Doing Business in Mexico

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Doing Business in Mexico

  • How to start a business and business license in Mexico
  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credit
  • Protecting minority investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts
  • Insolvency
  • Hiring workers in Mexico

About Mexico Work and Business

  • Agriculture: Exportation of products.
  • Mining and petroleum: Exportation of natural resources.
  • Manufacturing industry: Primarily aerospace and car production.
  • Tourism: Mexico is in the 7th most popular tourist destination. It has the second-most museums of any Latin American country. It has a wide variety of activities and climates; from beaches, to jungle, to arid deserts.

Opening a business in Mexico as a foreign  or as a mexican citizen requires not only knowledge of , but also how much time and money you will invest during the process.

1. Starting a business in Mexico

  The procedure to register your business in Mexico is quite simple; 8 steps completed within 9 days, on average.
  The cost of starting a business in Mexico : Registration fee is 16.3% of the estimated income of the business during its first year of operation. The fee is not paid in subsequent years. This is in addition to any income taxes incurred during that year. These registration fees are in line with the OECD average.
  The   must prove that it has a bank account in Mexico, with a minimum balance of $1 MXN Peso

How to register a business in Mexico?

At: Ministry of EconomyEstablishment of the company name as a trademark in Mexico.
At: Public NotaryArticles of incorporation are signed by founders.
At: Public Registry of CommerceArticles of incorporation are filed.
At: Tax authorities (Sistema de Administración Tributaria – SAT)Receive a Tax Registration Number – RFC
At:  Mexican Social Security Institute (IMSS)Register to enroll at least one worker in Social Security.
At: Secretary of Financial Administration of Mexico CityRegister with local tax administration to enroll taxpayers (employees) for.
At: Local District (Alcaldía)Notify authorities of the establishment of the enterprise.
At: National Business Information Registry (Sistema de Información Empresarial)Mandatory registration with specific chamber to its corporate purpose or activities.

2. Construction permits in Mexico

 

Once interest gathers all information needed, the procedure to legally build a commercial facility (warehouse, offices, etc.) is 15 steps. Average completion time is 72 days.

The procedure itself is similar to other countries, while completion time is relatively short.

  Money invested during the process is equivalent to 10% of the commercial real estate value. This is an expensive process compared to other countries.
 

Construction standards in Mexico are higher than average.

According to the Building Quality Control Index, or BQC, Mexico enjoys a rating of 12 out of 15.

Procedure

At: Borough Construction Authority (A combined point of contact for the Department Urban Development and City Government)Obtain the official number and alignment certificate
At: Private licensed companyObtain a topographic map
At: Subdirección de Ventanilla Única of the Secretaría de Desarrollo Urbano y Vivienda attached to the Dirección del Registro de los Planes y Programas de Desarrollo Urbano of the Dirección General de Desarrollo Urbano
Obtain single zoning certificate, land use and feasibility
At: Water Services Agency (Sistema de Aguas de la Ciudad de México)
Request a water feasibility study
At:  Water Services Agency (Sistema de Aguas de la Ciudad de México)Inspection for water feasibility study
At: Water Services Agency (Sistema de Aguas de la Ciudad de México)
Obtain water feasibility study
Water Services Agency (Sistema de Aguas de la Ciudad de México)
Certificate of debts for water services
At: Tax Administrator AgencyCertificate of good standing with property tax
At: Ventanilla Única DelegacionalRegister Construction Statement Type B
At: Municipality
Notify completion of construction work
At: Directorate of General Work
Inspection of completion construction work
At: Delegation One-Stop Shop
Obtain occupancy clearance
At: Secretaría de Protección Civil
Authorization from civil protection
At: Water Services Agency (Sistema de Aguas de la Ciudad de México)
Water and sewage services
At: Ministry of Finance of Mexico City (Secretaría de Finanzas de la Ciudad de México)
Update building status

For detailed procedure visit: https://www.gob.mx/tramites/ficha/permiso-de-construccion/Entidades7099

3. Getting electricity in Mexico

  The procedure to get electricity connection is 7 steps and 112 days of time spent. In comparison to other countries is a time-consuming method.
  Money invest through procedure is 281.3% of income per capita. In a monthly bill for commercial warehouse the tariff is $0.793 MXN pesos per kilowatt-hour. Which means the procedure is average cost but the tariff is expensive in comparison to other countries.
  The reliability between duration and frequency of power in relation to the tariff is measure from 0 to 8, being 8 the best one. In Mexico electricity reliability is above the average with 7 points.

4. Registering Property in Mexico

  In comparison to other countries Mexico has a low-step but time-consuming procedure for property registration. They are 8 steps that can be done in 42 days.
  The invest needed in this procedure is 6.2% of the property value. Value added tax and capital gain tax are excluded. Mexico is above the average cost for this operation.
  Quality of land administration in Mexico is 16 out of 30. It indicates not-so-good reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution and equal access to property rights.

5. Getting Credit in Mexico

Lender/borrowed confidence is high in Mexico, which enjoys a rating 10 out 12.

Rules affecting the reach of accessible information and its quality are measured through the Depth Credit Information index, from 0 to 8; 8 being the best one.

Mexico´s rate is 7, hence this information is reachable and above the average.

6. Protecting Minority Investors in Mexico

In overall, minority investors are protected in Mexico in a low to average rate compared to other countries. Only, corporate transparency on ownership stakes, compensation, audits and financial prospects is a extent of corporate transparency that leaves much to be desired.

7. Paying Taxes in Mexico

  The new company in Mexico  must pay 9 contributions per year.
  Time invested in collecting information, computing tax payable, separating tax accounting books, completing tax return, filling with agencies, arranging payment or withholding throughout the year is 248 hours.
This is a lot of spent time compared to other regions in the world.
  Companies in Mexico make contributions of total tax for about 55% of profit.
  Average time elapsed to comply VAT refund, to obtain VAT refund, to comply with corrections and to complete them

8. Trading across Borders in Mexico

  Time and cost to obtain, prepare and submit documents compliance to export in Mexico is 8 hours and $20USD. This process is more efficient than most other countries.
  Time and cost to obtain, prepare and submit documents to import in Mexico is 18 hours and $100USD. Compared to other countries, Mexico is below the average. This process is more expensive and time-consuming than in other countries.
  Time and cost to customs clearance and inspection for export products is 20 hours and $400USD.
This is about average in compare to other countries.
  Time and cost to customs clearance and inspection for import products is 44 hours and $450USD. Compared to other countries, companies will spend more time and money than average to import products.

9. Enforcing Contracts in Mexico

Time and cost for resolving commercial disputes. This evaluates the legal dispute process and the quality of legal institutions.

  Typical time in Mexico to file a lawsuit, go to court and receive a judgment is 350 days. This is relativity quick in compared to other countries.
  The cost to enforce the contract to courts including attorney fees, court costs and enforcement cost is 33% of the claim value. This is a low cost compared to other nations.
  Court structure, case management, court automation and alternative dispute resolution makes quality of judicial processes is not-so-good in Mexico compared to other countries.

10. Bankruptcy in Mexico

Bankruptcy is the legal proceeding that involves businesses or persons that are unable to repay debts. It is the legal means to insulate itself from creditors.

  Time to recover debt in Mexico is 1.8 years, this includes appeals and requests for extension. Compared to other countries in Latin America & the Caribbean this is comparatively fast.
  In Mexico, compared to other countries the cost required to recover debt is high. This is measured as a percentage of estate value including court fees, insolvency administrators, lawyers’ fees, assessors and other related fees.
  In many situations a company bankruptcy will continue operating until unable to do so or business assets are sold. In Mexico there is a tendency for companies to continue operating after filing for bankruptcy.
  The credit recovery rate is calculated by dividing the total payment amount by the amount of debt. It measures the cents on the dollar recovered by secured creditors. Companies in Mexico have a recovery rate of 63.9 cents per dollar.

11. Hiring workers in Mexico

For detailed information visit: Employing personnel in Mexico.

Hiring Employees in Mexico Companies can not defined a labor agreement if the nature of the work is undefined. The limit length for a single fixed-term contract, including renewals but the maximum probatory period is 1 month. The minimum wage is $140US per month.
Working Hours in Mexico A standard workday is 8 hours a day 6 days a week. Overtime is paid as +50% of hourly pay and there are no restrictions working at night or weekend. If the employee works on its  weekly rest day, this must be paid as +25% of hourly pay.   Vacations are awarded based on seniority 6 paid leave days after 1 year worked 12 paid leave days after 5 years worked 16 paid leave days after 10 years worked
Termination in Mexico The employer or employee may terminate the employment relationship at any time with cause. The worker must be notified of the conduct and dates on which is was committed. The lack of notice to the worker or the relevant government authorities will provide the employee with grounds to successfully claim that the dismissal was unjustified. As a consequence the company must pay:   Three months´ salary 20 days of salary per each year of service Payment of overdue wages, if applicable Vacation and Christmas bonuses accrued by the time of dismissal.

References:

https://www.doingbusiness.org/content/dam/doingBusiness/country/m/mexico/MEX.pdf

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