On January 1 2022, a new obligation related to the identification of the beneficial owner of legal entities and trusts, amongst others (obligated parties), came into effect with articles 32-B Ter through 32-B Quinquies of the Federal Tax Code (FTC). This enabled the tax authority to require this as a part of their accounting information.
For these purposes, the FTC defines the beneficial owner as the person or group of people that either:
- Directly, or by means of any legal act, obtains the benefit derived from its participation in a legal entity, a trust, or any other legal figure, as well as from any legal act. Alternatively, the person or group that ultimately exercises the rights of use, enjoyment, use, or disposal of an asset or service, on whose behalf a transaction is carried out, even if it does so on a contingent basis.
- Directly, indirectly, or contingently exercises control over a legal entity or trust. This, considering that the person or group exercises control over an entity when:
- Imposing, directly or indirectly, decisions at general meetings of shareholders, partners, or equivalent bodies, or appointing or dismissing the majority of directors, administrators, or their equivalents.
- Maintaining the ownership of the rights that allow, directly or indirectly, the exercise of voting rights in respect of more than 15% of the stock.
- Directing, directly or indirectly, the administration, strategy, or main politics of a legal entity or trust.
Requirements for companies in scope
In line with the above, the obligated parties must comply, in general terms, with the following:
- Implement internal reasonable control systems, properly documented, that allow obtaining and keeping the information on the identification of the beneficial owner as part of their accounting information.
- Identify, verify, and validate the beneficial owner and, if applicable, the information regarding the chain of control.
- Indicate the percentages of the participation of the beneficial owner in the capital of the legal entity, including the information related to the chain of ownership.
- Obtain, keep, and maintain the availability of reliable, complete, adequate, accurate, and updated information on the beneficial owner, the chain of control, and the chain of ownership.
- Provide, allow, and grant access to the tax authority to the information, records, data, and documents related to the controlling beneficiaries.
The risks of non-compliance
Non-compliance with the referred obligations could result in the imposition of fines that range from MXP 500,000 to MXP 2,000,000 ($25,000 to $100,000).
In addition, the legal entity’s opinion regarding the compliance with tax provisions in terms of article 32-D of the CFF could be changed to ‘negative’. This would prevent the obligated parties from accessing many opportunities, including public biddings and contracting with government entities.
The scale of the fines that could be imposed on the obligated parties is significant. Therefore, it is important to keep up to date with such obligations, duly integrating and maintaining a specific file related to the beneficial owner. It is worth remembering that the information will most likely be required by the tax authority during audit procedures or even through invitation letters.
Legal entities that carry out vulnerable activities in terms of anti-money laundering dispositions may be better prepared to comply with these new obligations, since they already identify and store information regarding the beneficial owner of their clients. Therefore, they could, in principle, improve their systems and procedures to integrate a 360° compliance programme.
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