Mexico

General Information Banking
Business Etiquette Tips Embassy Locations and Registration
Employment-Legal Requirements Entry and Exit Requirements
Intellectual Property Legal and Registration of a Business Entity
Safety and Crime Taxes

General Information

MexicoMexico is the most populous Spanish-speaking country in the world and the second most-populous country in Latin America (after Portuguese-speaking Brazil). About 76 percent of the people live in urbanized areas. Many Mexicans emigrate from rural areas to the cities in search of employment. It is estimated that nearly 20 million people live in or around Mexico City, making it the largest concentration of population in the Western Hemisphere.

Mexico has long enjoyed being a popular tourist destination for U.S. and world citizens alike. With its Aztec history, culture, and ruins in addition to beautiful beaches, coral reefs, and cultural highlights, Mexico has something to offer just about everyone.

Mexico's relationship with America has a fundamental impact on the lives and livelihoods of millions of both Mexicans and Americans through trade and economic reform, homeland security, drug control, migration, and the promotion of democracy. The United States and Mexico are partners in the North American Free Trade Agreement, (NAFTA) and enjoy a broad and expanding trade relationship. In March 2005, the United States, Mexico, and Canada formed the Security and Prosperity Partnership, which contemplates trilateral and bilateral initiatives to develop new avenues of cooperation that will enhance North America's security, competitiveness, and economic resilience.

There may be political unrest, and Mexico has a history of targeted crime against visitors to the country. Travelers should check with the U.S. State Department Web site for current travel safety information.

Major Cities
Capital: Mexico City
Major cities: Guadalajara, Monterrey, Puebla, Ciudad Juarez, Tijuana, Acapulco, Merida, Leon, and Veracruz
 
Official Currency Mexico's official currency is the peso.
Time Zone UTC -6 (1 hour behind Washington, D.C. during Standard Time).  Mexico is divided into three time zones. Daylight Saving Time: 1 hour, begins first Sunday in April, ends last Sunday in October.
Language
Spanish (92.7 percent) and other indigenous languages including various Mayan, Nahuatl, and other regional languages. English is widely spoken among a majority of the population.

Legal System and Government

Type of Legal System

The Mexican legal system is a mixture of U.S. constitutional theory and civil law system. It includes  judicial review of legislative acts, and it accepts compulsory International Court of Justice (ICJ) jurisdiction with reservations.

Form of Government

Federal republic

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Banking

Available Banking Services

ATMs
Online banking
Banking in English
Overdraft protection

Bank Holidays

New Year's Day 
Constitution Day
Birthday of Benito Juarez
Maundy Thursday 
Good Friday
Labor Day/May Day 
National Day   
Celebration of the Revolution  
Guadalupe Day 
Christmas Day                                                        

U.S. and Other Major Banks in Country

(Note: Addresses and contact information subject to change.)

Banamex
Act. Roberto Medellin 800
P.B. Sur
Col. Santa Fe
Mexico City C.P. 01210, Mexico
Phone: (52) 55 22 62 69 50
Web:  http://www.banamex.com/index.htm

Citigroup operates in Mexico through Banamex, and it is the second-largest bank in the country.

Standard Chartered Bank
Principal Office-Representative office
Paseo de Las Palmas, No. 239 - 401
D.F. 11000, Mexico
Phone: +52 (55) 5387 1300
Fax:    +52 (55) 5387 1399
Web:   http://www.standardchartered.com/mx/en/

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Business Etiquette Tips

Business Attire

Business attire is typically formal and includes business suits for men and conservative dresses or suits for women.

Business Negotiations

Building trust and establishing a sound relationship is crucial to a successful business negotiation. It is a good idea to include a senior-level executive on the negotiating team as Mexico is a hierarchical society.  One should also be prepared for lengthy negotiations that may include some haggling. Any written materials should be provided in both English and Spanish.

Proper Greetings

When greeting, men shake hands unless they know one another well, and women may tap each other on the right shoulder or forearm in lieu of shaking hands.

Scheduling Appointments

Business appointments are a necessity, and they should be made a minimum of two weeks in advance with confirmation made one week in advance. In social situations it is acceptable to arrive late, but in business meetings it is advisable to be prompt even if the person you are meeting is late.

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Embassy Locations and Registration

Americans living or traveling in Mexico are encouraged to register with the nearest U.S. embassy or consulate through the State Department's travel registration Web site so that they can obtain updated information on travel and security within Mexico. Americans without Internet access may register directly with the nearest U.S. embassy or consulate. By registering, American citizens make it easier for the embassy or consulate to contact them in case of emergency.

(Note: Addresses and contact information subject to change.)

Mexican Embassy in Washington, D.C.
1911 Pennsylvania Ave., NW
Washington, D.C. 20006
Phone: 202-728-1600
Fax:    202-728-1698
Web:   http://www.embassyofmexico.org

U.S. Embassy in Mexico
Paseo de la Reforma 305
06500 Mexico, DF.
Phone: (011) (52) 555-080-2000
Web:  http://mexico.usembassy.gov/

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Employment-Legal Requirements

Mexico's labor costs are considered highly competitive. The hourly pay and benefits for an employee in Mexico are six times lower than in the United States, and a normal work week is 48 hours over six work days. In the service sector, however, companies tend to work 40 hours a week over five work days.

Under Mexican labor law, workers must get double pay for overtime with a limitation of no more than nine hours of overtime permitted per week. Workers also receive an additional 25 percent premium for any work performed on a Sunday.  Nearly 40 percent of the Mexican workforce is unionized. 

If hiring a consultant, it is important to clearly define their role in a written agreement to avoid their being characterized as an employee. Rules similar to those in the United States apply in determining an employee versus a contractor.  In general, the terms of any consulting agreement should be short, and a new agreement should be issued in lieu of renewing an existing agreement.

Terminating Employees and Employee Contracts

Termination in Mexico is a very formal procedure. Permanent workers are entitled to a seniority premium of 12 days of salary for each year of service. The maximum amount to be used for the payment of the seniority premium is two times the minimum wage for the economic region in which the services are rendered. Termination can be a complex procedure, and legal advice should be sought prior to attempting to terminate any employees.

Legally Mandated Benefits and Leave

Annual vacation - 6 days after 1 year of employment. Add 2 days for every 3 subsequent years. A bonus of 25 percent of normal pay during the vacation period is compulsory.*

*Special note: Employees and workers are entitled to an annual year-end bonus, which must equal at least 15 days of salary and must be paid before December 20. Seniority premium consists of 12 paid days per year of service.

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Entry and Exit Requirements

In accordance with dispositions by the National Immigration Institute, U.S. citizens can show any U.S. official identification to enter Mexico. Passports are not required to enter Mexico, but passports are required for reentry into the United States.

U.S. citizens traveling by sea must also have government-issued photo identification and a document showing their U.S. citizenship (for example, a birth certificate or certificate of nationalization) or other Western Hemisphere Travel Initiative compliant document such as a passport card for entry or reentry to the United States. Sea travelers should also check with their cruise line and countries of destination for any foreign entry requirements.  For more information on other documents that may be utilized go to the U.S. Department of State International Travel Information Web Site: 

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Intellectual Property 

Mexico has a solid legal framework for intellectual property right (IPR) enforcement, but it lacks aggressive enforcement and prosecution. Many Mexican judges do not regard intellectual property crimes as serious offenses, so very few federal prosecutors take the time to bring counterfeiters to court. As a result, IPR-related convictions remain at low levels. Mexican officials are continuing to make efforts to improve the intellectual property enforcement environment, but Mexico was still placed on the U.S. Trade Representative's watch list for countries with inadequate enforcement.

Mexico has signed and ratified the World Intellectual Property Organization Internet, Copyright, and Performance and Phonograms Treaties.

Nature of Rights and Available Protection

Copyrights

Authors or owners of exclusive rights to books, sound recordings, computer software, or other works of original expression can register these rights in Mexico for 50 years to protect exclusive distribution and reproduction rights. You may transfer or license the copyright on privately negotiated terms.

Patents

Nonobvious patents with industrial applications may be registered for 20 years from the filing date by a company using the patented product.  Maintenance fees are due every five years in Mexico in order to continue enforcement of patent rights. Utility patents are protected for 10 years, and industrial design patents carry a 15-year protection from the filing dates.

Patents may be licensed on privately negotiated terms. The Mexican 1991 Law for the Promotion and Protection of Industrial Property provides for patenting of a broad range of inventions, including chemicals, plant varieties, and biotechnological processes.

Trademarks

Trademarks may be registered for a 10-year term that is renewable for an unlimited number of 10-year terms as long as the trademark is still being used.

Trade Secrets

Trade secrets under Mexican law are defined as confidential information safeguarded to maintain a competitive advantage, where the company has adopted means and methods to preserve such confidentiality. No registration is required to prevent individuals who have such secrets from disclosing them. Such individuals and other companies who hire those individuals to gain the information may be subject to penalties for disclosure of trade secrets.

Enforcement

Enforcement of intellectual property rights is governed by the domestic laws of the country in which the rights are sought to be enforced. Mexico has a legal system to enforce intellectual property rights that includes civil remedies by Mexican authorities such as criminal sanctions for willful counterfeiting or piracy on a commercial scale. NAFTA requires that the civil actions conform with legal standards that include orders to cease infringement, damage awards, and reimbursement of attorney costs and fees to the plaintiff if the case is found in the plaintiff's favor. The plaintiff also has the right to request that counterfeit and/or pirated goods not be released from customs.

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Legal and Registration of a Business Entity

In order to establish branch operations in Mexico, a foreign corporation must obtain prior authorization from the government and register with the National Foreign Investment Registry. Foreign and domestic private entities are permitted to establish, own, and dispose of business enterprises and interests in Mexico without restriction. The rules and regulations for starting an enterprise differ for each structure.

Branches are liable for corporate income tax and generally have the same obligations as Mexican corporations. Additionally, they are subject to a withholding tax if they pay dividends from sources other than the net tax profit account (a retained earnings account for profits on which income tax has already been paid).

Registration Formalities (Including Timing)


The length of time to start a business in Mexico can largely depend on the city. Overall, a minimum of four to six weeks should be allotted to establish an office and obtain the necessary forms and approvals. The two most common types of business entities are corporations (Sociedad Anonima) and limited partnerships (Sociedad de Responsibilidad Limitada). Under these legal entities a foreign company may operate an independent company, a branch, affiliate, or subsidiary company in Mexico.

The World Bank lists six steps and approximately 11 different agencies to contact in order to start a business in Mexico.

Briefly, these are the steps involved in establishing an office: 

  1. Obtain the authorization of using the company name online and file the draft deed of incorporation with the notary online
  2. Sign the deed of incorporation before a notary public, obtain Tax Registry Number (RFC) and file online the deed of incorporation with the Public Register of Commerce 
  3. Register with the Mexican Social Security Institute (IMSS) 
  4. Register with the local tax administration (Secretaría de Finanzas del Gobierno del Distrito Federal) for payroll tax
  5. Notify the local government (Delegación) online of the opening of a mercantile establishment.
  6. Register with the National Business Information Registry (Sistema de Information Empresarial, SIEM)

Below is an additional listing of resources to assist in establishing an office.

Attorney General's Office
http://www.pgr.gob.mx/
Finance and Public Credit Ministry
http://www.shcp.gob.mx/
Foreign Affairs Ministry
http://www.sre.gob.mx/
Interior Ministry
http://www.gobernacion.gob.mx
Labor Ministry
http://www.stps.gob.mx/
Official Governmental Site of Mexico

http://www.gob.mx/ (English version)

Social Security Institute
http://www.imss.gob.mx/english

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Safety and Crime

Crime in Mexico can be a concern, and it has affected many areas of the country.  Visitors to the U.S.-Mexico border region, including cities such as Tijuana, Ciudad Juarez, Nuevo Laredo, Nogales, Matamoros, and Monterrey should remain alert and be aware of their surroundings at all times. In its efforts to combat violence, the Government of Mexico has deployed military troops in various parts of the country. Military checkpoints increased in border areas in early 2008.

U.S. citizens are advised to cooperate with official checkpoints when traveling on Mexican highways. Sporadic outbursts of politically motivated violence can also occur from time to time in certain areas of the country, particularly in the southern states of Chiapas, Guerrero, and Oaxaca. The Department of State recommends U.S. citizens traveling to the southern state of Chiapas remain cautious at all times and contact the U.S. embassy for further security information prior to traveling to the region. 

It is also important to be mindful that standards of security, safety, and supervision may not reach those experienced in the United States.  In particular, travelers are advised to be vigilant and cautious when driving (Mexican auto insurance is a requirement) or participating in water sports activities as there may not be a lifeguard on duty. The Department of State urges American citizens to take responsibility for their own personal security while traveling overseas. 

Kidnapping and virtual (or telephone) kidnapping is becoming a more frequent occurrence, and it targets middle class and wealthy individuals.  In a virtual or telephone kidnapping, a call is made and an individual will attempt to solicit information about a "victim" while using a distraught voice to distract the individual answering.  Never give out personal information, and always strive to stay calm should such a situation occur.

For the latest security information, Americans traveling abroad should regularly monitor the U.S. State Department's travel Web site. Please visit the "Safety Issues" section for additional safety information.

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Taxes 

Mexico and the United States have concluded a double-taxation treaty. The tax year in Mexico is the same as the calendar year and ends December 31st. 

Individual and Employee Taxation

Determining Tax Residence

If an individual establishes a permanent residence or resides in Mexico for more than 183 days in any one-year time period he or she will be classified as a resident for tax purposes. An individual is also classified as a resident (or immigrant) once he or she has five consecutive annual renewals on their immigration permit and/or initially entered the country for the purpose of: (i) filling a management position in a Mexican company or institution; or (ii) carrying out work as a technician or scientist or conducting research in production, technical, or specialized functions in a Mexican company or institution. Mexican residents are taxed on their worldwide income.

Nontax Resident Employees

As with most countries, if vacationing or visiting for less than 183 days in a one-year time frame, you will not be considered a resident for tax purposes. Additionally, if an individual is in Mexico on a purely temporary basis and is also employed by a foreign firm, the income generated is exempt from taxes in Mexico. Income tax laws of an individual's home country still apply, however. In contrast, nonresident employees employed by a Mexican company will be taxed on all income generated in Mexico. 

Corporate and Employer Tax Obligations

Mexico allows taxpayers to credit foreign income taxes paid against Mexican corporate income tax due. Consequently, a Mexican corporation that receives dividends from a foreign resident corporation may credit foreign taxes paid associated with any dividends paid.

Corporate Taxation

If a company is incorporated in Mexico or establishes a permanent home office or headquarters presence in Mexico, the company will be considered a resident company. (Legal advice should be sought when establishing a branch or representative office to ensure that it is structured properly.)  All resident corporations are taxed on their worldwide income. Companies whose main headquarters are not located in Mexico are taxed only on Mexican-sourced income. 

A withholding tax may also apply toward dividends paid abroad unless it is paid from after-tax dollars. Other taxes that can apply include social security contributions, payroll tax, value-added tax, and a cash deposit tax.

Mandatory Profit-Sharing

Resident Mexican corporations are required to pay a percentage of their taxable income to their employees on an annual basis. This tax is nondeductible for income tax purposes. 

More information about corporate income tax, residency statuses, and value-added tax, please visit the Mexconnect Web site.

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Online Resources Used for This Template

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