The subsidiary setup process in Mexico is one option for developing and growing your company internationally. Establishing a Mexico subsidiary requires a significant amount of time, money, and resources.
How to establish a subsidiary in Mexico
A subsidiary allows you to operate as a branch of a parent company while meeting the needs of local customers in Mexico. Companies in Mexico are commonly incorporated as an Anonymous Society of Limited Responsibility (S.A. de R.L.) or Anonymous Society of Variable Capital (S.A. de C.V.). The subsidiary gets limited independence from the parent company, and the parent company is liable for the acts of the subsidiary.
The Mexico subsidiary setup process begins by choosing a corporate name and registering with the Ministry of External Affairs (SRE). If there are no duplicate names, your name should get approved. You will then enter into a proforma agreement where any non-Mexico-based shareholder is bound by laws in Mexico.
You will also need to prepare the bylaws and transitory agreements, if necessary. After that, you will need to notarize these documents before a Notary Public.
Registration of the company in the respective Public Registry of Commerce, Federal Taxpayers Registry, and the National Registry of Foreign Investments is mandatory in case a subsidiary with foreign capital is being established.
Hiring a local attorney who can prepare documents for you, and assist with corporate governance, duration of existence, and more will help ensure compliance. They can explain many employment, compensation, and benefits laws in Mexico. You should get every document notarized and establish a power of attorney for your subsidiary.
Mexico subsidiary laws
As soon as you establish a subsidiary, you must comply with all Mexico subsidiary laws — including zoning, environmental regulations, health and sanitary issues, and immigration.
Taxes are one of the most significant aspects of Mexico’s subsidiary law. Typically, the Mexico subsidiary company will receive a tax credit for any income, dividends, and withholding taxes paid to the government in Mexico. However, it is important to stay compliant with all tax laws in Mexico to avoid costly fines. You must enroll as an employer with the Mexican Social Security Institute and register for taxes.
Subsidiaries in Mexico are required to use an in-country bank account to pay employees, social security, and other taxation agencies this way. Payments must be in Mexican pesos.
Benefits of establishing a subsidiary in Mexico
Expanding your company to Mexico is something to celebrate, and subsidiaries in the country enjoy many benefits. For example, setting up a subsidiary allows you to find and recruit talent across the borders, in a growing market, with highly skilled personnel.
The parent company will also have control over the subsidiary in Mexico. Your Mexico branch will decrease its liability while still operating as a part of the overall company.
You’ll also determine your subsidiary’s level of independence. You can tailor the subsidiary to the country’s laws and cultural customs while still retaining elements of the parent company.
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