What to do to invest in Mexico? The main procedures and requirements

25/10/2020

When making an investment, you should consider the regulatory aspects of the different matters that are applicable to the activity you plan to undertake. The current legal framework in Mexico imposes certain obligations and requirements that must be considered when scheduling activities and planning the implementation and good performance of any project.

This chapter analyzes regulatory aspects in different areas -corporate, fiscal, labor, administrative, and environmental- that must be taken into account when establishing operations in Mexico. It also analyzes the most convenient legal means to comply with these regulations.

Investment regulations

In general, governments at all levels -federal, state and municipal- have an interest in bringing new investments and productive projects to the country. The federal government has several laws and regulations to encourage foreign investment to contribute to the country's development. Although the general rule is that investment is open to foreign capital, there are some exceptions and restrictions that are detailed below.

Activities reserved to the State

The Foreign Investment Law establishes that the following activities can only be carried out by the Mexican government:

Extraction and exploration of oil and other hydrocarbons in which no concessions are granted. In order to guarantee the long term development of the country, the State will carry out oil extraction and exploration activities through assignments to productive State companies or through contracts with them or with individuals. In order to comply with such assignments or contracts, productive state companies may contract with individuals. These investment schemes, derived from the energy reform, are based on the premise that at all times hydrocarbons in the subsoil are property of the nation.

Planning and control of the national electrical system and the public service of transmission and distribution of electrical energy No concessions will be granted in these activities. The State may enter into contracts with individuals under the terms established by the applicable laws, which determine the manner in which they may participate in the other activities of the electric industry.

Generation of nuclear energy

Radioactive Minerals

Telegraphs

Radiotelegraphy

Post Office

Issuance of paper money

Coinage

Control, supervision and surveillance of ports, airports and heliports.

Activities reserved for Mexican investors

The following economic activities and companies are reserved for Mexicans or Mexican companies with a foreigner exclusion clause:

National land transportation of passengers, tourism and cargo, except for courier and parcel services.

Development banking institutions.

Professional and technical services expressly indicated in the applicable legal provisions.

Activities subject to specific participation percentages

Mexican law allows foreign investors to participate in the following activities with a limit on the percentage of their intervention:

Up to 10%

Cooperative production societies.

Up to 25%

National air transport, air cab transport, specialized air transport.

Up to 49%

Manufacture and commercialization of explosives, firearms, cartridges, ammunition and fireworks, not including the acquisition and use of explosives for industrial and extractive activities, nor the elaboration of explosive mixtures for the consumption of such activities.

Printing and publication of newspapers for exclusive circulation in national territory.

Series "T" shares of companies that own agricultural, livestock and forestry land.

Fishing in freshwater, coastal and in the exclusive economic zone, not including aquaculture.

Integral port administration.

Port services for piloting vessels to carry out inland navigation operations under the terms of the law on the subject.

Shipping companies dedicated to the commercial exploitation of vessels for inland and coastal navigation, with the exception of tourist cruises and the exploitation of dredges and naval devices for the construction, conservation and operation of ports.

Supply of fuel and lubricants for ships and aircraft and railway equipment.

Broadcasting, according to the existing reciprocity in the country where the investor is constituted.

The limits to foreign investment contemplated in the Foreign Investment Law, including those indicated in the previous points, may not be exceeded directly, nor through trusts, agreements, social or statutory pacts, pyramid schemes, or any other mechanism that grants foreign capital control or a greater participation than that established -except in the case of neutral investment described below-.

Investments subject to government approval

In order for a foreign investor to participate in a percentage greater than 49% in the economic activities and companies described below, it is necessary to have a favorable resolution from the National Commission of Foreign Investments, in charge of the General Directorate of Foreign Investment (DGIE) of the Ministry of Economy of the Federal Government.

Port services such as towing, mooring and launching, provided to vessels for inland navigation operations.

Shipping companies dedicated to the operation of vessels exclusively in high seas traffic.

Companies with concessions or permits for public service airfields.

Private services of pre-school, primary, secondary, upper middle, higher and combined education.

Legal services.

Construction, operation and exploitation of railways that are general communication routes, and provision of public service rail transport.

Modalities of foreign investment in Mexico

Mexican law allows three types of foreign investment.

Direct

It is the one aimed at industrial or commercial capital in order to internationalize, and that allows for sustained and long-term growth.

Indirect

Also known as equity, portfolio or portfolio investment; it is carried out through the stock or debt market. Foreign citizens can buy securities under different modalities issued by companies and the government.

Neutral

It is the one carried out in Mexican companies or in authorized trusts, according to the Foreign Investment Law, with the particularity that it will not be counted as a percentage of foreign investment in the capital of Mexican companies. This type of investment allows for better business schemes in sectors such as agriculture.

Regulatory bodies and investment protection

The DGIE is the Administrative Unit of the Ministry of Economy of the Federal Government whose functions include issuing administrative resolutions under the Foreign Investment Law; managing and operating the National Registry of Foreign Investments; preparing and publishing statistics on the behavior of FDI in Mexico; acting as the Technical Secretariat of the National Commission on Foreign Investment; representing the country at international investment forums; assisting in the promotion and attraction of investments; disseminating information and studies on the investment climate in the country; and implementing public policy guidelines on FDI.

Instruments to operate in Mexico

Ways to establish and develop business activities in Mexico.

Representative offices and branches

One option for making investments in Mexico is the opening of representative offices or branches -with or without income- as a tool to expand the activities of a firm's headquarters. The disadvantage of this scheme is that the corporate veil is not applicable to the branch office in Mexico: the responsibility for its activities extends to the parent company.

A branch is any secondary establishment with permanent representation and certain management autonomy through which the activities of the parent company are developed, in whole or in part. In general terms, the characteristics of branches are as follows:

These are secondary establishments in which the full management of the business does not reside; they are legally and fiscally subordinated to the main establishment and have the same purpose as the latter.

They have a certain amount of management autonomy, so they have their own organization and a management body that holds sufficient powers granted by the head office to attend to their operations in Mexico.

They do not have a legal personality. They are not separate and legally independent from the main company, so the parent company is responsible for the acts of the branch. The above, without prejudice to the mandatory registration of the minutes of the meeting that resolves the opening of the branch in Mexico in the Public Registry of Commerce.

The identity with the object of the parent company may be total or partial; it is common that the activities of the branch are only some of those contained in the sole object of the parent company.

The liability of the branch is not independent from that of the main establishment, so creditors of the branch can be directed against the parent.

There are two types of branches:

Representative office or branch without income

This concept is useful when you want to carry out promotional activities, and not necessarily commercial acts.

Branch with income

This structure is often used to simplify communication and accounting and thus consolidate certain business advantages between the branch and the parent company.

The operation of a branch requires an authorization from the DGIE, which will be issued within fifteen working days from the date of the corresponding application. If the DGIE does not issue any resolution within that period, the application will be considered accepted. Subsequently, the branch must be registered with the Federal Taxpayer Registry.

The main requirements to apply for the authorization of the DGIE are the following:

Letter addressed to the DGIE, in free format, requesting authorization to open a branch office. The letter must contain a detailed description of the activities of the parent company in its country of origin and the activities that its branch will carry out in Mexico.

Proof of incorporation of the parent company, duly formalized before a notary public in its country of origin and, if applicable, apostilled or legalized. If the certified statement is in a language other than Spanish, it must be accompanied by its due translation by an expert translator.

Corporate statutes of the parent company, duly formalized before a notary public and, if applicable, apostilled or legalized. If the certified statutes are in a language other than Spanish, they must be accompanied by their due translation by an expert translator.

Special power of attorney granted by a legal representative of the parent company to a person who preferably resides in Mexico, who will act as the legal representative of the branch in the country.

With these documents the respective Authorization of the National Commission of Foreign Investments will be processed, according to the Law of Foreign Investments.

In order to establish a representative office for foreign legal entities to provide a service, it is not necessary to request authorization; it is sufficient to file with the DGIE a document under protest, in the original and a copy, with the following information:

Name of the requesting foreign company.

Name of the representative or the person promoting on behalf of the company.

Address for hearing and receiving notifications, and if applicable, the names of the persons who may receive them on behalf of the company.

Declaration that:

Its social contract and other constituent documents are not contrary to public order.

The main activity they intend to carry out in Mexican territory complies with the provisions of the Foreign Investment Law regarding the activities that may be carried out by foreign investors (it is necessary to indicate the corresponding main activity).

The company is constituted in accordance with the laws of its country of origin (the country must be expressly specified).

In the case of the establishment of an agency or branch, it has a domicile in Mexico (it is essential to provide the corresponding address).

In the case of establishment of representative offices, there will be a representative domiciled in the place where they are going to operate, authorized to respond for the obligations contracted in Mexico (it is indispensable to provide the name and address of the representative).

Place and date of application.

Autograph signature of the representative or person acting on your behalf.

Once this information has been submitted, the DGIE, through the Directorate of Legal Affairs and the National Foreign Investment Commission, will immediately decide whether the procedure is appropriate. In addition, it is necessary to submit the public instrument stating the representation of the legal entity in the name of the person submitting the notice or, if applicable, the power of attorney granted before a notary public abroad, duly legalized or apostilled, as the case may be.

If the documents are written in a language other than Spanish, they must be translated by an expert translator. The translation must be of the entire document, including the apostille. If the power of attorney is drafted simultaneously in Spanish and in any other language, those parts that may only be in the foreign language -for example, the apostille- must be translated.

Once the authorization has been obtained, said document must be submitted, duly stamped with the acknowledgement of receipt and page number assigned by the Ministry of Economy, for the registration of the branch before the Public Registry of Commerce. Having this document is an indispensable requirement to establish and operate a representative office in the country.

In addition, foreign legal entities that intend to carry out acts of commerce must register with the National Registry of Foreign Investments.

To do so, they must submit the authorization issued by the DGIE together with the bylaws of the foreign company duly legalized or apostilled, as the case may be, with its corresponding translation by an authorized expert. The constitution of the branch office will be formalized before a notary public, by means of a public deed, which will include:

Authorization of the Ministry of Economy.

Power of attorney granted to the legal representative.

Statutes of the foreign company, duly formalized.

An estimated time of three to four weeks is required to complete these procedures.

Commercial and civil companies

Companies can be classified according to the laws that regulate them. Thus, there can be societies and civil associations, regulated according to the civil codes of each state, and mercantile societies, regulated according to federal laws.

Although laws confer different attributes, different types of society share some characteristics, including the following:

They have their own legal personality.

Must be made up of at least two people.

They have an obligation to pay taxes.

According to the Foreign Investment Law, the general rule is that foreign participation may occur in any proportion of the capital stock of Mexican companies and in various forms - such as acquiring fixed assets, entering new fields of economic activity or manufacturing new product lines, opening and operating establishments, and expanding or relocating existing establishments, except in the exceptions provided for by the legislation itself.

The following is a description of the main characteristics and advantages of the most common types of companies in Mexico. Corporations and Limited Liability Companies are usually of variable capital. In all cases, the transfer of shares causes taxes.

Mercantile companies

Public Limited Company (SA)

This type of partnership offers considerable advantages for any type of business, among them is the following:

The formalities to transfer the shares are few and can be negotiated with complete freedom; the endorsement and subsequent registration in the corporate books is enough for the transfer to generate all its legal effects. It is possible to limit this facility in the legal statutes of the corporation.

No minimum share capital is required for the incorporation of the company.

The management, representation and surveillance organs of the company are well developed in the law and there is enough flexibility in terms of their integration.

Limited Liability Company (S de RL)

As in a public limited company, in this type of companies the partners respond up to the amount of their contributions, without requiring a minimum share capital to constitute the company. Some characteristics of this type of society are:

They admit a maximum of 50 members.

The social parts are indivisible.

Unless the bylaws provide for a further limitation, the admission and transfer of shares is subject to the approval of the partners representing the majority.

The partners have the right of first refusal (a preferential right) for the acquisition of shares in case it is authorized in favor of a third party.

When dividends are paid to a foreign company with participation in the S de RL, the foreign company may have a tax advantage in its country if it is incorporated under a regime similar to that of the company in Mexico. For example, in the case of the Limited Liability Company (LLC) in the United States, it is possible to apply the provision known as check-in-the-box, which authorizes U.S. companies to deduct the losses incurred by their subsidiaries abroad, provided that these subsidiaries are companies that resemble the Limited Liability Companies provided for in the U.S. commercial laws.

Civil societies

Civil Society

In a Civil Society, two or more persons are obliged to contribute with resources or efforts to the achievement of a common, lawful, possible and predominantly economic end - but which does not constitute commercial speculation, so that the society is not of a transitory nature. Generally, this figure is used for the provision of professional services.

In a Civil Society, two or more persons are obliged to contribute with resources or efforts to the achievement of a common, lawful, possible and predominantly economic end - but which does not constitute commercial speculation, so that the society is not of a transitory nature. Generally, this figure is used for the provision of professional services.

Civil companies have many similarities with commercial companies, for example:

Each partner is liable to third parties up to the limit of his contributions (with the exception of the managing partner, who is liable without limit).

The supreme body of the corporation is the Assembly of Partners; in it, the votes are proportional to the contributions made by each partner.

Mexican law regulates certain derivations of the corporation, according to the nature of its operations. Among these derivations are the following:

Banking

Multiple banking institutions and development banking institutions (Law of Credit Institutions).

Insurance and bonds

Mutual Insurance Institutions and Societies and Bonding Institutions (General Law of Mutual Insurance Institutions and Societies and Federal Law of Bonding Institutions).

Stock Exchange

Investment promotion companies (SAPI), stock market investment promotion companies (SAPIB) and stock market companies (SAB) (Stock Market Law).

The SAPI is a type of SA created in accordance with the Securities Market Law of 2006. It is the ideal vehicle to receive investment from private capital funds since, unlike other S.A.'s in which the guiding principle to establish the rights of majorities and minorities is almost exclusively the percentage of participation in the company's capital stock, in the SAPI different criteria are established to protect such rights.

In comparison with the SA, the SAPI offers a more flexible and modern corporate regime, since it allows the conclusion of diverse agreements among the shareholders. In addition, in a SAPI, independently of their percentage of participation in the capital, the minority shareholders can exercise control over the corporate governance.

The percentages for the appointment of directors or statutory auditors in a SAPI, as well as the percentages required for making relevant decisions regarding corporate governance -such as opposition to shareholder meeting resolutions or civil liability action- may be decreased, but not increased.

In case the promoters of private capital investment ("Promoter Group") are listed in the Stock Exchange, the SAPI must adopt the SAB or SAPIB regime -an intermediate modality between the SAPI and the SAB-. The SAPIB is the way for medium companies to obtain resources through the Stock Market -the word Stock Market implies that the company has all the rights of a listing and placement in the Stock Market-. A SAPIB can become SAB within a period of 10 years.

As a result of the most recent reforms to the legislation, the shareholders of a S.A., as well as those of a SAPI, are legally able to stipulate restrictions or diverse options regarding the rights that their shares incorporate, such as the stock flow, the ease of sale or acquisition, and they can even establish special agreements among themselves regarding preference, voting and other similar agreements. However, unlike the SAPI, in a SA it is not possible to exclude, limit or extend the distributed profits or other special economic rights, such as bonds or participation derived from other operations, corresponding to the shareholders.

Mergers

A merger is the union, mainly in terms of assets, of two or more companies. The following possibilities may result from such a merger:

That one of the companies disappears (merged company) and one survives that would absorb all the assets of the rest (merging company).

That both companies disappear so that a new company is created from the union.

The General Corporate Law expressly establishes that mergers are possible in all types of companies. In any case, there are a series of rules that must be considered for the incorporation of the merging company or, if applicable, of a new company. In order to carry out a merger, the following must be done:

To carry out a merger agreement between the companies that will participate in the merger. In such agreement the Basis of Merger must be included, these are:

Type of merger.

In the event that any company is the merging party, it must be fully identified.

Confirmation of the effective date of the merger.

Indicate the legal effects with respect to the new shareholding, once the merger has been carried out. Likewise, the list of shareholders of the new company or of the merging company must be included.

Mention that on the effective date of the merger all the stock certificates or certificates of parts of the company will be cancelled.

Include the instruction to issue new titles or certificates in the name of the shareholders or partners resulting from the merger.

If there is no liability of any kind with respect to the merged companies, it must be expressly stated in the merger agreement; in this case no other formality is required other than the express acceptance.

If there is any liability on the part of the merging companies, the merging company must expressly mention that it will be liable as from the effective date of the merger. In addition, it must be mentioned that all the obligations and responsibilities of the merging company will not be affected, and it must be included in the ratification that it will comply with third parties with respect to the above.

Each of the companies, whether merged or merging, must hold a Shareholders Meeting or an Extraordinary Shareholders Meeting, as the case may be, to approve the merger agreements.

A merger notice must be published, together with the last balance sheet of the previous month of the Company, in the electronic system established by the Ministry of Economy.

Once the notice has been published, the merger must be formalized before a notary public and, subsequently, registered with the Public Registry of Commerce.

The effective date of the merger that will take effect among the shareholders will be the one mentioned in the Merger Agreement.

The merger will be enforceable against third parties once it has been registered at the Public Registry of Commerce.

In addition, the following notices are required:

Notice before the Tax Administration Service (SAT). In the case of merged companies, the Notice of Cancellation due to Merger is filed, which indicates and identifies both the merged company and the merging company; in the case of the new company resulting from the merger and the merging company, it is necessary to file the Notice of Registration due to Merger.

Notice of change of merger before the Mexican Social Security Institute (IMSS), as well as before the Institute of the National Workers' Housing Fund (Infonavit) This procedure must be carried out by the company's legal representative.

Notice both to the union - in case of having unionized employees - and to the Local Conciliation and Arbitration Board corresponding to the domicile of the work center.

If the employer is the merged company, an employer substitution must be carried out before the IMSS, Infonavit, the union and the corresponding Local Conciliation and Arbitration Board. In addition, each worker will be informed of the details of his new employer by means of a free writing, signed by the legal representatives of the substitute employer and the substituted employer; such writing must thus have the express acceptance signature of the worker.

The National Registry of Foreign Investments must be notified if the company has foreign capital.

In case the owner of the Importers' Registry is the merged company, this is automatically cancelled at the moment of requesting the cancellation of the Federal Taxpayers' Registry. If the merging company is not registered with the Registry of Importers, its registration must be processed.

If the merged company has programs of the Ministry of Economy (SE), such as IMMEX or PROSEC, the agency must be notified, by means of a free writing, of the cancellation of such programs.

Notice must be given to the Mexican Institute of Industrial Property (IMPI) by means of a free writing for each of the trademark registrations of which the company is the owner.

Notice must be given to any bank, national or foreign, with which the merged company has open accounts.

A communication must be sent to the merged company's suppliers to avoid any inconvenience.

Divisions

A spin-off is carried out when a company called spin-off company decides to extinguish itself and divides all or part of its assets, liabilities and share capital into two or more parts that are contributed to other companies called spin-off companies or to a newly created company.

For such purpose, an extraordinary meeting must be held in which the following is resolved:

Report presented by the Board of Directors in relation to:

The business and affairs of the Company

The policies adopted for the management of the main existing projects

The main tax and reporting policies, as well as the criteria to be followed for the preparation of financial information for the fiscal year prior to the effective date of spin-off.

Distribution and explanation by the Board of Directors of the balance sheet and audited financial statements for the fiscal year prior to the effective date of spin-off.

Proposal and discussion of the spin-off of the Company, as a spin-off company, through the en bloc contribution of a part of its assets, liabilities and stockholders' equity to a newly created spin-off company as a result of the spin-off, and in case it is so resolved:

Approval of the basis and terms of the split

Corresponding reduction of the variable part of the Company's capital

Any action and documentation required in relation to the above.

Detailed description of the assets, liabilities and the share capital of the spun-off company that will be transferred to the spun-off company, or if applicable, to the new company. The above for a clear identification of them; also, the terms and conditions must be included.

Clear identification of the contractual obligations that the split-up company will have to assume as a result of the split-up. In case the spin-off company does not comply with its obligations, the responsibility will be of the spin-off company, provided that the creditors have not given their express consent to the spin-off. The above will be valid for a term of three years from the last publication.

The effective date of the split.

Formalization of the resulting resolution before a Notary Public and registered in the Public Registry of Commerce.

Publication of a summary of the resolution in the electronic system established by the Ministry of Economy.

Inclusion of a note indicating that the resolution will be available to partners and creditors at the domicile of the spun-off company for forty-five calendar days from the date of both the publication of the resolution in the system established by the Ministry of Economy and the registration of the spin-off before the Public Registry of Commerce.

The spin-off will take effect before the tax authorities as of the date indicated in the resolution. However, any creditor, partner (or partners) representing at least 20% of the total capital stock of the spun-off company may oppose the spin-off through a court proceeding. If this situation arises, the spin-off will be suspended until the resolution of such proceedings. The creditor, partner (or partners) who initiates a judicial procedure must provide a bond sufficient to cover the damages that may be caused to the company.

If after the 45 days mentioned there is no opposition, the split will be considered valid and binding.

The spin-off company will be valid from the date it is incorporated before a notary public; for such purpose, the spin-off agreements must include the bylaws of the spin-off company.

In those cases where the spin-off implies the extinction of the spun-off company, the cancellation of its registration before the Public Registry of Commerce must be requested, and the same notices described in the section on mergers must be filed.

Other types of instruments to operate in Mexico

In addition to the companies, there are other forms under which it is possible to operate in Mexico, among them:

Commercial commission contract

It is a contract by which a merchant agrees to perform on behalf of another, one or more commercial operations.

Distribution agreement

It is a contract by virtue of which the distributor undertakes to acquire from the distributed mass consumer goods for their subsequent placement in the market, at its own risk and expense, in exchange for a stipulated profit or income margin as consideration.

Public-private partnerships

Under the Public-Private Partnerships Law, a Public-Private Partnership (PPP) contract may be entered into between a government entity and an individual to carry out projects of public interest in investment and infrastructure in Mexico, as well as applied research and technological innovation activities, with the purpose of increasing social welfare.

The aim is for these projects to be long-term, under any scheme, and to be contractually regulated for the provision of services to the public sector (wholesalers, intermediaries or the end user), using infrastructure provided by the private sector.

Some of the contracting regimes provided for in the Public-Private Association Law are competitive bidding -exceptionally it can be through invitation to at least three persons-, and direct awarding, as appropriate.

The application of the Law of Public Private Associations is without prejudice to international treaties. The laws on Procurement, Leasing and Services of the Public Sector and Public Works and Related Services are not applicable to PPP projects, except in the cases expressly provided by the referred law.

For the realization of PPP projects, it is required:

Granting of one or more permits, concessions or authorizations for the use and exploitation of public property when necessary for the provision of the respective services.

Conclusion of long term contracts, in which rights and obligations are established between the unit or entity and the service providers or individual performers of the work.

To determine the viability of a PPP project it is necessary to analyze the following aspects:

Project description and technical feasibility

Properties, goods and rights necessary for the development of the project

Authorizations for the development of the project, if necessary

Legal, economic and environmental viability of the project, as well as its impact, profitability and convenience of implementation.

All of the above, based on the analysis of the competent authorities in terms of compliance with applicable provisions for their efficient performance (for example, in terms of environmental protection and conservation of the ecological balance in each area of government, and provisions related to human settlements and urban development). Once the respective authorities evaluate all the conducive issues, the unit or entity decides if the project is viable and, if so, proceeds to its implementation and development.

In order to start a PPP project, the public entity that intends to develop it must call for a contest that will be carried out according to the principles of legality, free competition and competence, objectivity and impartiality, and in equal conditions for all participants.

National and foreign individuals and companies that comply with the requirements of the call, with the rules and regulations applicable to the project in question may participate in these competitions. In the event that an individual is the winner of the project, he or she must be constituted as a legal entity, since the PPP contract can only be entered into with legal entities whose corporate purpose is specifically aimed at carrying out the activities to develop the respective project.

In the PPP projects it is contemplated that the developer will be responsible for the provision of the services, according to the agreed performance levels and the characteristics established for services such as construction, equipment, maintenance, conservation and repair of infrastructure.

The Public-Private Partnerships Law provides for the intervention by the agency or contracting entity in the preparation of the work and its execution, the provision of services or any other stage of the project, when it considers that the developer has failed to comply with its obligations for reasons attributable to it, seriously jeopardizing the development of the project. This intervention will have a maximum duration of three years; if after this period the agency or contracting entity considers that the developer cannot complete the project, the contract will be terminated and the authorizations granted for the development of the project will be revoked. Once the contract has been terminated, the contracting unit or entity may take direct charge of the execution of the work and conclusion of the project or hire a new developer.

In the event of any dispute arising from differences of a technical or economic nature, the parties to the APA contract may resolve them by mutual agreement; if they do not reach an agreement within the agreed period, they shall submit the matter to a committee made up of three experts in the field in question, each party appointing an expert and these two experts choosing the third who will be exclusively responsible for dealing with any disagreements that may arise in relation to the matter under analysis.

In the case of disputes relating to the performance of the contract, the parties may agree to file a request for conciliation with the Ministry of Public Function or agree to an arbitration procedure in terms of the provisions on arbitration in the Commercial Code.

In case of appeal before the jurisdictional authority, the federal courts will be in charge of hearing disputes arising from the interpretation or application of the law on the matter, as well as from acts and provisions emanating from it.

The published calls for PPP projects can be consulted in the government public information system CompraNet, in charge of the Ministry of Public Function. The system is free of charge and through it the contracting procedures of the public administration in Mexico are developed.

Association in participation

In Joint Venture agreements, a person called the associate receives from another person, called the associate, goods or services in exchange for a share in the profits and losses obtained, either by operating his or her company, through negotiation or by conducting one or more commercial businesses.

The Association in Participation has no organs or any other form of internal organization and cannot exercise rights or contract obligations with third parties. It is eminently a commercial contract of economic collaboration, with the following characteristics:

Minimum two parts required.

It does not have legal personality (by exception, for tax purposes, as noted below).

Does not have a name or company name.

It does not have a social patrimony, nor does it create a common patrimony between the member and the associate.

The associate is responsible for acting as the legal representative and the manager of the business.

There is a common interest between the one who carries out the activity and the one who provides the capital.

Profits and losses are distributed as agreed in the contract.

The losses of the associates cannot exceed their contribution.

At no time can it take the form of a commercial company.

In the absence of special stipulations regarding operation, dissolution and liquidation, it shall be governed by the rules established for the Society in Collective Name, as long as these do not contravene the respective provisions of the chapter that regulates the Association in Participation.

The procedure to carry out a Joint Venture contemplates the execution of a contract that, according to the law, must be in writing and, although it is not subject to registration with registration authorities (such as the Public Registry of Commerce), it must be registered in the Federal Taxpayers' Registry.

For tax purposes, the Joint Venture will have legal personality when the agreement is entered into in accordance with Mexican law or when it is considered a resident for tax purposes in Mexico. For this purpose, it will comply with the same tax obligations established for legal entities.

Joint ventures

The joint venture concept as it exists in international practice is not regulated in Mexican law. In this sense, the operation of a joint venture is governed by the terms of the contract entered into by the parties for such purpose.

The purpose of the parties in agreeing to a joint venture must be to carry out a specific business or commercial project. If the scheme is not taken care of, a Joint Venture can be set up, which will entail tax obligations, just as if a commercial company were incorporated.

Procedures to open a business in Mexico

Basic requirements

The steps to follow to incorporate a company in Mexico are the following:

Obtain the authorization of the Ministry of Economy for the use of a corporate name, in accordance with the provisions of the Foreign Investment Law. To do so, it is necessary to enter the Ministry of Economy's computer system to verify whether the name to be used is available. The estimated time for this procedure is about two working days; however, such time may vary if the name chosen by the company is already being used by another company.

Protocolization of special power of attorney granted to a person in Mexico before a Notary Public, in case the partners or shareholders cannot appear in person to carry out the necessary steps to incorporate the company. The power of attorney granted abroad must be legalized or apostilled in case the country of origin is a signatory of the Hague Treaty. In addition, if the power of attorney was written in a language other than Spanish, it must be translated by an expert translator. The estimated time for the notarization is two to three working days.

Provide the notary public with the following information of each of the partners or shareholders that will make up the company, in order to comply with the provisions of the Law for the Prevention and Identification of Operations with Resources of Illicit Origin. It is necessary to provide the following information:

Name, nationality and address

Occupation.

Tax Identification Number.

If a company already constitutes a shareholder of the new company, it is also necessary to provide its corporate purpose and the identification data of its legal representative.

Formalize the statutes of the company before a notary or public broker to later register the company before the Public Registry of Commerce at its corporate headquarters. The inscription in the Registry is an indispensable requirement so that the society has its own legal personality; a society not registered before the Public Registry of Commerce is irregular, and its partners will have to respond in a subsidiary, joint and several and unlimited way for the legal acts carried out in its name. On average, this procedure takes one week.

Registration before the Federal Taxpayers' Registry (RFC) Before the corporation carries out commercial operations or opens bank accounts, it must register with the RFC to obtain its tax identification card. This procedure can be carried out through a Notary Public and takes one day if an appointment is made at the corresponding Tax Administration Service (SAT) office.

Obtain the Advanced Electronic Signature (FIEL) and the Strengthened Confidential Electronic Identification Key (Strengthened CIEC). Once the company is incorporated and its Federal Taxpayer Registry is obtained, in the pre-operational stage of the new company it is necessary to process the FIEL and the CIEC Fortalecida, which are means of identification that will necessarily be required to comply with the company's tax obligations in a timely manner.

Registration in the National Registry of Foreign Investments if the company has foreign capital, within a period not exceeding 40 calendar days after the date of incorporation of the company. This registry is not public, so only the State may consult the information provided for statistical purposes.

Employer Registration for Mexican National Companies or Associations in case the company employs one or more workers. According to the Social Security Law, the employer is obliged to register and enroll its workers in the IMSS. This procedure must be carried out by the legal representative of the company at the sub-delegation or Auxiliary Administrative Office of the IMSS corresponding to the domicile of the work center. To know which sub-delegation or Auxiliary Administrative Office corresponds to you, you may consult www.imss.gob.mx/directorio.

Other procedures that may be necessary for the operation of the company, depending on the nature of its operations, are:

Register of Importers

Operating license

Construction license

Environmental Impact Authorization

Land use license

National Registry of Foreign Investments

The National Registry of Foreign Investments (RNIE), attached to the Ministry of Economy, is in charge of accounting for and following up on the flow of foreign investment in Mexico. Companies with foreign capital must carry out the following procedures before the National Registry of Foreign Investments (RNIE):

Application for registration.

Quarterly Update Notice (which includes the procedures for Notices of Changes and Quarterly Economic Reports). It is presented only when the company has modifications in its name or corporate name, economic activity or fiscal domicile, registers changes in the corporate capital or shareholding structure when the participation of foreign capital involves amounts greater than 20,000,000 (twenty million) Mexican pesos, as well as in the case that the income or expenses (both in Mexico and abroad) are greater than the mentioned amount.

Renewal of the registration certificate through the presentation of the Annual Economic Report. This is only done in the case that, during the fiscal year in question, the accounts of the company with foreign investment - whether of total assets, total liabilities, income or expenses (in Mexico and abroad), and whether initially or finally - are greater than 110,000,000 (one hundred and ten million) Mexican pesos.

Request for cancellation of registration.

Notices from public notaries (only applicable to these).

It is important to carry out these procedures in time and form to avoid economic sanctions.

Fast business opening system

In the Internet portal tuempresa.gob.mx the federal government, through the Ministry of Economy, facilitates the fulfillment of different procedures necessary for the constitution, opening and development of new companies. The site concentrates most of these procedures and allows them to be carried out quickly, free of charge and online, reducing time and costs by avoiding the need to fill out forms for different procedures with the same information and eliminating the need to go personally to government offices.

There are some procedures, such as the protocolization of the articles of association before a notary public, which do have a cost -which depends on the notary public- and which must be done in person.

Tax regulation

The Mexican fiscal system contemplates the presence of the three levels of government: federal, state and municipal.

Tax system and Federal Taxpayers' Registry (RFC)

Legal entities and individuals who must file periodic returns or who are required to issue tax receipts for the activities they perform or the income they receive, are required to register with the Federal Taxpayers' Registry and obtain their Advanced Electronic Signature certificate, as well as to provide the information related to their identity, their domicile and in general their tax status through the notices established in the various tax provisions.

For tax purposes, individuals are those with the capacity to exercise rights and incur obligations of a tax nature, while corporations are groups of people who meet for a specific purpose. When the Income Tax Law speaks of legal entities, it refers to commercial companies; decentralized agencies that mainly carry out business activities; corporations and civil associations; credit institutions and joint ventures.

Permanent Establishment

The Income Tax Law considers as a permanent establishment any place of business in which business activities or independent personal services are developed, partially or totally, such as branches, agencies, offices, factories, workshops, facilities, mines, and any place of exploitation of natural resources.

Likewise, a foreign resident is considered to have a permanent establishment in Mexico when:

It conducts business activities in Mexico through a trust.

It is an insurance company resident abroad that receives income from the collection of premiums within Mexican territory or grants insurance against risks located in it through a person other than an independent agent, except in the case of reinsurance.

Provides construction, demolition, installation, maintenance or assembly services on real property, or for projection, inspection or supervision activities related thereto, for more than 183 calendar days, consecutive or not, in a twelve-month period.

When the resident abroad subcontracts the above-mentioned services with other companies, the days used by the subcontractors in the development of these activities will be added, if applicable, to the calculation of the aforementioned period.

On the other hand, a foreign resident will not be deemed to have a permanent establishment in the country if he acts through an independent agent, unless such agent does not act within the ordinary framework of his activities, i.e., when the agent:

Has goods or merchandise in stock with which you make deliveries on behalf of the resident abroad.

Assume the risks of the resident abroad.

Act subject to detailed instructions or the general control of the foreign resident.

Carry out activities that economically correspond to the resident abroad and not to your own activities.

Receives his or her remuneration regardless of the result of his or her activities.

Carry out transactions with the foreign resident using prices or amounts of consideration other than those that would have been used by unrelated parties in comparable transactions.

When a foreign resident acts in the country through a dependent agent, it will be considered that he generates permanent establishment in relation to all his activities, even when he does not have a place of business or provision of services, if said agent exercises powers to enter into contracts in the name or on behalf of the foreign resident to carry out the latter's activities in Mexico.

A foreign resident will not be considered to have a permanent establishment in the following cases of activity:

Use or maintain facilities for the sole purpose of storing or displaying goods or merchandise belonging to the resident abroad.

To keep goods or merchandise belonging to the resident abroad, with the only purpose of storing or exhibiting such goods or merchandise.

Using a place of business for the sole purpose of purchasing goods or merchandise for the resident abroad.

Using a place of business for the sole purpose of carrying out activities of a preliminary or auxiliary nature for the activities of the resident abroad, for example, propaganda, provision of information, scientific research, preparation for the placement of loans or other similar activities.

To carry out the fiscal deposit of goods or merchandise of a resident abroad in a general deposit warehouse or to deliver them for their import into the country.

Maintaining relationships of a legal or economic nature with companies that carry out maquila operations, which process goods or merchandise held in the country by the resident abroad, using assets provided, directly or indirectly, by the resident abroad or any related company, provided that Mexico has entered into a treaty with the country of residence of the resident abroad to avoid double taxation, and all the requirements set forth in such treaty are met, including amicable agreements.

Advanced Electronic Signature Certificate

In accordance with the tax legislation in force in Mexico, when the provisions on the subject require the submission of documents, these must be digital and contain the Advanced Electronic Signature (FIEL) of the author.

The FIEL is a digital file with which the holder can identify himself to carry out procedures via the Internet before various government agencies. To obtain it, it is necessary:

Present an original and a copy of a valid official identification.

Verify that the applicant's Sole Population Registration Key (CURP) is certified in the National Population Registry. If the applicant is an individual, his or her own CURP will be verified; if the applicant is a legal entity, the CURP of its legal representative will be verified

Present a proof of address no older than four months.

FIEL is valid for four years. If the FIEL has not expired, the procedure for its renewal can be carried out online, using the Certifica application, which can be downloaded at portalsat.plataforma.sat.gob.mx/solcedi/ or by personally going to any office of the Tax Administration Service (SAT). If the FIEL has already expired, the renewal can only be processed personally at the SAT offices.

To request the renewal of the FIEL at the SAT offices, it is necessary to present a request:

Original or certified copy of a current official ID.

The applicant's e-mail address.

A storage device (USB memory stick).

Similarly, the revocation of the FIEL may be requested online (only if the FIEL is in force) or in person at the SAT offices, by presenting a valid official identification.

Opening notices

Individuals and legal entities that carry out the opening of establishments, branches, premises, fixed or semi-fixed posts, and in general any place for the development of their activities, must submit a notice to the SAT -by Internet or in person at the offices of the dependency- notifying such opening. This notice must be submitted within the month following the opening, and in order to submit it, it is necessary to have FIEL and a valid Confidential Electronic Identification Code (CIEC Fortalecida).

Withholdings for payments abroad

In general, the payer will withhold the tax if he is a resident in Mexico or has a permanent establishment in the country; otherwise, the person receiving the income must pay the corresponding tax through the methods established by SAT.

Taxes

The following is a brief analysis of the most important taxes in Mexico.

Federal Taxes

The body in charge of determining and collecting federal taxes is the SAT. There are tax coordination agreements between the federal and state governments, so the federal entities are empowered to audit and collect federal taxes. The most important federal taxes are:

Income Tax

Income Tax (ISR) directly taxes the income of individuals and corporations, whether resident or non-resident in Mexico, according to the following criteria:

Individuals and legal entities resident in Mexico, with respect to all their income, regardless of the location from which they come.

Foreign residents who have a permanent establishment in Mexico, with respect to the income attributable to such permanent establishment.

Residents abroad, with respect to income from sources of wealth located in Mexico, when they do not have a permanent establishment in Mexico, or when having one, such income is not attributable to such permanent establishment.

The ISR rate is 30% for legal entities, while for individuals a progressive rate ranging from 1.92% to 35% is applied.

In general terms, the taxable base is obtained by subtracting the deductions authorized by the Income Tax Law from the cumulative income. Under the general regime for corporations, the result obtained is reduced by the workers' share of profits and unamortized losses from previous fiscal years; the result obtained is called the tax result, which is the taxable base on which the 30% rate is applied.

Income tax is paid on an annual basis, although provisional monthly payments must be presented throughout the tax year.

Value Added Tax

The Value Added Tax (VAT) taxes the sale, granting of temporary use or enjoyment, and import of goods, as well as the provision of independent services, carried out by individuals and companies in national territory.

The VAT is 16% on the consideration, or on the value of the goods and/or services. However, some transactions are subject to a 0% rate. In the case of imports, VAT is paid directly at the time of importation.

For each taxable act, the taxpayer must charge VAT to the legal entities and individuals that acquire the goods, receive the use or enjoyment of the goods or receive the services. Against the VAT that the taxpayers charge, they can credit an amount equivalent to the VAT that has been charged to them. The difference between the VAT that the taxpayer collects and the VAT that is charged is the amount that the taxpayer must pay -or in its case, the balance in favor to recover- for VAT in its monthly declarations.

Only VAT taxpayers can credit the tax charged to them so that, as a general rule, final consumers, which include foreign residents without a permanent establishment, cannot recover the tax charged to them.

The export of goods and certain services is taxed at a 0% rate, which results in favorable treatment since it is possible to recover the creditable tax.

Special Tax on Production and Services

The Special Tax on Production and Services (IEPS) is caused by the sale and import of goods such as alcoholic beverages, tobacco, gasoline and diesel, and by the provision of services among which the mediation and commission in relation to the sale of the taxed products, as well as games, raffles and bets allowed in Mexico stand out. The STPS is applied on the value of the taxed acts, at a rate ranging from 3% to 160%.

Local taxes

They are determined and collected by the state and municipal treasuries. The most important local taxes are:

Payroll Tax

The purpose of this tax is to pay for work. The rate varies depending on each state, and ranges from 2% to 2.5% applicable to the total amount of the monthly outlay.

Property Tax

This tax is levied on the ground and the constructions attached to it. The tax rate is variable and depends on the state and the value of the land and property.

Tax on the acquisition of real estate

It is caused by the acquisition of real estate consisting of the land, the buildings or the ground and the buildings attached to it. The rate of this tax varies between 2.5% and 4.5% on the total value of the property.

In addition to these taxes, at the municipal level, tax payments are made for the supply of drinking water, drainage, sewage and public lighting, among other public services.

Notice of change of fiscal address

Individuals and legal entities that establish their domicile in a place other than the one they have declared before the Federal Taxpayer Registry or that update their domicile data -without this implying a physical change of location-, must file a Notice of Change of Tax Domicile, within ten days following the change.

The notice can be submitted online or in person at the SAT offices. In order to do the procedure online, it is necessary to have the FIEL, RFC and the password issued by the SAT; to do it in person, it is necessary to present the original proof of the new fiscal address, a valid identification and, in the case of foreigners, a certified copy of the power of attorney appointing a representative for fiscal purposes.

RFC Cancellation Notice

When the taxpayer is in any of the following cases he must request - personally or through an interested and duly accredited third party, and in accordance with the specific rules established for each case - the cancellation of the RFC before the SAT:

Total cessation of operations

In the case of legal entities residing abroad that cease operations or close their permanent establishments in Mexico.

Total liquidation of assets

When the legal entities have concluded their process of liquidation of assets or change their tax residence.

Death

In case of death of an individual, at the request of relatives or an interested third party.

Liquidation of succession

Presented by the person or persons who have accepted the position of legal representative of a succession (executors). Processed by the merging company when it survives due to a takeover as a result of said merger.

Labor considerations

In Mexico, the Federal Labor Law establishes the rights of workers. The following explains some aspects that are important to know about this legislation.

Workers

Workers are those persons who provide another person or a company with subordinate personal work in exchange for remuneration. Work means any kind of human activity, intellectual or material. Persons or companies that use the services of workers are called employers.

It is recommended that, in order to start operations in Mexico, an individual work contract be established strictly with the workers, in which their rights and obligations are clearly defined.

Unions

A union is an association of workers or employers whose main purpose is to improve and defend the interests of its members. Association in a union is an inherent right, so no prior authorization is required to constitute it; however, in order to be recognized by government authorities it is necessary to register it with the administrative authority.

Among the powers of unions are to acquire movable and immovable property directly intended for the purpose of their institution and to defend before all authorities their rights and those of their members.

The minimum number of members to constitute a workers' union is twenty, while to form an employers' union a minimum of three members is required.

Mexican law recognizes the following types of workers' unions:

Trade Unions

They are those formed by workers of the same profession, trade or specialty.

Corporate

Those formed by workers who provide their services in the same company.

Industrial

They are those formed by workers who provide their services in two or more companies in the same industrial branch.

Domestic industry

They are those formed by workers who render their services in one or several companies of the same industrial branch, installed in two or more states.

Various trades

They are formed by workers from various professions.

For their part, employers' unions can be of two types:

Those formed by employers from one or more branches of activity.

The national ones, which are formed by employers from one or several branches of activities from different states.

Unions may not participate in religious activities or exercise commercial activities.

Types of contracts

Mexican law allows companies to hire their workers in several ways, namely:

For an undetermined time

This is the general rule.

For a given work

Only when the nature of the work to be done - such as the construction of a building, for example - so requires.

For a given time

Only when the nature of the work to be performed requires it; for example, when someone is hired to temporarily replace another worker.

By season

Only when the nature of the work requires it; for example, when it involves activities such as mining that do not have year-round resources.

Also, working relationships may be subject to various conditions, such as:

Trial

In working relationships for an undetermined time - or when they exceed 180 days - a trial period of maximum 30 days may be established, in order to verify that the worker complies with the requirements and knowledge necessary to carry out the activities requested. In the case of management or administrative positions, the trial period may be extended to up to six months.

Training

It is a labor relationship by virtue of which a worker is obliged to render his subordinate services, under the direction and command of the employer, in order to acquire the knowledge or skills necessary to carry out the activity for which he will be hired. The training period may not be longer than three months, unless it is for management or administrative positions, in which case the period may be extended up to six months.

Wages

The salary is the remuneration that the employer must pay the worker for his work. In Mexico there is a minimum wage, which is the minimum amount the worker must receive for services rendered during a work day. This salary is defined by the National Minimum Wage Commission - made up of government, company and worker representatives - and may vary depending on the state where the worker works and the activity carried out.

Regardless of the above, the law allows a worker's salary to be set based on various criteria, depending on the nature of the work. The most commonly used criteria are:

Per unit of time

In no case may it be less than that corresponding to a working day.

Per unit of work

It is not the production time that matters, but the units produced. The employer cannot charge the worker for the tooling used to carry out the work.

By commission

The worker will be paid a percentage of the product of the sale or business he or she carries out. Under this modality, the worker must be guaranteed a base salary, which will be paid regardless of the sales or business he or she carries out.

Lump-sum payment

It is calculated based on the finished work, but in this case the worker must put the materials and tools that are required.

In order to guarantee equity in salaries, in Mexico the principle of: "equal work, equal positions, equal working hours and equal conditions of efficiency, correspond to equal salaries".

Working hours and rest days

A working day is the time during which the worker is at the employer's disposal to perform his work. There are three types of working days.

Daytime

It includes the schedule between 6:00 and 20:00 hours. The maximum duration of this day is eight hours.

Night shift

It includes the schedule between 8:00 p.m. and 6:00 a.m. The maximum duration of this day is seven hours.

Mixed day

It includes a combination of daytime and evening hours. The maximum duration of this day is seven and a half hours. If it is necessary for the workday to be extended beyond the hours listed above, the employer must pay overtime to the workers.

In Mexico, workers are entitled to at least one day off for every six days worked. On the day of rest, workers are not obligated to render their services; if it is really necessary for the worker to report to work on days of rest, the employer must pay him/her double wages on that day. In addition to the rest days that by right correspond to each worker, the following are mandatory rest days in Mexico:

On January 1st

The first Monday of February, in commemoration of February 5th

The third Monday of March, in commemoration of March 21

On May 1st

September 16th

The third Monday of November, in commemoration of the 20th

On December 1 of every six years, when it corresponds to the transfer of the Federal Executive Power

On December 25th

Those determined by federal and local election laws, in the case of ordinary elections, to carry out Election Day. In addition to the obligatory rest days, the employer and the workers may agree on other rest days for their company

Benefits

Legal services

Mexican law provides for the following benefits for workers:

Vacation

The worker has the right to enjoy them, according to the number of days of seniority in the service of the company. This benefit is paid on the basis of the nominal salary earned by the worker and is covered in proportion to the number of days worked in the year.

Vacation premium

Equivalent to 25% of the worker's salary during the vacation period.

Bonus

Equivalent to the amount of 15 days of nominal base salary for each year of services rendered -or fraction thereof in proportion to the time worked in the year-.

These are the minimum benefits provided for in the Federal Labor Law; however, the personnel in the service of a company may receive more days of salary for a bonus or vacation, or a higher percentage for a vacation premium, depending on what is agreed in the corresponding contract.

If the worker is entitled to any additional benefit to those established by law, in addition to the minimum wages and benefits established by law at the date of termination of the labor relationship, he or she must be paid the proportional amount corresponding to such additional benefit.

Profit sharing

Another benefit contemplated by Mexican law is the participation of workers in the companies' profits. Workers will participate in the companies' profits according to the percentage determined by the National Commission for Workers' Participation in Companies' Profits. Profit sharing must be made within sixty days after the deadline for filing the annual tax return.

Newly created companies are not required to distribute profits during their first year of operation. For the payment of worker's compensation, profit sharing is not computed as part of the salary.

Housing Fund

In Mexico, the National Workers' Housing Fund Institute (Infonavit) is the agency in charge of establishing and operating a financing system so that workers have access to an economic credit that allows them to acquire a home, build a new home or remodel a home of their own.

The contributions that workers and employers make to Infonavit are considered social security expenses and are applied in full to constitute deposits in favor of the workers. The employer is obliged to allocate 5% of the worker's salary to Infonavit.

The credits granted by Infonavit are covered by an insurance for cases of permanent total disability and death, so that the worker -or his/her beneficiaries in case of death- is released from the obligations derived from the credit granted in his/her favor.

Social Security

The Mexican Social Security Institute (IMSS) is responsible for safeguarding the social security of workers. The IMSS contemplates two types of social security, the Obligatory Regime and the Voluntary Regime

Obligatory Regime

Persons subject to this regime are workers who provide a subordinate personal service and are paid a salary, either permanently or temporarily. The benefits received by workers affiliated to the IMSS are:

Insurance for work risks (accidents or illnesses during the performance of their work or because of it).

Sickness and maternity insurance.

Disability and life insurance.

Retirement, old age unemployment and old age.

Nursery schools and social benefits.

Voluntary Regime

It includes the same benefits of the Obligatory Regime. Those who can access this regime are:

Workers in industries or family businesses

Land owners, community members and smallholders

Domestic workers

Those workers in the service of the Federal Public Administration as determined by the respective authorities.

The payment of fees for social security benefits is covered by both the employer and the workers. Employers are responsible for withholding from workers the amount of their IMSS contribution and delivering it to the Institute on the 17th of each month.

The contribution to be paid to the IMSS is calculated based on the worker's contribution base salary, which includes the total of the worker's payments for salary, bonuses, payments, food, housing and commissions. In those cases in which the worker's salary is equivalent to a minimum salary, the employer must fully cover the IMSS contribution.

Termination of employment

Under Mexican law, an employment relationship may be terminated as a result of the following:

The mutual consent of the parties.

The death of the worker.

The completion of the work or expiration of the term or capital investment.

The physical or mental incapacity or manifest disability of the worker, which makes it impossible to perform the work. When the incapacity is due to a risk of non-professional work, the worker has the right to be covered with one month's salary and twelve days for each year of services, if possible, or to be provided with another job compatible with his or her abilities.

At the end of the labor relationship, the employer will be exempted from the obligation to reinstate the worker, through the payment of the compensations determined by law in the following cases:

When dealing with workers with less than one year of seniority in the company.

If it is proven before the Board of Conciliation and Arbitration that due to the work performed or the characteristics of his work, the worker is in direct and permanent contact with the employer and, taking into consideration the specific circumstances of the case, the Board considers that the normal development of the work relationship is not possible.

In the case of trusted workers.

In domestic service.

When it comes to casual workers.

The causes for termination of the employment relationship without liability to the employer are limited and must coincide with that expressly indicated by the Federal Labor Law, including:

Deception by the worker or, if applicable, by the union that proposed or recommended it, with false certificates or references in which the worker is attributed capacities, aptitudes or powers that he or she lacks. This cause for termination ceases to have effect after thirty days after the worker has rendered his services.

That during his or her work, the worker incurs in a lack of probity or honesty, in acts of violence, threats, insults or bad treatment against the employer or his or her family members; against the management or administrative personnel of the company or establishment, or against clients and suppliers, unless he or she acts with provocation or in self-defense.

That the worker commits any of the acts listed in the previous section against any of his or her colleagues, if as a consequence of them the discipline of the place where the work is performed is altered.

That outside the service, the worker commits any of the acts referred to in the second point against the employer, his relatives or the company's management or administrative personnel, if they are so serious that they make it impossible to comply with the work relationship.

That during the performance of his or her duties or because of them the worker intentionally causes material damage to the buildings, works, machinery, instruments, raw materials and other objects related to his or her work.

That without malice but with negligence, the worker causes the damages referred to in the previous point in a proportion that is considered serious, provided that negligence is the only cause attributable to the damages caused.

That due to recklessness or inexcusable negligence, the worker compromises the safety of the work establishment or of the persons who are in it.

That the worker commits immoral acts or acts of harassment or sexual harassment against any person in the establishment or workplace.

That the worker reveals manufacturing secrets or discloses matters of a confidential nature, to the detriment of the company.

That the worker has more than three absences in a period of thirty days, without the employer's permission or without justified cause.

That during his work the worker disobeys the employer or his representatives, without just cause.

That the worker refuses to adopt preventive measures or follow the procedures indicated to avoid accidents or diseases.

That the worker attends work in a state of drunkenness or under the influence of any narcotic or enervating drug - unless there is a medical prescription; in that case, the worker must inform the employer of the fact and present the prescription signed by a doctor.

That there is an enforceable sentence that imposes a prison sentence on the worker that prevents him from complying with the work relationship.

The lack of documents required by the laws and regulations necessary for the provision of the service, when such lack is attributable to the worker and exceeds a period of two months.

Those analogous to those established in the previous points, in the same serious way and with similar consequences as far as work is concerned.

An employer who terminates an employee must give the employee written notice, clearly stating the conduct or conducts for which the termination was made, and the date or dates on which the conduct was committed. This notice must be personally delivered to the worker at the time of the dismissal or, else, sent to the competent Conciliation and Arbitration Board within five working days following the dismissal, together with the last registered address of the worker, so that the authority may notify the worker personally of the reasons for the dismissal.

The statute of limitations to exercise the actions derived from the dismissal will commence when the worker personally receives the notice of termination. The lack of notice to the worker, either personally or through the Conciliation and Arbitration Board, will by itself determine the unjustified dismissal and, consequently, the nullity of the dismissal.

At the end of an employment relationship, the law establishes the following compensations:

If the employment relationship was for less than one year, the compensation will be equivalent to the amount of wages corresponding to half the time during which the services were provided. If the relationship exceeds one year, the worker shall be compensated with an amount equal to the amount of the salaries of six months for the first year of service, plus twenty days for each of the additional years in which the services were rendered.

When the employment relationship is for an undetermined period of time, the indemnification shall consist of twenty days of salary for each of the years of service rendered.

Independently of the indemnifications referred to in the previous points, the amount of three months' salary and the payment of the due wages and interests, if any.

In summary, according to the Federal Labor Law, when the employer terminates the labor relationship with a worker without just cause, he must pay him the following indemnification benefits:

Constitutional compensation consisting of the payment of three months' integrated daily salary.

Seniority bonus consisting of the amount of twelve days of basic salary for each year of services rendered, plus the proportional amount in case of incomplete year. In the case of this benefit, it should be taken into account that when the nominal salary of the worker exceeds twice the amount of the minimum salary, such benefit will be paid to the worker over the salary corresponding to twice the minimum.

Local procedures

Public Registry of Property and acquisition of real estate

Each state has its own provisions, rules and costs of the procedures. The requirements vary according to the geographic boundaries of each office of the Public Registry of Property.

When acquiring a property, the public deed in which the purchase and sale is recorded must be registered with the local Public Registry of Property, within the time period established by local law and applicable registry provisions, in order to protect your rights before third parties. In order for the sale and purchase to be registered without any contingency, the property subject to the operation must be free of any liens constituted prior to the registration, and the contributions caused previously (property and water consumption rights) and the contributions caused later (tax on property acquisition and income tax) must be covered.

Land use license

For the implementation of any establishment it is necessary to have the corresponding land use license, which indicates the uses that can be given to a property in accordance with the rules of land use and urban-environmental development. These licenses are regulated by the urban development laws of each state, and are processed in the urban development office of the town where the property is located. Response times vary depending on the location. The classification of the land will determine the use of it, according to territorial ordering (zoning).

Urban land - Residential, Open spaces, Commercial, Green areas, Industrial, Services.

Conservation land - Tourism, Environmental value areas, Recreation, Agriculture, Forestry, Agro-industry, Livestock, Rural equipment, Fish farming.

In rural villages - Low-density rural housing, commercial rural housing, rural equipment.

Building permits

When a construction, extension, remodeling or repair work is carried out, it will be necessary to obtain a construction license from the Works Department of the corresponding municipality, especially when it is a question of:

Buildings on conservation land.

Subway or aerial installations on public roads.

Cellular and/or wireless communication repeater stations.

Demolitions.

Excavations or cuts deeper than one meter.

Tapestries that invade the sidewalk by more than 50 centimeters.

Temporary works or installations such as fairs, mechanical devices, circuses, tents, removable stands and similar.

Installations or modifications of elevators for people, freight elevators, escalators and similar.

The requirements for applying for a construction license are similar in all municipalities of the country. In general, it is necessary to submit a written application accompanied by the following documents:

Valid official identification with photograph

Proof of payment of fees

Proof of non-debt of contributions

In case of legal entities: Constitutive Act duly registered in the Public Registry of Property and Commerce, and power of attorney of the legal representative.

Corresponding plans

Proof of Alignment and official number (local procedure)

Land use license.

Operating license

Before starting operations in a commercial establishment, the corresponding operating license must be processed with the authority of the municipality where the establishment is located. Depending on the line of business of the Company, this license may be commercial or industrial.

The requirements for obtaining it are:

Written request indicating:

Name or company name and signature of the interested party or parties or their legal representative

Address for hearing or receiving notices and documents

Federal Taxpayer Registry

Nationality

Commercial name or company name of the commercial establishment

Location and surface of the premises where the business is to be established

Commercial turn that is intended to be exercised.

Certificate of zoning for specific use, certificate of zoning for permitted land uses or certificate of accreditation of land use by acquired rights, which proves that the main business it intends to operate is permitted on the site.

Safety and operational approval issued by a responsible construction manager if the building was constructed before August 1993; if the construction is subsequent to that date, the original or certified copy - and a simple copy for comparison - of the occupancy permit must be submitted.

Document certifying ownership or possession.

Payment of applicable fees.

Payment of applicable fees.6. It must be accredited with the title of property or contract of purchase-sale, lease, bailment or provision of services.

Comply with the applicable regulations on civil protection.

Environmental impact considerations

In Mexico, the Federation, the states and the municipalities exercise their attributions in the matter of preservation of the ecological balance and protection of the environment in a coordinated way and in accordance with the distribution of competences foreseen in the applicable legislation.

The protection of the environment is regulated by a concurrent system of legal provisions, authorities, procedures and authorizations, which must be analyzed in depth for the establishment of any type of project that may imply some affectation or alteration to the environment. The most relevant aspects to be considered in this matter are listed below.

Environmental Impact Statement

Individuals who intend to carry out works that may alter the ecological balance or exceed the limits and conditions established in the applicable provisions to protect the environment, must submit their project to an environmental impact assessment, through the submission of an Environmental Impact Statement.

The Manifestation of Environmental Impact is a document that, based on specialized studies, informs the competent authority about the environmental impact that a work or activity could have, as well as the form to avoid it or to attenuate it in case it is negative. This document provides the authority with the information and elements it needs to issue an Environmental Impact Authorization.

The Environmental Impact Statement is processed before the Secretariat of Environment and Natural Resources (Semarnat). The granting or not of the Environmental Impact Authorization depends on the result of the evaluation procedure carried out by the General Direction of Environmental Impact and Risk of Semarnat.

Unique Environmental License

The Unique Environmental License is an authorization in matters of prevention and control of atmospheric pollution granted by Semarnat for the operation and functioning of fixed sources under federal jurisdiction.

The fixed sources of federal jurisdiction are all those industrial facilities whose activities correspond to the following areas or sectors: chemical, oil and petrochemical, paints and inks, automotive, cellulose and paper, metallurgical, glass, power generation, asbestos, cement and lime, and hazardous waste treatment.

To operate establishments of this type, any individual or company must obtain a Unique Environmental License.

Registration as a generator of hazardous waste

Generators of hazardous waste are required to register with Semarnat, through the Register of Generators of Hazardous Waste, so that the authority can have control over who the generators of this type of waste are in the country and what category they fall into, based on the amount of waste they generate.

The existing categories for registration as a Generator of Hazardous Waste are as follows:

Large generator

It is one that generates an amount equal to or greater than 10 tons of hazardous waste per year.

Small generator

It is one that generates a quantity greater than 400 kilograms and less than 10 tons of hazardous waste per year.

Microgenerator

It is one that generates up to 400 kilograms of hazardous waste per year.

Change of forest land use

Semarnat is responsible for regulating the use of forest resources and promoting the sustainable use of the country's forest ecosystems. When the development of any activity or work requires the total or partial removal of vegetation on forest land, before doing so, an application must be made to Semarnat for Authorization to Change the Use of Soil on Forest Land, through the presentation of a Technical Study to justify this.

Use and development of a beach area and/or Federal Maritime Land Zone

The procedure to request a Concession for the use and exploitation of a beach area and/or Federal Maritime Land Zone (ZOFEMA), is carried out before the Semarnat, and can be carried out by individuals and companies, national and foreign. The procedure to obtain this type of concession is extensive and can take up to 200 calendar days.

Source: ProMexico