Financial Regulatory Compliance in Mexico: a Guide

If you are doing business in the Mexican market, or intending to launch there, you will need to have a grasp of financial regulatory compliance in Mexico.

Because  failure to comply with financial regulations can cause legal issues or result in financial penalties, potentially diminishing the standing of your company in the eyes of local authorities and impacting your business. 

Financial regulatory compliance is a crucial aspect of corporate compliance, and one of the key services offered as part of a package of corporate secretarial services, which is widely referred to as ‘cosec.’

If you are considering company formation in Mexico, the following guide will give you an overview of the financial regulatory compliance requirements your business will need to meet.

If you already have ongoing operations in Mexico, or have queries about market entry, contact us today to discuss how we can help you support your business.

Mexican market offers investment opportunities

Mexico is the second-largest economy in Latin America, with a GDP of more than $1 trillion (all figures in USD) – a figure only exceeded in the region by Brazil. In 2019 alone, Mexico generated more than $29 billion in foreign direct investment (FDI).

In a sign of Mexico’s increasing popularity among foreign investors, while FDI as a percentage of GDP has fluctuated over recent years, it has followed a generally upward trend, almost tripling between 1990 and 2020. General prosperity has also improved, with gross national income per capita tripling during the same period.

Mexico is known for being a key hub for trade in the Americas, with high-volume ports serving the Pacifica and Atlantic oceans, and more than $1.7 billion in goods crossing the border with the United States each day. 

That movement of goods is bolstered by the fact the the country has a series of bilateral and multilateral free trade agreements (FTAs) in place providing preferential access to key markets around the world. 

That includes the US-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) in 2020. It also includes FTAs with the European Union, Central America, and the likes of Japan.

On top of that, Mexico is a founding member of the Pacific Alliance – a decade-old economic association that also includes Chile, Colombia, and Peru, and to which Ecuador recently made a formal application to be accepted.

In a mark of the Pacific Alliance’s long-rumored desire to expand into the Asia-Pacific region, in late 2021 Singapore was inaugurated as an associate member, with Australia, Canada, New Zealand, and South Korea among the nations that could follow.

While Mexico is well-known for its agricultural and industrial output, boasting considerable facilities and available manpower to investors seeking to enter those sectors, the country generates more than 60% of GDP from its services sector.

It is also increasingly recognized as a source of tech and other skilled talent, with the city of Guadalajara emerging as a hub for innovation and being labeled one of Latin America’s ‘new’ Silicon Valleys.

However, anyone seeking to take advantage of the opportunities on offer in this massive market will need to adhere to financial regulatory compliance in Mexico.

Financial regulatory compliance in Mexico: key responsibilities

While financial regulatory compliance in Mexico may vary based on the type of legal structure your company has, the following aspects of corporate compliance are generally applicable to all. Note that in Mexico the financial year runs from January 1 to December 31.

Hold an annual general meeting: All shareholders must be provided proper prior notification of the AGM, which is a crucial requirement of corporate compliance in Mexico. This meeting must be held within four months of the end of the financial year. During this meeting, the financial statements and other reports from the previous financial year must be approved by shareholders.

Update corporate books: The AGM will feed into another critical compliance issue, which is the proper updating of corporate books, including minutes from the AGM and any annual resolutions that were agreed. 

Shareholders report to the Tax Authority: A shareholders report must be presented to the Tax Authority before March 31 when a Mexican company has shareholders or partners without a Mexican tax number – meaning they do not pay tax in Mexico. This must contain personal details of those shareholders or partners, including information on where they do pay taxes.

Annual economic report: Companies that reach a certain size (based on active total, liabilities, and outflows) must submit an annual economic report to the National Registry of Foreign Investments. Submission is due in either April or May each year.

Quarterly economic reports: Quarterly reports are due from companies that meet particular financial benchmarks, and must be submitted to the National Registry of Foreign Investments within 10 business days of the end of each period.

Update Mexican Entrepreneurial Information System (SIEM): All corporations are obliged to register themselves and keep their information up to date in the government-run SIEM, with fines levied upon those who do not. comply.

Beyond those key requirements related to financial regulatory compliance in Mexico, the following demands must also be met:

Renewal of employer registration with immigration authorities: In order to hire foriegn staff, a company must be registered with the Mexican immigration authorities, known as INAMI. Updating this license must be completed at least 30 days prior to the expiry of the outstanding license and accompanied with the presentation of a recent tax return.

Review and modification of internal labor regulations: All companies in Mexico are obliged to maintain labor regulations in keeping with Mexican labor law, and therefore to implement modifications consistent with changes made to those regulations. Those regulations and subsequent changes have to be registered with Mexico’s labor courts.

Preparing labor contract addendums: Any salary raise or other critical change in working conditions must be supported with an addendum to that employee’s contract.

Data protection and intellectual property: Company policies with regard to data protection and intellectual property must be in line with the most up-to-date regulations, and therefore must be reviewed and, where applicable, modified periodically.

Renew leases: In order to adhere to financial regulatory compliance in Mexico, companies must have up-to.date leases on any property used by the business, including renewing them in a timely manner, so that all information held by authorities is correct.

Provide information to bank(s): Each year, banks where corporate accounts are held will request up to date information from account holders, which must be provided in a timely manner. Failure to do so could result in the bank account(s) of the business being frozen. 

Biz Latin Hub can help with your financial regulatory compliance in Mexico

At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean. We have offices in 17 key cities around the region, making us ideal partners to support multi-jurisdiction market entries and cross-border operations.

Our portfolio includes accounting & taxation, company formation, due diligence, hiring & PEO, and corporate legal services.

Contact us today to find out more about how we can assist you.

If you found this article on financial regulatory compliance in Mexico of interest, you may want to check out the rest of our coverage of this massive North American economy. Or read about our team and expert authors.