{"id":20516,"date":"2022-02-10T13:45:59","date_gmt":"2022-02-10T21:45:59","guid":{"rendered":"https:\/\/foundersnetwork.com\/?p=20516"},"modified":"2023-02-23T12:59:53","modified_gmt":"2023-02-23T20:59:53","slug":"demystifying-mexico-tax-compliance-complexity","status":"publish","type":"post","link":"https:\/\/foundersnetwork.com\/demystifying-mexico-tax-compliance-complexity\/","title":{"rendered":"Demystifying Mexico Tax Compliance Complexity"},"content":{"rendered":"
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In the past two years, the Mexican government enacted far-reaching changes to the Mexican income tax, value-added tax, and Federal Tax Code. While previous Mexican government tax reform efforts were aimed at highly digitalized businesses, the most recent round of tax reform went beyond prior efforts and changed the entire international Mexican tax system.<\/span><\/h2>\n<\/blockquote>\n

Today, Mexico\u2019s tax system is one of the most complex in the world. That\u2019s why accounting expert Juan Alberto Morales recommends startups develop an in-depth understanding of Mexico\u2019s tax system before doing business in the country.\u00a0<\/span><\/p>\n

\u201cIf you\u2019re not related to the tax system, it\u2019s difficult to understand a new one because it has a lot of regulations and rules that make it challenging,\u201d Morales says.<\/span><\/p>\n

Morales is a Bilingual International Public Accountant who specializes in tax consulting, corporate tax compliance, automation of tax calculation, and risk assessment of fiscal function processes. He is a tax director at JA Del R\u00edo, an accounting firm focused on helping companies do business in Latin America. On March 24, Morales hosted a webinar for Founders Network<\/a> members where he provided the demystifying of Mexico tax compliance.<\/span><\/p>\nWe are a very complex country. <\/a><\/span>Share on X<\/a><\/span>\n

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To learn more about the demystifying of Mexico tax compliance<\/span>,\u00a0see if you qualify for membership<\/a>\u00a0and check out the\u00a0<\/b>webinar<\/a><\/b> from March 24.<\/b><\/p>\n<\/blockquote>\n

A digital system<\/span><\/h3>\n

Morales says Mexico tax compliance is unique because it operates via a largely digital system. According to one <\/span>report<\/span><\/a>, Mexico has one of the most advanced digital tax administration systems among the world\u2019s emerging economies. While this digitalization has improved the effectiveness of tax collection in Mexico, it presents a few hurdles for startup founders doing business in the country.<\/span><\/p>\n

\u201cWe are a very complex country,\u201d Morales says. \u201cIt\u2019s one of the most complex systems in the world and mostly because our taxation system is based in a digital environment. Everything you need to do is through the Mexican internal revenue service system. All of your invoices, all of your expenses, all of your bank accounts must pass through this system.\u201d<\/span><\/p>\nIn Mexico, you have to put a lot of effort into understanding the system. <\/a><\/span>Share on X<\/a><\/span>\n

Starting on the right foot<\/span><\/h3>\n

According to Morales,\u00a0<\/span>there are 14 steps startups must take prior to starting operations to ensure they are in line with Mexico tax compliance.\u00a0 These include securing a tax ID, a fiscal address certified by the tax authorities, legal representation in Mexico, and more.\u00a0 Only in this way can startups avoid running afoul of Mexico\u2019s tax authorities.<\/p>\n

\u201cIn Mexico, you have to put a lot of effort into understanding the system. You have to plan and set all of your tax obligations before you start operations,\u201d Morales says. \u201cA lot of startups that try to come and do business in Mexico, they just start. They forget about the tax formalities. When they turn back and see what they have missed, it can be difficult to remediate.\u201d<\/span><\/p>\nWhen you start a business and you don\u2019t comply with the formalities, the tax authorities in Mexico will fine you and put penalties on you. <\/a><\/span>Share on X<\/a><\/span>\n

Avoiding penalties<\/span><\/h3>\n

Through reform efforts over the last five years, the Mexican tax authorities have made it clear that noncompliance will have consequences. As a result, taxpayers take Mexico tax compliance very seriously. According to a recent <\/span>report<\/span><\/a>, 83 percent of surveyed Mexican taxpayers thought it was likely they would be sanctioned if they failed to comply with their tax obligations.<\/span><\/p>\n

\u201cWhen you start a business and you don\u2019t comply with the formalities, the tax authorities in Mexico will fine you and put penalties on you,\u201d Morales says. \u201cStartup founders often think they can do it all themselves. When startups come to us, they have a lot of issues that could have been avoided if they had got the proper advice.\u201d\u00a0<\/span><\/p>\n

At his webinar, Morales covered:<\/span><\/p>\n