Who is considered the beneficial owner?
What are the tax obligations of this new figure in companies?
As a result of the need to have regulations that promote transparency in information and due to international pressure, Mexico has enacted tax guidelines that affect legal entities that are part of corporate groups, on the clear identification of a new tax figure called: beneficial owner.
Purpose of this new obligation
In order to respond to the guidelines established by the Group of Twenty (G20), the 2022 Tax Reforms Initiative proposed to reform the tax framework to ensure that the tax authority has mechanisms in place to identify a beneficial owner.
The main purpose of these international measures is to detect beneficial owners who engage in tax evasion, criminal activities and the circulation of illicit funds.
These measures include the addition of certain articles in the Federal Tax Code to regulate the obligated parties, the multiple obligations they must comply with and the enforcement measures in case of non-compliance.
Therefore, the following are the attributes that define the beneficial owner, which, if applicable, will be the gateway to the obligations that legal entities will have to comply with.
Concept of beneficial owner
According to tax legislation, a controlling beneficiary is a natural person -or a group of them-, so it is important to note that this concept excludes legal entities.
Additionally, this regulation defines that the benefit may be direct or indirect, that is to say, it transcends the shareholding or control between legal entities, to the point of identifying the natural person.
Once we have addressed the above terms and given that it is of vital importance, a beneficial owner is defined as a natural person or group of natural persons who:
Obtains a benefit directly or through other legal entities, legal act or legal figure, as a result of its participation in a legal entity, a trust or any other legal figure, as well as any other legal act (hereinafter referred to as persons it controls).
Exercises the rights of use, possession, benefit, advantage or disposition of a good or service or on whose behalf a transaction is carried out.
Exercises control of a legal entity through the ownership of securities, which allows any of the following situations:
To impose decisions at general shareholders’ meetings, or equivalent bodies.
Appoint or remove the majority of the directors, administrators or their equivalents.
Maintain the ownership of the rights that allow, directly or indirectly, the exercise of voting rights in regard to more than 15% of the capital stock.
To direct the management, strategy, or main policies of the persons it controls.
4. In the event that the beneficial owner cannot be identified in accordance with the abovementioned, the natural person who holds the position of sole director of the legal entity or equivalent shall be held to be the beneficial owner of the legal entity. Each member of the Board of Directors shall be considered as the beneficial owner of the legal entity.
Tax obligations
On this matter, the following is a list of some of the main obligations that must be complied with by legal entities.
Identify, verify and validate information on controlling beneficiaries.
Keep as part of the accounting and upon request provide to the SAT.
Keep the information updated, with a period of 15 calendar days to update information in case of change.
Obtain information on the chain of ownership, this applies in the case of indirect ownership, through other legal entities, so the percentages of participation in the capital must be indicated.
Identify, verify and validate the information related to the chain of control, when the control is indirect and by means other than ownership.
Implement internal control procedures properly documented.
Provide and allow timely access to the tax authorities and provide the required documentation.
Violations for failures to comply
The same tax law establishes fines for non-compliance in the following cases:
The tax reform in this matter is not clear. First of all, it should be clarified that it does not exclude any legal entity, being an administrative burden for large companies as well as for small and medium-sized companies and non-profit organizations.
At the same time, no rules have been issued for the presentation of the information. The Federal Tax Code regulates that the information regarding the beneficial owner is part of the accounting and that if required it must be presented, but to date neither the form nor the way of its presentation is clear.
Due to the large amount of the fines, it is suggested that legal entities identify their beneficial owners and require them to provide the information that should be part of their accounting records.
This tax regulation is part of the “Compliance – Tax” or “Compliance Model”. Therefore, in case you require further information, advice, implementation, evaluation and/or improvements; our team of professionals always has a space for you.
Published on May 27th, 2022
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