08 Jan Relevant Tax Assessment to USA Companies Doing Business in Mexico.
With the implementation of the Corporate Transparency Act (CTA) in the United States, companies with operations or registration in the U.S. face new challenges in meeting tax and regulatory obligations.
This document aims to inform you of the inherent risks and responsibilities, particularly in relation to Mexico’s Beneficial Owner (BC) requirements.
1. Implications of the Corporate Transparency Act
The CTA mandates companies to report detailed information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), including:
- Full name.
- Date of birth.
- Residential address.
- Government-issued identification.
The applicable periods to file the reports depend on the dates when the company was incorporated:
- Companies existing as of January 1st, 2024, had until January 1st, 2025, to comply with the initial reporting.
- Companies created or registered after January 1st, 2024, must report within the 30 following days after their creation or registration.
In addition to the above, in case there is any update in the information required by the CTA, the company must perform the update within 30 days after the change.
Failing to comply with these provisions occur when: (i) the report is not submitted within the established deadlines; (ii) false, incorrect, or incomplete information is provided; and (iii) the information is not updated when necessary.
Non-compliance can result in fines of up to $10,000 USD and imprisonment of up to two years. Furthermore, information reported in the U.S. may be shared with other countries under international agreements between the tax authorities of each country, including Mexico, where there is an obligation to identify and report to the tax authority, upon formal request, the controlling beneficiary or beneficiaries of the Mexican company, which is a very relevant obligation for tax compliance.
The Corporate Transparency Act applies to most registered companies in the United States, including corporations and LLCs, with the objective of ensuring transparency in beneficial ownership information. However, public entities, financial institutions, among others, are exempt due to the strict regulatory requirements to which they are already subject.
This regulation seeks to close gaps in the supervision and tax audit, to prevent illicit activities, such as money laundering and tax evasion.
2. Risks of Discrepancies Between the CTA and Mexico’s Beneficial Owner Rules
Although the assumptions of compliance and analysis of information for the identification of controlling beneficiaries or beneficial owners are different, it is important that the results of the investigation matches between different jurisdictions, since the tax authorities of each country may corroborate the information reported in other jurisdictions to assess the correct compliance with tax regulations, which may lead to reviews, audits, investigations and a fine or administrative imprisonment if inconsistencies are found with the information reported to different authorities.
3. Regulatory Consistency
In an era of increasing global transparency, it is essential for companies to evaluate the consistency of information reported across jurisdictions. Aligning obligations under the CTA and Mexico’s Beneficial Owner rules (for the Mexican subsidiaries) not only mitigates the risk of penalties but also strengthens compliance positions in the face of potential audits.
As a result of the above, it is advisable to consider a review of the analysis for the identification of controlling beneficiaries or beneficial owners, as well as of the information presented, ensuring that they comply with the standards required by both FinCEN and the Mexican tax authorities.
4. Immediate Actions
We recommend taking the following steps:
- Review the criteria under which your company has researched and completed its analysis regarding the identification of controlling beneficiaries in Mexico for reporting to the tax authority.
- Validate if the information provided to FinCEN under the CTA is accurate and consistent with the records in Mexico.
Identify possible modifications, suggestions or areas for improvement in the analysis and conclusions to minimize risks and ensure compliance.
The tax and regulatory compliance landscape is becoming increasingly complex as international coordination grows. Avoiding risks and penalties requires proactive and precise management of legal responsibilities.
For further information or assistance with this process, please contact the following individuals:
Contact
Rafael Sánchez
Jorge González
Javier Castañeda
THE ABOVE IS PROVIDED AS GENERAL INFORMATION PREPARED BY PROFESSIONALS WITH REGARD TO THE SUBJECT MATTER. THIS DOCUMENT ONLY REFERS TO THE APPLICABLE LAW IN MEXICO. WHILE EVERY EFFORT HAS BEEN MADE TO ENSURE ACCURACY, NO RESPONSIBILITY CAN BE ACCEPTED FOR ERRORS OR OMISSIONS. THE INFORMATION CONTAINED HEREIN SHOULD NOT BE RELIED ON AS LEGAL, ACCOUNTING OR PROFESSIONAL ADVICE BEING RENDERED.