Ultimate Beneficial Owner (UBO)

Since 2022, identifying and documenting the Ultimate Beneficial Owner has been an explicit tax obligation to the The Mexican Tax Administration Service (SAT).

Who is required to comply?

• Legal entities resident in Mexico.
• Foreign legal entities with a permanent establishment in Mexico.
• Trusts and other legal structures. 

Key obligations

Entities must:

• Identify the controlling beneficiary(ies).
• Obtain and maintain complete, accurate, and up-to-date information.
• Integrate this information into their accounting records.
• Provide it to the The Mexican Tax Administration Service (SAT) upon request.

Any changes must be updated within 15 calendar days.

To achieve the above, it is necessary to have a Defense File for the controlling beneficiary that provides for:

• Supporting the criterion adopted in accordance with SAT requirements.
• Documenting the analysis of control and beneficial ownership.
• Reducing tax contingencies.
• Aligning tax, legal, and corporate criteria.
   

Risk and penalties

Non-compliance may result in:

• Fines of up to MX$2.2 million per beneficiary, cumulative.
• Penalties for incomplete, incorrect, or outdated information.
• Taxpayers who are required to file a statutory tax report (dictamen fiscal) and answer affirmatively to having“kept accounting records for purposes of Article 28 of the Federal Tax Code (CFF)” must include the beneficial owner documentation in their accounting records; otherwise, this could result in a tax audit.
• Increased exposure during: 
  1. Tax audits.
  2. corporate restructurings.
  3. Mergers, spin-offs, and shareholding changes.
  4. Related-party transactions.

Proper assessment

Correct compliance requires:

• Analysing the direct and indirect ownership chain.
• Identifying effective control, even without shareholding.
• Documenting who makes key decisions within the entity.

If no individual can be identified under these criteria, the person holding the highest administrative position must be analysed, in accordance with the Federal Tax Code (CFF).

Why act now?

The Ultimate Beneficial Owner is currently a key focus of The Mexican Tax Administration Service (SAT) audits. Failing to have proper analysis and documentation significantly increases tax risk.
 

How we can help

• Diagnosis of corporate structures.
• Identification of the real controlling beneficiary.
• Preparation of the Defense File.
• Support during The Mexican Tax Administration Service (SAT) upon request audits and reviews.

Review your Ultimate Beneficial Owner compliance today with the support of our experts. Contact us.