal incentives and regulatory reforms designed to drive economic growth and enhance Mexico’s competitiveness on the global stage.
A key focus of the plan is to make Mexico more attractive to international investors by streamlining bureaucratic procedures and removing barriers to entry. At the same time, the government is committing substantial resources to infrastructure projects in sectors such as energy, transportation, and telecommunications. By improving these critical areas, officials hope to create a more efficient business environment that will encourage long-term investment and economic expansion.
To support this growth, the plan also introduces several fiscal measures designed to reduce the tax burden on businesses and stimulate investment. Companies investing in priority sectors will be able to claim additional tax deductions of up to 30% for infrastructure, machinery, and equipment costs. Additionally, businesses that establish operations in newly designated Special Economic Zones (ZEEs) will benefit from a reduced corporate tax rate of 20% for their first ten years, a significant decrease from the general 30% rate. Other tax benefits include accelerated asset depreciation for firms in clean energy and technology sectors, as well as exemptions from local payroll and property taxes for up to five years in select regions.
Sustainability is also a central pillar of Plan Mexico. The government has introduced a range of incentives to encourage businesses to adopt environmentally friendly practices. Companies investing in renewable energy projects, such as solar, wind, or geothermal power, will be eligible for tax credits covering up to 25% of their total investment. Businesses purchasing clean technologies, including electric vehicles and energy-efficient equipment, will be able to deduct these expenses immediately. Meanwhile, firms that successfully reduce their carbon emissions will receive tradable carbon certificates, which can be used to offset tax liabilities or sold on international markets. The plan also includes financial incentives for businesses implementing circular economy practices, such as recycling and material reuse, through reduced environmental duties.
A key element of the strategy is the creation of four Special Economic Zones (ZEEs) aimed at driving regional development and attracting industry-specific investment. The Southeast ZEE, covering states such as Tabasco and Chiapas, will focus on renewable energy, agribusiness, and sustainable tourism. The Northern ZEE, which includes regions like Nuevo León and Coahuila, will prioritise advanced manufacturing, logistics, and information technology. The Pacific ZEE, spanning Guerrero, Oaxaca, and Michoacán, will concentrate on port infrastructure, sustainable fishing, and clean energy initiatives. Meanwhile, the Central ZEE, covering Hidalgo, Puebla, and Tlaxcala, will support the growth of the automotive, textile, and agribusiness sectors.
The implementation of Plan Mexico is expected to create significant opportunities for businesses, but it also brings challenges. Experts recommend that companies assess whether relocating or expanding into Special Economic Zones could provide financial advantages. Businesses should also review their tax strategies to ensure they maximise available deductions and reduced rates. Additionally, adopting sustainable practices could unlock further incentives while aligning operations with global environmental standards. Given the complexity of the new tax regulations, firms are advised to seek expert guidance to ensure compliance and avoid potential penalties.
With Plan Mexico, the government is positioning Mexico as a leading destination for international business while driving domestic economic expansion. The combination of tax incentives, infrastructure development, and sustainability measures is expected to attract significant investment. However, businesses will need to navigate the evolving regulatory landscape carefully to take full advantage of the opportunities presented by this sweeping economic reform.
March 20, 2025
Kreston FLS in Mexico is pleased to announce that from the 3 March, they have added Corporate Finance Consulting services to their portfolio.
Kreston FLS have invited CPA José Luis Madariaga Cervantes to lead the Corporate Finance Consulting services (FCA) division. The firm is confident that his expertise will bring significant benefits to their clients, making the firm more comprehensive, integrated, and robust.
José Luis career’s spanning over forty-two years, forty of which have been in the financial market. He began as a private banker and established himself as a successful broker in the Mexican capital market.
His curriculum includes roles such as Director of Commercial Banking and subsequently Director of Corporate Banking at Banco Mexicano, now Banco Santander, where he managed credit products, electronic banking, international banking, foreign exchange, etc.
For six years, he served as a partner in an M&A firm. He has been the Commercial Director at Unifin Financiera, which became the largest non banking financial company in Latin America. His tenure at UNIFIN led the institution to place credits and pure leasing.
A summary of his professional experience in the financial sector:
Professional experience in the non-financial sector:
Enrique Pastor, Director Partner at Kreston FLS Mexico City, commented: “We are confident that this service will be highly appreciated by our current and future clients, as José Luis will bring new options to solve corporate finance problems, with the high-quality standards and trust of our firm. José Luis will now provide services including company valuation for purchase or sale, capital raising, financing through his relationships with investment funds, and the engineering of mergers, acquisitions, and spin-offs, as well as financial engineering, thereby completing a segment of services that offer concrete solutions for our clients.”
With this important addition, Kreston FLS (Mexico) provides solutions for both domestic and foreign investors, as they can not only establish a company but also buy one or set up joint ventures or other forms to achieve their objectives.
For more information about doing business in Mexico, click here.
October 15, 2024
Nearshoring, particularly in Mexico, is becoming an increasingly popular answer for US firms who are struggling with a labour shortage. US companies are looking south of the border as they search for new ways to stay profitable. A big push to nearshore in Mexico comes from the labour market, but Veronica Quintana, Director at CBIZ, finds that strong cultural links between Mexico and America are also adding to the allure.
“We increasingly have more clients coming to us looking for advice on nearshoring,” she said. ‘Some still have family in Mexico and they want to invest in their hometowns. I have seen an uptick in US businesses wanting to invest in tequila and spirits. However, US firms across the board are finding it difficult to be profitable due to the rising costs of materials and labour. They have mentioned that perhaps it is best to invest in Mexico, where the labour market is cost-efficient and highly motivated.’
There is a national labour shortage in the US. Many baby boomers are retiring, and others left the workforce during the pandemic. Offshoring can look different for each company, depending on the industry and their reasons for offshoring.
‘Companies are mostly looking to reduce or optimise costs, access specialised skills, staff augmentation, and effective scaling,’ said Quintana. ‘Offshore employees are often more flexible, which is important if business conditions change, and they need to downsize quickly and efficiently.’
Mexico has a skilled workforce with lower labour costs, and Quintana pointed out that this is especially true in the manufacturing industry.
‘The close proximity to the US also makes it easier to transport goods and materials quickly and at a cost savings,’ she said. ‘The United States-Mexico-Canada Agreement (USMCA) provides several benefits, such as reducing or eliminating tariffs, US firms turn to nearshoring for labour streamlines customs procedures, and provides market access to a large consumer base.
India is another country that has seen an increase in offshoring. They also have a talented labour force, especially in the business field, and CBIZ has personal experience here that it can draw on to help clients.
‘We have had success offshoring some our income tax preparation to India,’ said Quintana. ‘We have worked with their team for several years now, trained them on our processes, software and procedures. They do good quality work, and that gives us the confidence and assurance that offshoring has been a success.’
The pandemic and growing instability in the world’s geopolitics has also pushed nearshoring up the list of priorities for US companies. The disruption to supply chains during the pandemic made the thought of investing in manufacturing sites closer to customers much more attractive. More recently, Russia’s invasion of Ukraine and growing tensions between Washington and Beijing have made nearshoring even more of a priority.
Over the past few years, nearshoring from the US has created a boom in Mexico. US imports from Mexico totalled US $455 billion in 2022, up nearly 19% from the previous year and up 64% from 2012, according to the United States Census Bureau. At the same time, the share of Mexico’s imports from China went from 1% in 1994 to 20% in 2022 according to a recent study by academics Laura Alfaro and Davin Chor.
New manufacturing plants could add an additional 3% to the country’s GDP over the next five years as well as over 1 million jobs, according to a recent study by Deloitte.
New manufacturing plants could add an additional 3% to the country’s GDP over the next five years as well as over 1 million jobs, according to a recent study by Deloitte. The Mexican government is cashing in by making the country’s tax laws more favourable to foreign companies. For instance, as of October 2023, international electric vehicle manufacturers could claim an 86% tax deduction on investments in the country.
US investors have been made nervous, however, by a bill of judiciary reforms that has been passed by the Mexican government, that makes Mexico the first country to allow judges to be elected rather than appointed.
Several big-name investors have come out against the reforms, including US investment banking giant Morgan Stanley. More recently, Julius Baer warned that rating agencies could change Mexico’s creditworthiness as soon as next year if the judicial reform is approved. But Mexico’s outgoing president Andrés Manuel López Obrador has hailed the approval of controversial reforms, saying they would be an “example to the world”.
Obrador who left office on October 1, 2024, accuses the current judicial system of serving the interests of the political and economic elite. ‘It’s very important to end corruption and impunity,’ he said.
Investors will be watching the market closely, as energy and tax reforms would stall the nearshoring boom if they are not followed through. But US firms seem to be happy to be moving South, for now.
September 19, 2024
SAN Group is a multinational corporation that operates across five continents, offering innovative solutions in animal health, crop protection, and food safety. Their business strategy centres on three key pillars: Plant Health, Animal Health, and Planet Health. This structure supports their long-term vision of contributing to a sustainable future.
With ambitions to expand into Mexico, SAN Group required the guidance of a professional services firm with both local expertise and global insight. They sought a partner who could navigate Mexico’s regulatory landscape while aligning with their global operational standards.
When SAN Group decided to establish its operations in Mexico, they faced several challenges. From navigating complex legal and tax frameworks to managing the operational setup, they needed a partner who could provide local insight while ensuring global business continuity. Establishing a new entity required expert knowledge of local compliance, tax regulations, and business structuring to ensure a smooth and cost-effective entry into the market.
SAN Group partnered with Kreston FLS, who provided tailored guidance from the outset. With Enrique Pastor, Partner at Kreston FLS, leading the collaboration, the firm worked closely with SAN Group’s headquarters and Brazilian teams to devise an operational structure for Mexico that minimised costs and risks while maximising benefits.
Kreston FLS advised on the optimal corporate structure, aligning with SAN Group’s global values and business strategy. They ensured compliance with local laws, provided monthly financial reports, and offered expert tax advisory services to meet the stringent demands of Mexican regulatory authorities.
Since 2016, Kreston FLS has been an integral partner in SAN Group’s successful expansion into Mexico. They delivered professional and timely advice, ensuring that SAN Group’s operations in Mexico remained compliant, efficient, and strategically aligned with their global objectives. By managing financial reporting, tax advisory, and compliance, Kreston FLS enabled SAN Group to focus on their core business and growth.
“Kreston supported us in implementing our business unit in Mexico, always working with great professionalism and transparency.” – Ricardo Felix, Regional Finance Director, AMERICAS
Francisco’s academic background spans degrees in Law and Public Accounting and two master’s degrees in Business and Tax Law. He participated in the High Business Management Program at IESDE Business School. An expert in legal and tax matters, with special attention to international taxation. He advises national and multinational companies with extensive experience in wealth, succession consulting, and business restructuring operations. He has been a professor of tax matters for over 20 years. He is an active member of the College of Public Accountants of the State of Puebla, the International Fiscal Association, and the tax commission of Coparmex. He regularly contributes to various national publications specialising in tax matters, regularly participates in specialised radio programs, and has taken part in international congresses on tax issues. In 2003, he was certified through examination by the Mexican Institute of Public Accountants, A.C. (IMCP), with recognition for obtaining the highest score nationwide. He is currently a member of the board of directors of Kreston Global and the Regional Director of Kreston Latin America.
May 9, 2024
Mexican tax law and transfer pricing regulations have recently updated tax obligations for the common practice for subsidiaries, which are Mexican tax residents and part of a multinational group, to make payments to another group company residing abroad for administrative services. In some instances, these payments are disallowed as deductions by the tax authority. This often occurs because taxpayers fail to convincingly demonstrate that such services were provided or do not adhere to the formalities prescribed in the Income Tax Law (ITL) for such deductions. Francisco Bracamonte, Tax Partner from Kreston BSG in Mexico explains more.
Frequently, taxpayers either do not have a written contract or, if they do, it contains a very generic description of services, such as accounting services, budgeting, computer system assistance, legal advice, and human resources consulting. Additionally, the service description on the invoice might merely state “administrative services” or a similarly vague term.
It is also typical for the evidence supporting the provision of such services to be inadequately documented. Many services are delivered via phone calls, foreign personnel visits, emails, letters, and reports, making proper documentation impractical. For example, consider a scenario where a group company manages the subsidiary’s monthly accounting and suggests adjustments to certain accounts via a few phone calls. Documenting each interaction in a logbook would be both impractical and costly and might still not satisfy the tax authorities.
Moreover, the valuation of these services often does not employ the transfer pricing method known as “comparable uncontrolled price” because the group company providing the services does not offer them to unrelated third parties. Instead, costs are allocated among group companies based on criteria like sales volume, number of employees, computer equipment, and asset values, sometimes with an added profit margin.
The issue arises during tax audits when authorities challenge these deductions due to insufficient proof of the services’ existence and lack of detailed documentation as required by the authority. Arguments are also made that the prices do not reflect market rates and some formal requirements are not met.
The evidentiary standard required by the tax authority for these services typically exceeds the documentation that taxpayers maintain. Merely presenting invoices, contracts, bank statements, and accounting records is often insufficient. Additional information and documentation are required to verify the service provision, such as evidence demonstrating that the service is not duplicative of functions performed by the taxpayer, the names and professional experience of the individuals involved, the service location, dates, rationale for the service’s necessity, pricing determination process, deliverables, and benefits obtained. Such extensive documentation is often difficult to compile.
Recent judicial decisions from the Mexican federal courts have defined the evidentiary standard in very general terms. For instance, in a criterion from October 2023, registration number 2027498, it was stated that proof might consist of a set of indirect evidence made up of private documents accepted by business practices, as no specific legal formalities are mandated. Another criterion from the same period, registration number 2027497, suggests that the evidentiary standard should be objective and reasonable, without demanding proof of impossible or excessive extremes.
The question then arises as to what level of documentation detail should be maintained. In my opinion, at a minimum, documentation should include:
a) A clear and specific contract detailing the type of services contracted, along with the corresponding invoice.
b) Conditions under which the services were provided, which can be evidenced through correspondence, travel logs, meeting minutes, personnel lists, venue rentals, plane tickets, hotel stays, etc.
c) Outcomes of the service, documented in reports containing analyses, recommendations, and conclusions.
If these documents are in another language, they can be retained as such, but translations may be required by the authority per administrative rule 2.8.1.2.
Moreover, transfer pricing guidelines indicate that these are low-value-added services because:
Documentation should also include:
This documentation is crucial not only to meet legal requirements but also to provide additional support during audits. Sometimes, the non-deductibility of an expense stems not from its non-existence, but from failing to meet specific requirements in the tax receipts supporting these transactions. This includes ensuring that receipts issued by residents abroad comply with certain specifications (RMF 2.7.1.14):
I. Issuer’s business name, address, and, if applicable, tax identification number or equivalent.
II. Place and date of issuance.
III. Tax ID and business name of the recipient.
IV. Description and quantity of goods or services covered.
V. Unit value and total amount in both numbers and letters.
Additional reasons for deduction denial include failures in withholding income tax on the services provided by the non-resident, or non-compliance with obligations under article 76 of the Income Tax Law, such as issuing tax receipts for payments made, presenting foreign financing details by February 15, and detailing related party transactions by May 15 annually.
Regarding income tax withholdings, a 25% rate must be applied to the total income received by the non-resident, without deductions, provided that the service is rendered in Mexico. Proof of tax residency is necessary to apply for treaty benefits, which can be substantiated with a certificate from the foreign authority, valid for the calendar year issued and not requiring legalization.
Finally, compliance with additional procedural provisions is required, such as submitting financial statement reports when demanded and verifying adherence to foreign financing and related party disclosure requirements. Proper documentation is essential to convincingly demonstrate the service provision, timing, outcome, benefits received, and other considerations mentioned herein.
To speak to one of our tax experts in Mexico, please get in touch.
April 11, 2024
Graduated in Public Accounting at La Salle University and is in the process of graduating as a lawyer from the National Autonomous University of Mexico. He is currently the Managing Partner and in charge of the Tax and Consulting Area of the Kreston FLS SC Firm in Mexico City.
March 13, 2024
Setting up a business in Mexico has been a strategy of global businesses in the region, looking for ways to sidestep geopolitical challenges creating pinch points in supply chains. This presents an opportunity in some regions, businesses pull operations geographically closer to avoid costly delays and unpredictable prices.
Mexico is a benefactor of the US moving away from manufacturing in Asia, with US firms setting up operations closer to home Mexico, capitalising on lower labour costs, geographical proximity and free trade agreements. Enrique Pastor, Tax and Business Processes Partner at Kreston FLS in Mexico City shares his experience in setting up businesses in Mexico for the last two decades.
Whether you want to take advantage of nearshoring benefits or have your own expansion plan, before establishing a company in Mexico, it is important to consider several factors.
Conduct a detailed analysis of the Mexican or North American market if you are an exporting company to understand consumer preferences, competition, and business opportunities.
The legal and regulatory requirements for operating companies in Mexico, including obtaining permits, licenses, and compliance with labour and environmental regulations, must be considered. There are various legal entities to establish a company in Mexico. The most suitable depends on various criteria, so proper advice is essential to define the most appropriate. Regulatory issues are a speciality in professional consulting; do not embark on a venture without being sure of the regulatory requirements, which can vary even by city.
Have a plan for recruiting, training, and retaining human talent in Mexico, considering cultural and labour differences. Issues such as social security costs, union relations, and other matters must be analysed to define operational strategies in the country
Evaluate the political and economic risks in Mexico, including the recent strength of the Mexican Peso exchange rate.
Although the country has good communications, its size can affect the timing and quality of supplies. Consider this before deciding where to establish the company. Trade agreements Mexico may have the highest number of treaties to avoid double taxation and treaties to boost trade, so consider that besides the North American market, there is a whole world that could buy from you.
Consider establishing in the Isthmus of Tehuantepec area, where a project connecting the Pacific
and Atlantic Oceans by rail, complementing the Panama Canal, offering shorter crossing times and competitive costs and will offer significant real estate and industrial development opportunities. This could be beneficial if your market is not exclusively North America.
Mexico offers a variety of fiscal incentives to promote investment and economic development in various parts of the country, including development zones, border incentives, and programs like IMMEX and the Inter-Oceanic Train of the Isthmus. These range from one-third discounts on the Income Tax rate and 50% off the Value Added Tax to immediate deductions for investments in specific industrial areas or sectors.
To promote foreign investment interest in Nearshoring, the federal government enacted in October 2023 a Fiscal Incentives Decree for the 20 export production sectors listed below.
The benefits, which are the accelerated deduction of investments for companies, vary from 56% to 89%
in 2023 and 2024. An additional deduction of 25% for three years for worker training expenses, focusing on human capital development, is allowed in the Income Tax. The incentives are available in all states and municipalities of the country, extending the opportunity window by one year for interested companies
The sectors benefiting from these incentives include fertilisers, agrochemicals, food products, pharmaceuticals, electronic components, medical equipment, batteries, electrical cables, automotive engines and parts, electrical and electronic equipment, and non-electronic medical devices, among others.
A fiscal incentive is also offered for the production of copyrighted cinematographic or audiovisual works intended for export. Mexico is an attractive destination for nearshoring and the domestic market due to its strategic location, competitive costs, access to the US market, and fiscal and regulatory incentives. However, it’s crucial to consider the mentioned factors thoroughly to ensure a successful establishment in Mexico.
If you are looking for advice on establishing a business in Mexico, please get in touch.
Carlos Sierra is an accomplished expert in tax planning, risk reduction, and financial consulting, boasting over 10 years of experience. Specialising in intelligent tax strategies, he helps clients navigate complex tax laws, minimising liabilities ethically and legally. His focus includes risk assessment and mitigation, ensuring accurate and timely tax filings. With a comprehensive skill set in financial consulting, Carlos aids business owners in financial optimisation and growth. He remains dedicated to staying informed about evolving tax regulations and economic trends, equipping clients with the latest insights for sound financial decisions.
November 29, 2023
The Mexican Federal Revenue Law 2024 update by the Mexican Senate is now benefitting from the recently approved Federal Revenue Law for the fiscal year 2024, marking a significant increase in the country’s projected revenues. The total expected revenue for 2024 is 9.066 trillion pesos, a notable 9.36% increase from the previous year’s 8.29 trillion pesos. This section will delve into the specifics of these projections, including the breakdown of various revenue sources such as taxes, social security fees, and other contributions.
The Senate approved the Revenue Law for fiscal year 2024. The total amount of expected revenues for the next fiscal year is detailed as follows:
A crucial aspect of the new revenue law is the authorization to contract and exercise loans. The law permits a net domestic indebtedness of up to 1 trillion 990 billion pesos and an external indebtedness of up to 18 billion dollars. This section will discuss the implications of these debt allowances and their role in the overall fiscal strategy of the government.
One of the key highlights of the 2024 revenue law is the modification of tax structures and surcharge rates. Notably, the law maintains monthly surcharge rates at the same level as in 2023, with specific rates for extensions, installments, and deferred payments. Additionally, the income tax withholding rate on interest has seen an increase. This section will provide a detailed analysis of these changes and their potential impact on businesses and individuals.
While the Senate’s approval of the Federal Revenue Law is a crucial step, the final authorization from the Executive Branch remains pending. This section will discuss the potential economic implications of the new fiscal measures, focusing on how they might influence the national economy. It will also emphasize the importance of staying informed about the evolution of these measures and their practical impact.
Although the Senate’s approval represents a significant step forward, waiting for the final authorisation from the Executive Branch will be crucial for the implementation and effectiveness of these fiscal measures. Therefore, it is important to keep informed about their evolution and impact on the national economy.
If you would like more advice on the Mexican Federal Revenue law update, please contact the Kreston BSG team.
This guide is an overview of the Mexico’s Value Added Tax (“VAT”) system, focussed on how it affects foreign businesses trading with
the Mexico. It is general in nature and unlikely to cover the specifics of your scenario. It should be read as such and not be construed as advice. For advice as to how your business is affected by Mexico VAT please contact a Kreston Global Mexico VAT specialist.
September 11, 2023
Herbert M. Chain is a highly experienced auditor and is a financial expert with over 45 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance. Herb is a member of MHM’s Audit Methodology Steering Committee.
Contact Herb here
Guillermo Narvaez is a Tax Partner at Kreston FLS Mexico City Office and the Technical Tax Director, Global Tax Group, Kreston Global and member of the International Fiscal Association (IFA). Guillermo is a tax expert on international taxation, corporate taxes, transfer pricing, mergers and acquisitions, corporate reorganisations and litigation.
Within international taxation, Guillermo specialises in the analysis and interpretation of treaties to avoid double taxation applied to international transactions.
Contact Guillermo here.
September 8, 2023
In a recent article exploring global cryptocurrency accounting and tax standards in Bloomberg Tax, Herbert M. Chain, Deputy Technical Director of Kreston Global Audit Group and Shareholder, Mayer Hoffman McCann P.C., and Guillermo Narvaez, Technical Tax Director at Kreston Global Tax Group and Tax Partner, Kreston FLS, delve into the difficulties of codifying digital assets within the scope of existing accounting standards. You can read the full article on Bloomberg Tax, or read the summary below.
On September 6 2023, the Financial Accounting Standards Board (FASB) approved new rules for accounting for cryptocurrencies. The standard requires crypto assets to be measured at fair value each reporting period, while also requiring enhanced disclosures for annual and interim reports. The rules will be effective for 2025 annual reports, but may be adopted for earlier periods. The FASB expects to formally issue the standard by year-end. On the taxation front, crypto assets are considered personal property, subject to capital gains tax. The U.S. Internal Revenue Service recently proposed new regulations set to come into effect in 2026, with a focus on simplifying tax filings and curbing evasion.
The authors highlight that there is currently no unified global framework to govern cryptocurrencies due to the divergence in local criteria, with China, Japan, Canada and the EU offering no classification. The tax treatment varies from jurisdiction to jurisdiction, often classifying crypto as personal property, intangibles, or other asset classes for tax purposes. The lack of consensus extends to valuation models, though countries like the U.S., UK, and Australia propose fair value accounting.
When it comes to regulation, the global scene is diverse and regulators worldwide find themselves in a difficult position. Guidelines must be robust enough to address the inherent risks of this fast-evolving sector, without curbing its innovative potential. The urgency of these efforts has been underscored by recent setbacks in the crypto space, including the collapse of the FTX digital currency exchange platform. Such incidents have heightened concerns and accelerated regulatory initiatives.
In the United States, the government has released “The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks,” a comprehensive guide addressing issues surrounding protection and enforcement. Meanwhile, the European Union has made strides in creating a unified regulatory framework through its recently adopted Markets in Crypto Assets (MiCA) rules. Not to be left behind, Canada has also stepped into the regulatory arena by issuing its first set of federal guidelines.
As nations continue to take individualistic or collective strides, the onus remains on stakeholders to remain updated and adaptable, ensuring compliance while optimising opportunities.
Cross-border transactions of crypto assets also present unique tax implications. With no uniform classification of digital assets as currencies, existing double taxation treaties play a pivotal role in determining tax liability.
Navigating the maze of global tax and accounting rules for cryptocurrencies is not straightforward, but Double Tax Treaties (DTAs) offer some guidance. These treaties, modelled on a global standard, contain Articles 7 and 12, which help determine whether income from selling a crypto asset counts as a “business profit” or a “royalty.”
Article 7 applies when you Are making money from ongoing operations in another country, but only if you have a stable, permanent business there. Article 12 comes into play when you get paid for allowing, among others, the use of an intangible asset like a cryptocurrency.
Countries often hold back some tax right at the source when a royalty payment is involved. So, figuring out whether your crypto sale is a business profit or a royalty is crucial. Business profits are usually taxed in your home country unless you have a permanent operation in a foreign country. Royalties, on the other hand, can be taxed right where the payment originates.
Cryptos are intangible, just like a piece of copyrighted software. However, there is debate around whether just using the software counts as “use of copyright,” which is what traditionally triggers a royalty tax. Typically, you would need to have in-depth control or rights over the software for it to be considered a royalty.
Think of it like this: If you buy off-the-shelf software, you are paying for the use of the software itself, not the underlying algorithms or any other intellectual property. Therefore, this payment is not considered a royalty. Likewise, if you are simply buying or selling cryptocurrencies, and not tapping into its underlying algorithm for further financial gains, it may not count as a royalty either.
What is the practical impact? If your crypto income is not a royalty, you might escape withholding tax in the other jurisdiction, as per Article 7. This is especially significant given crypto assets’ growing market capitalisation, which currently hovers around $1.2 trillion.
As cryptocurrencies continue to disrupt traditional financial systems and gain economic relevance, the regulatory landscape is ever-changing. Whether it is accounting standards or tax treatments, differences exist across countries—from complete bans to open-armed acceptance. It is crucial, then, to consult experts to understand how each jurisdiction treats crypto assets, as global policies are far from settled.
Boasting a global market cap nearing $1.2 trillion as of July 2023 (Rashi Maheshwari, Why Is the Crypto Market Rising Today?, Forbes Advisor), the crypto asset sector has entrenched itself as a mainstay in the financial landscape. This is even though it is still short of its 2021 zenith of nearly $3 trillion (Davis Chu and Victoria Schumacher, A Deep Dive Into Crypto Valuation, S&P Global). The crypto world is undeniably impactful but is still in a phase where policies and frameworks are very much a work in progress.
As the regulatory landscape for crypto assets is still developing, with very different positions being taken across jurisdictions. Accordingly, seeking expert advice from accounting and/or tax advisors is vital.
If you have questions about crypto assets, accounting and taxation challenges and would like to speak to an expert, please get in touch.
June 14, 2023
Kreston BSG, which has 10 offices across Mexico, recently held an event to raise the profile of the work accountants do in Mexico and the development of new technology to support businesses to grow and thrive. This event was held to mark Accountants Day in Mexico.
Kreston BSG created an infographic to share the details of the size and capacity of this ambitious firm, with 228 accountants across 10 offices, including Mexico City, Cabo San Lucas and the largest office, which is in Puebla. They recorded eight different services, including tax, audit and transfer pricing. You can read the full document with Kreston BSG capacity facts and figures here, in both English and Spanish.
Kreston BSG shared tips and answered pressing questions for businesses looking to do business in Mexico successfully. They also shared a day in the life videos, to give an inside view on what it is like supporting clients as an accountant in Mexico.
The team also held a webinar with accountants from across all the offices of Kreston BSG to discuss the future of AI in Mexico, evaluating how the team visualise accounting in the future with the rise of artificial intelligence Watch the video here in Spanish.
If you would like to learn more about Kreston BSG, please get in touch.
Javier is an audit manager at Kreston FLS in Mexico City. He graduated from Universidad Iberoamericana and holds a Master’s degree in Business Administration from Shanghai and has studied at Loyola University in Chicago. He has experience in auditing and consulting, both in Mexico and the United States, where he worked for over six years.
June 13, 2023
The use of AI in Mexico is experiencing rapid growth in adoption, which has been further accelerated by the COVID-19 pandemic. Among these technologies, Artificial Intelligence (AI) has emerged as a disruptive force, transforming the way businesses operate and deliver services. Read the full article written by Kreston FLS audit expert, Javier García Sabaté Payró, and featured in Veritas here (Spanish) or the summary below.
According to a study conducted by IBM, the current adoption of AI in Mexican companies stands at 35%, with an additional 44% already incorporating AI into their existing applications and processes. This indicates a growing recognition of the potential benefits that AI can bring to entrepreneurs and business advisors. By embracing AI, businesses can take advantage of an already thriving industry to save costs on the bottom line. Examples below;
AI offers a wide range of valuable applications, one such application is data analysis. With AI, large volumes of financial, accounting, and contractual data can be analysed within seconds. This enables the identification of patterns and trends that would be difficult to detect manually, leading to more informed decision-making and targeted recommendations for clients. Here is a brief summary of just some of the areas AI could support businesses in Mexico;
The most basic function of AI facilitates the automation of manual and repetitive tasks such as data entry and account reconciliation. This not only saves valuable time and minimises errors but also allows accountants, advisors, and entrepreneurs to redirect their focus towards strategic and high-value tasks specific to each business. By automating mundane processes, AI streamlines operations, enhances efficiency, and maximises productivity.
By leveraging AI, large volumes of data, including financial, accounting, and contractual information, can be analysed within seconds. This capability enables the identification of intricate patterns and trends that would be arduous to detect manually, potentially taking years to analyse. The ability to swiftly analyse data empowers businesses to make more informed choices and provide precise, targeted decisions, based on real-time data.
With advanced algorithms, AI can identify potential risks and evaluate their likelihood of occurrence. Moreover, by analysing vast amounts of data from diverse sources such as financial reports, market trends, legal references, and customer behaviour, analysts and entrepreneurs can concentrate their efforts on specific areas of interest. This focused approach enhances risk management practices, allowing for a comprehensive understanding of possible risks and paving the way for better outcomes.
Through AI-driven data analysis, process automation, risk analysis, electronic invoice analysis, and identification of risks, businesses can harness the transformative power of AI. By embracing these applications, organisations gain valuable insights, optimise operations, and make informed decisions that drive success in an increasingly data-driven and competitive business landscape.
AI is proving to be a valuable tool for compliance and efficiency in Mexico. For instance, AI-powered tools that facilitate the download and analysis of electronic invoices have revolutionised the process. These tools can swiftly analyse complete years’ worth of invoice information within minutes. This capability assists advisors and entrepreneurs in accurately responding to authorities’ requirements, avoiding the need for deadline extensions and mitigating potential costs for both companies and authorities.
The future of AI in Mexico looks promising, with a wealth of job opportunities emerging in the fields of data science, machine learning, and software development. According to the World Economic Forum, AI is expected to generate 900,000 new jobs in Mexico by 2025. Technological hubs such as Mexico City, Guadalajara, Monterrey, and Tijuana are witnessing a surge in startups and technology firms, further propelling the AI revolution in the country.
In conclusion, AI is revolutionising business operations and services in Mexico. Entrepreneurs and business advisors have a unique opportunity to leverage AI’s capabilities to streamline processes, make more informed decisions, and drive growth. By embracing AI early on, businesses in Mexico can gain a significant competitive advantage and pave the way for future success. With the rapid advancement of AI, it is crucial for authorities, entrepreneurs, and business advisors in Mexico to stay informed and delve deeper into this transformative technology. By doing so, they can position themselves at the forefront of the AI revolution and seize the numerous opportunities it presents for business growth and innovation in Mexico.
If you want to discuss using AI to improve business processes for your business in Mexico, please get in touch.
General Manager and shareholder of consulting companies with a Marketing/ business development and a Financial background with direct experience with several sectors (Real estate, Transport, Fintech, Legaltech, M&A, Import- Export, HR, Restructuring). Exco Polska Board Member.
Christina is an experienced consultant specialising in ESG, sustainability, and climate change. She has over 13 years of expertise and has worked with various organizations, including local municipalities, national government agencies, the Directorates-General of the European Commission, and the private sector across different industries.
May 9, 2023
Our experts and ESG Committee members Laurent Le Pajolec and Christina Tsiarta recently collaborated on an article where they shared insights on why a firm should engage in Trade Cooperation Agreement (TCA) and why existing accounting methodologies are no longer sufficient for modern-day businesses.
The Netherlands has overtaken Canada to become home to the world’s most diverse, equitable, and inclusive workplaces, as per Kantar’s Inclusion Index 2022. The index measures progress in developing inclusive and diverse workplaces globally, with personal services, non-profit, and professional services being voted as the most inclusive industries, while the entertainment industry remains among the least inclusive. Despite a growing appetite for systemic change in diversity, equity, and inclusion, progress in developing diverse and inclusive workplaces has stalled globally, with countries such as Canada, the USA, and Italy seeing a significant drop in their scores. Failure to take meaningful action impacts recruitment and retention, with one in four employees likely to leave their organisation due to a lack of inclusion.
The research indicates that although DEI has become more prominent in businesses’ agendas, there has been a lack of progress. The global score for the index remains at 55, the same as in 2020. In contrast, eight out of twelve markets surveyed have experienced a decline in their Inclusion Index score from 2019 to 2022. However, Mexico and Australia have made significant strides in DEI progress, with 15% and 7% increases in the last three years.
Industries are making varied progress in their efforts towards inclusion. Personal services (such as beauty salons), professional services (like legal and accounting firms), and non-profit organizations are leading the way. Financial services, ranking in the middle, and IT and marketing companies, in the lower half of the ranking, are taking steps to improve inclusion. However, industries like fashion, hospitality, security, entertainment, media, sports, publishing, and agriculture, ranked at the bottom, still have a lot of work to do to improve their inclusivity.
Read more from Laurent Le Pajolec and Christina Tsiarta here.
April 19, 2023
April 18, 2023
March 8, 2023
A new Head of Anti-Money Laundering has been announced by Kreston FLS in Mexico. CPA Joaquín Muñoz de Cote Navarro joins as Head of Anti Money Laundering to lead the Money Laundering Prevention and Compliance area.
His career includes 39 years of professional experience, of which 26 years have been in charge of management positions in the banking sector, developing Control, Audit, Compliance and AML/KYC functions.
Development of strategy implementation skills in complex PLD projects based on global standards of Financial Institutions of international scope.
Analytical and communication skills to identify problems and implement solutions with the necessary clarity for effective execution.
Professional experience in the Financial Sector
• Scotiabank Inverlat:
o Corporate Director of Money Laundering Prevention Control (2019-2022).
• Banco Nacional de Mexico- Citibanamex:
o Director of Compliance and Money Laundering Prevention Commercial Banking (2003 to 2018).
o Director of Credit Audit (1996 to 2003)
Professional experience in the Non-Financial Sector:
• Alcatel Indetel Telecommunications:
• Teléfonos de México SA de CV.
• KPMG Consultants
Kreston FLS comments
Enrique Pastor Socio Director en Kreston FLS Mexico City commented, “We are delighted to have invited Joaquin to be part of this project, and we are sure that soon the service at the firm will be a benchmark for the Mexican market and foreign investments that have to comply with these provisions.”
With this important incorporation, Kreston FLS (México) will be in a competitive position to attend international businesses in which compliance with these matters is a field of speciality and mandatory.
Contact CPA Joaquín Muñoz by clicking here, or calling on +52 5559857558 C. +52 5554069516
January 25, 2022
Javier Sabate, Tax & Audit Partner at Kreston FLS, Mexico, writes about upcoming changes to Mexican VAT law.
The new 2022 Revenue Law in Mexico is on track to being approved, only awaiting the Senate´s decision. This initiative under which the Mexican government estimates that it will be attaining just over $7 billion pesos, of which $3.9 billion will allegedly come directly from tax collections.
The Mexican authorities observe the following fiscal and tax matters in this Initiative:
The Initiative presented seeks to reform, add and repeal various provisions of the Income Tax Law (LISR*), the Value Added Tax Law (VATL), the Production and Services Tax Law, the Federal Law on New Car Tax, the Tax Code of the Federation and other ordinances, presented last September 8, 2021 by the Mexican President before its Congress.
The VAT changes contained in this proposed economic package for 2022 are:
As we witness the legitimate interest and effort of the Mexican authorities in continuing to facilitate the understanding and accessibility of tax payments and reporting to the general tax paying population, these efforts continue in many cases to inadvertently increase legal responsibility and administrative burden for all Taxpayers.
For these upcoming years, we strongly encourage businesses that supply goods or services to or within Mexico to pay special attention to their corporate governance, organizational structures and reporting. This will be vital in order to adequately navigate the increasing requirements for greater transparency and more accountability in the Mexican and LATAM economies.
