As of 2022, Mexico implemented a reform to the Federal Tax Code (CFF), which requires the identification of the controlling beneficiaries of corporations, trusts and legal entities to collect, preserve, verify and keep available the information of the controlling beneficiary. This obligation also applies to notaries, brokers and any other person involved in the formation or execution of such agreements.
Controlling beneficiary is defined as the individual or group of individuals who directly or indirectly obtain a benefit derived from a legal entity, trust or any other legal entity, or exercise control over such entities. For example, when, through the ownership of securities or contracts, they can:
- To impose decisions at the shareholders’ meeting.
- Exercise the vote of more than 15% of the capital.
- To decide directly or indirectly on the administration of the company or legal entity.
The purpose of the figure of the controlling beneficiary is to identify the individual who actually uses, enjoys and disposes of the assets of a company or other individuals. Internationally, this figure has existed for a long time and its purpose is to find the person who really manages the company’s operations.
Its initial application is given in the PIORPI Law (Law for the Prevention and Identification of Operations with Resources of Illicit Proceeds), which has managed this figure for more than ten years. Sometimes, companies did not pay attention to it due to the dynamics of their operations. Therefore, the authority has designed a series of obligations and prohibitions for taxpayers to identify the controlling beneficiary in a comprehensive manner, since this figure is linked to crimes such as tax fraud, money laundering and tax discrepancy.
It is crucial to identify the controlling beneficiary correctly, as it is not simply a matter of identifying the majority shareholder, information that is already available in the partners’ declaration. The authority seeks to close legal loopholes and prevent financial crimes related to the use of front companies and loan sharks. In this context, measures have been implemented to collect, corroborate and keep up to date the information of the controlling beneficiaries.
In order to identify the controlling beneficiary, the miscellaneous tax resolution establishes that we must carry out a sequential type of investigation. First, the company’s shareholding structure must be reviewed. If the shareholders are not the definitive beneficiaries, other control methods should be used until the definitive natural person is identified. If not found, the most senior employee or representative will be considered the controlling beneficiary.
The information obtained must be thoroughly researched, documented, updated and made available. This is an integral part of the company’s accounting and must be supported by reasonable and necessary internal control protocols.
Failure to comply with this obligation carries severe fines, ranging from $562,000.00 to $2,249,000.00. The implementation of specific and appropriate manuals for each company is essential, as there are no general solutions that work for all companies.
It is recommended to follow the criteria of good international tax practices, such as the Financial Action Task Force (FATF) and the OECD, to develop these manuals. These manuals help to conduct investigations and comply with the obligation to identify the controlling beneficiary, minimizing the risk of sanctions by the authority.
