Penner & Associates - Mexico Law Firm and Business Consulting for Mexico

For professional assistance & information on legal & business matters regarding Mexico and Latin America, please contact:

ATTORNEYS AT LAW FOR MEXICO
Please contact us at our Mexico offices located at:
Apartado Postal No. 9
San Miguel de Allende, Guanajuato, Mexico
TEL. US.: (800) 856-5709
Local Phone (415) 152-3648

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BUSINESS CONSULTANTS FOR MEXICO
REAL ESTATE BROKERAGE ASSISTANCE FOR MEXICO
At our Phoenix or Mexico Offices
P.O. Box 42773
Phoenix, Arizona 85080
Tel: (623) 242-7442

e-mail E-MAIL

OUR MEXICO CITY OFFICES
Montecito no. 38 Piso 37 Oficina 37
Edificio World Trade Center
Colonia Napolis C.P. 03810
Mexico, Distrito Federal

Tel: (55)5351-0438

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FOREIGN INVESTMENT LAWS AND REGULATIONS

 

LAWS , NATIONAL COMMISSION ON FOREIGN INVESTMENT , LISTING OF ACTIVITIES AND THEIR LIMITS FOR FOREIGN INVESTMENT , FOREIGN INVESTMENT IN REAL PROPERTY IN MEXICO , TRUSTS , INCORPORATED ENTITIES , "T" and "N" STOCK , NATIONAL REGISTRY OF FOREIGN INVESTMENT , CALVO CLAUSE , RENTAL BY FOREIGNERS OF REAL ESTATE.

 

LAWS EXISTING

Regulations to the Foreign Investment Law dated May 16, 1989 (applicable in all that is not contrary to the subsequent Foreign Investment Law). This regulatory law is still applicable in that portion that it is not contrary to the new Foreign Investment Law of December 27, 1993.

Foreign Investment Law dated December 27, 1993. This is the fundamental law governing over foreign investment in Mexico.

NEW GENERAL RULE MAKING IT EAISER TO SET UP AGENCIES AND SUBISIDIARIES OF FOREIGN BUSINESS ENTITIES IN MEXICO (Entered into effect on August 9th, 2012)

On August 8, 2012, the "General Resolution establishing the criteria for the application of Article 17 of the  Foreign Investment Law with respect to the establishment of foreign business entities in Mexico" was published in the Federal Daily Gazette of Mexico. Article 17 of the Federal Foreign Investment Law refers to foreign business entities seeking to establish agencies or subsidiaries in Mexico to carry out business activities in Mexico be required, among other, to obtain authorization from the Federal Ministry of Foreign Affairs. This includes the foreign business entities that want to setup an "office of  representation" that will not be receiving or producing income in Mexico. As part of the requirement, they are to register with the Public Registry of Commerce, just like all the Mexican business entities, in order to legally transact business in Mexico (the new criteria stipulates that, for purposes of registration with the Public Registry of Commerce, if the entity will regularly carry out business activities, filing the written statement with an acknowledgment of receipt will be sufficient). This General Resolution does away the need to acquire the authorization mentioned under Article 17 and in its place  the applicant is to present a prior written statement in which they state, under oath: (i) that the company's incorporation documents are not contrary to the public policy (of Mexico) and that the activities it is going to perform  are legally permitted under the laws of Mexico for foreign entities (in Mexico); (ii) that the entity has been duly formed in accordance with the laws of the country of origin; (iii) that the company will establish an agency or subsidiary (identifying which one) in Mexico and then it states its domicile is abroad; and (iv) that the foreign company (agency or subsidiary) will have a representative domiciled in Mexico, authorizing this person (individual) to be responsible for any obligations of the foreign company in Mexico in the case necessary.  It is important to note the importance of carefully evaluating the different options available for establishing and commencing operations in Mexico, along with the risks and benefits that each provides.

Diario Oficial de la Federacion: 08/08/2012 Resolución General por la que se establece el criterio para la aplicación del artículo 17 de la Ley de Inversión Extranjera relativo al establecimiento de personas morales extranjeras en México.

Al margen un sello con el Escudo Nacional, que dice: Estados Unidos Mexicanos.- Comisión Nacional de Inversiones Extranjeras.

RESOLUCION GENERAL POR LA QUE SE ESTABLECE EL CRITERIO PARA LA APLICACION DEL ARTICULO 17 DE LA LEY DE INVERSION EXTRANJERA RELATIVO AL

ESTABLECIMIENTO DE PERSONAS MORALES EXTRANJERAS EN MEXICO

La Comisión Nacional de Inversiones Extranjeras, en ejercicio de las atribuciones que le confiere el artículo 26, fracción IV de la Ley de Inversión Extranjera, y

CONSIDERANDO

Que conforme al artículo 17 de la Ley de Inversión Extranjera deberán obtener autorización de la Secretaría de Economía las personas morales extranjeras que pretendan realizar habitualmente actos de comercio en la República, así como las personas a que se refiere el artículo 2,736 del Código Civil Federal que pretendan establecerse en la República y que no estén reguladas por leyes distintas a dicho Código;

Que el precepto aludido aplica sin perjuicio de lo establecido en los tratados y convenios internacionales de los que México sea parte;

Que de conformidad con el artículo 13 del Código de Comercio los extranjeros serán libres para ejercer el comercio según lo que se hubiere convenido en los tratados con sus respectivas naciones;

Que conforme a lo establecido en el capítulo XI Inversión del Tratado de

Libre Comercio de América del Norte; el capítulo 9 Inversión del Tratado de Libre Comercio entre la República de Chile y los Estados Unidos Mexicanos; el capítulo XIII Inversión del Tratado de Libre Comercio entre los Estados Unidos Mexicanos y la República de Costa Rica; el capítulo XVII Inversión del Tratado de Libre Comercio entre los Estados Unidos Mexicanos y la República de Colombia; el capítulo XVI Inversión del Tratado de Libre Comercio entre el Gobierno de los Estados Unidos Mexicanos y el Gobierno de la República de Nicaragua; el capítulo XIV del Tratado de Libre Comercio entre los Estados Unidos Mexicanos y las Repúblicas de El Salvador, Guatemala y Honduras; el capítulo XIII Inversión del Tratado de Libre

Comercio entre los Estados Unidos Mexicanos y la República Oriental del Uruguay; el capítulo 7 Inversión del Acuerdo para el Fortalecimiento de la Asociación Económica entre los Estados Unidos Mexicanos y el Japón; y el capítulo XI Inversión del Acuerdo de Integración Comercial entre los Estados Unidos Mexicanos y la República del Perú; México se comprometió a otorgar a los inversionistas de la otra Parte un trato no menos favorable que el que otorga, en circunstancias similares, a sus propios inversionistas, en lo referente al establecimiento, adquisición, expansión, administración, conducción, operación, venta u otra disposición de las inversiones;

Que la autorización a que se refiere el artículo 17 de la Ley de Inversión Extranjera es un requisito que aplica únicamente a las personas morales extranjeras en la fase del establecimiento;

Que la eliminación de la citada autorización constituye una medida de simplificación regulatoria que favorece las condiciones para hacer negocios en el país, y

Que mediante opinión por escrito de los integrantes de la Comisión Nacional de Inversiones Extranjeras se tuvo a bien emitir la siguiente:

RESOLUCION GENERAL POR LA QUE SE ESTABLECE EL CRITERIO PARA LA APLICACION DEL ARTICULO 17 DE LA LEY DE INVERSION EXTRANJERA RELATIVO AL ESTABLECIMIENTO DE PERSONAS MORALES EXTRANJERAS EN MEXICO

PRIMERO.- Las personas morales extranjeras constituidas de conformidad con las leyes de los Estados Unidos de América, Canadá, República de Chile, República de Costa Rica, República de Colombia, República de Nicaragua, República de El Salvador, República de Guatemala, República de Honduras, República Oriental del Uruguay, Japón y República del Perú, no están obligadas a obtener la autorización a que se refiere el artículo 17 de la Ley de Inversión Extranjera, siempre y cuando presenten, a través de su representante legal o apoderado, un escrito bajo protesta de decir verdad en el que declaren que:

(i)    su contrato social y demás documentos constitutivos no son contrarios al orden público, debiendo proporcionar la actividad principal que pretenden realizar en el territorio nacional, misma que deberá adecuarse a lo previsto por la Ley de Inversión Extranjera,

(ii)   han sido constituidas de conformidad con las leyes de su país de origen,

(iii)   en el caso de las personas a que se refiere la fracción I del artículo 17 de la Ley de Inversión Extranjera, que dichas personas se establecerán en la República o tendrán en ella alguna agencia o sucursal, debiendo proporcionar el domicilio correspondiente; y

(iv)  en el caso de las personas a que se refiere la fracción II del artículo 17 de la Ley de Inversión Extranjera, que dichas personas tendrán representante domiciliado en el lugar donde van a operar, autorizado para responder de las obligaciones que contraigan, debiendo proporcionar el nombre y domicilio correspondientes.

SEGUNDO.- Para efectos de la inscripción en el Registro Público de Comercio a que se refieren los artículos 24 del Código de Comercio y 251 de la Ley General de Sociedades Mercantiles, en lo que respecta a la autorización establecida en el artículo 17 de la Ley de Inversión Extranjera bastará con presentar el escrito referido, que contenga el sello y fecha de recepción, así como el folio correspondiente otorgado por la Secretaría de Economía.

TERCERO.- Esta Resolución General se emite únicamente para los fines señalados y sin perjuicio de lo dispuesto por las leyes y demás disposiciones jurídicas aplicables.

TRANSITORIO

 UNICO.- La presente Resolución General entrará en vigor al día siguiente de su publicación en el Diario Oficial de la Federación.

Una vez enterado y analizado el contenido del proyecto de la "Resolución General por la que se establece el criterio para la aplicación del artículo 17 de la Ley de Inversión Extranjera relativo al establecimiento de personas morales extranjeras en México", que entrará en vigor al día siguiente de su publicación en el Diario Oficial de la Federación, en mi carácter de Presidente de la Comisión Nacional de Inversiones Extranjeras, otorgo mi aprobación a dicha Resolución, en los términos planteados.

Atentamente

México, D.F., a 14 de junio de 2012.- El Presidente de la Comisión Nacional de Inversiones Extranjeras, Bruno Francisco Ferrari García de Alba.- Rúbrica.

 

NATIONAL COMMISSION ON FOREIGN INVESTMENT

This is the federal Mexican Government agency that is charged with the compliance and application of the rules on foreign investment in Mexico.

The Commission normally considers approvals in the light of : Capitalization requirements, Maximum investment levels for fixed assets; Financing form Non-Mexican sources; Compliance with environmental regulations; Permanent job creation programs and training programs; Positive balance on exports (vs. imports); Investment in fixed assets; Acquisition of new or better technology; Contribution to less developed zones, How well does it complement Mexican investment, and Other similar items that will improve the country and business climate of Mexico.

(A). LISTING OF ACTIVITIES AND THEIR LIMITS FOR FOREIGN INVESTMENT IN MEXICO (LIMITING LIST).

Economic Classifications. Economic activities are now classified into seven categories (the 8th would be no limit on foreign investment). I call them: i.) New areas of economic activity, ii.) Strategic state areas of activity, iii.) Areas reserved for Mexicans, iv.) Areas of foreign investment up to 34%, v.) Areas of foreign investment up to 40%, vi.) Areas of foreign investment up to 49%, and vii.) Areas of foreign investment requiring the Commission's approval for up to 100% (opening new areas).

Within the 7th group there were originally 58 activities, amongst which were (a few have been liberalized by the Commission over time): agricultural, cattle breeding , magazine and newspaper editing, housing and several types of construction activities, water recycling plants, drilling of oil and water wells, educational and certain professional services, legal and accounting counseling services, certain air transportation services and administration of airports and heliports.

(There is a tendency to relax the controls, so if the reader is interested in a particular activity and finds it listed as controlled in some manner, it might be worth checking with the National Commission on Foreign Investment to verify whether there are new rules lessening the controls on it.)

1. ACTIVITIES RESERVED FOR THE STATE (FEDERAL GOVERNMENT)
a: Petroleum and all other Hydrocarbons
b: Basic Petrochemical
c: Electricity
d: Generation of Nuclear Energy
e: Radioactive Minerals
f: Communications via Satellite
g: Telegraph
h: Radiotelegraphic
i: Mail
j: Railroad
k: Issuance of paper money
l: Making of metallic money
m: Control, supervision, and vigilance of Ports, Airports
     and heliports
n: Those specifically foreseen in laws. 
2. ACTIVITIES FOR MEXICAN INDIVIDUALS AND MEXICAN COMPANIES
THAT HAVE A FOREIGNER EXCLUSION CLAUSE (which may be incremented by means of the neutral
 investment foreseen under Title V of the Foreign Investment Law)
a: National land transport of passengers, tourism and freight (not including messenger and packages services).
b: Retail sale of gasoline and distribution of liquid petroleum gas.
c: Services of Radio Broadcasting and other Radio and Television services, other than cable television.
d: Credit Unions.
e: Development banking institutions (in the terms of the law that applies to that area).
f: The rendering of professional and technical services that are expressly identified in the
 legal dispositions applicable. 
3. ACTIVITIES WITH CERTAIN PERCENTAGE RESTRICTIONS FOR FOREIGN
INVESTMENT PARTICIPATION (IN THE ACTIVITY OR CORPORATE
CAPITAL OF THE COMPANY THAT PERFORMS THE ACTIVITY): (which
may be incremented by means of the neutral investment fore-
seen under Title V of the Foreign Investment Law). 
FOREIGN INVESTMENT UP TO 10% IN:
a: Cooperative Production Companies. 
FOREIGN INVESTMENT UP TO 25% IN: 
a: National Air Transport.
b: Air Taxi Transport.
c: specialized Air Transport.
FOREIGN INVESTMENT UP TO 30%
a: Controlling Companies of Financial Groups.
b: Multiple Banking Credit Institutions.
c: Stock Brokerage Firms .
d: Stock Market Specialists. 
4 . FOREIGN INVESTMENT UP TO 49%
a: Insurance Institutions.
b: Bonding Institutions.
c: Money Exchange Houses.
d: General Depository Warehouses.
e: Financial Lessors.
f: Financial Factoring Companies.
g: Financial Companies of limited scope (referred to in article 103, fraction iv of the Credit Institutions Law).
h: Those companies referred to in article 12 bis of the Stock Market Law.
i: Stock representative of the fixed capital of investment companies and operating companies of investment companies.
j: Fabrication and commercialization of explosives, fire arms, cartridges, munitions and fireworks (not including
   the acquisition and using of explosives for industrial and extractive activities nor the elaboration of explosive mixtures
   for consumption for said activities).
k: Printing and publication of periodicals exclusively for national circulation.
l: "T" series shares of stock of companies that hold (in ownership) agricultural, ranching and forestry lands.
m: Cable television.
n: Basic telephonic services.
o: Fishing in fresh water, along the coast, and in the exclusive economic zone (not including aqua culture).
p: Integral port administration.
q: Piloting services in ports for performance of interior
    navigation by boats.
r: Navigating companies dedicated to the commercial exploitation of water traveling vessels for interior naviga-
   tion and pilotage (coasting trade), (not including touristic cruisers and exploitation of dredgers and naval
   artifacts for construction, conservation and port operation.
s: Services connected to the railroad sector, that consist in services to passengers, maintenance and rehabilitation of
   railways (tracks), easements, repair shops for tractive and pulling (dragging) equipment, organization and commercial-
   zation of unitary trains, operation of interior freight terminals railroad telecommunications.
t: Providing of combustibles and lubricants to water traveling vessels, airplanes and railroad equipment. 
ACTIVITIES WHEREIN RESOLUTION IS REQUIRED FROM THE NATIONAL
COMMISSION ON FOREIGN INVESTMENT, IN ORDER THAN FOREIGN
INVESTMENT MAY EXCEED 49% (IN THE ACTIVITY OR CORPORATE
CAPITAL OF THE COMPANY THAT PERFORMS THE ACTIVITY''.
a: Port services...
b: Navigating services ...
c: Air terminal administration
d: Private Education ...
e: Legal services.
f: Credit Information services.
g; Institutions that qualify stock and similar.
h: Insurance agencies.
i: Cellular telephone services.
j: Duct (CHANNEL) construction for the transport of petroleum and derivatives.
k: Perforation of petroleum and gas wells. 
5. ACTIVITIES WITH PERCENTAGE INCREMENTS PERMITTED IN THE
   CORPORATE CAPITAL OF MEXICAN COMPANIES (FOR FOREIGN
   INVESTMENT) OVER TIME. 
	I. INTERNATIONAL LAND TRANSPORT OF PASSENGERS, TOURISM AND
	   FREIGHTS, BETWEEN POINTS INSIDE MEXICO; AND THE ADMINIS-
                  TRATIVE SERVICES OF BUS STATIONS AND AUXILIARY SERVICES.
		
	a: Through December 17, 1995 - 0% Foreign Investment.
	b: From December 18, 1995 through December 31, 2000 - Up to 49% Foreign Investment.
      	c: From January 1, 2001 through December 31, 2003 - Up to 51% Foreign Investment.
      	d: From January 1, 2004 and thereafter, Up to 100% - Foreign Investment, without prior requirement of
           a favorable resolution from the National Commission on Foreign Investment. 
	II. ACTIVITIES OF FABRICATION AND ASSEMBLY OF PARTS, EQUIP-    
	   MENT AND ACCESSORIES FOR THE AUTOMOTIVE INDUSTRY. 
	a: Through December 31, 1998 - Up to 49% Foreign Investment (Subject to that set forth in the Decree
            for the Development and Modernization of the Automotive Industry).
	b: From January 1, 1999 and thereafter - Up to 100% Foreign Investment, without prior requirement of
	    a favorable resolution from the National Commission on Foreign Investment. 
	III. ACTIVITIES OF PROVIDING THE SERVICES OF VIDEOTEXT AND    
	   COMMUTATION IN PACKAGE.
	a: Through June 30, 1995 - Up to 49% Foreign Investment. 
	b: From July 1, 1995 and thereafter Up to 100%, without the prior requirement of a favorable resolution from    
            the National Commission on Foreign Investment. 
	IV. EDIFICATION, CONSTRUCTION AND INSTALLATION JOBS 
	a: Through December 31, 1998 - Up to 49% Foreign Investment (with the understanding that the % 
            may increase if prior favorable resolution from the National Commission on Foreign Investment is 
   	    obtained) (Note: restriction take off before that date)
 	b: From January 1, 1999 and thereafter - Up to 100% without prior requirement of a favorable resolution    
            from the National Commission on Foreign Investment. 
6. IF NOT IN ANY OF THE PRECEDING CATEGORIES AND THE INVESTMENT 
   BY FOREIGN INTERESTS IS LESS THAT $85 MILLION PESOS (NEW PESOS), 
   THEY MAY PARTICIPATE AT WILL. IF THE INVESTMENT IS GREATER THAN 
   $85 MILLION NEW PESOS, THEN PERMIT IS REQUIRED FROM THE NATIONAL 
   ON FOREIGN INVESTMENT TO EXCEED 49% INTEREST.

(B). FOREIGN INVESTMENT IN REAL PROPERTY IN MEXICO.

1. INSIDE THE RESTRICTED ZONE .

Foreigners may not directly acquire ownership of real property in the Restricted Zone.

Foreigners may acquire qualified residential property in the Restricted Zone via the long term irrevocable title transfer (Mexican) bank trust mechanism or via a Mexican incorporated entity (subject to the limited of foreign investment per the company activity see LISTINGS above ).

Foreigners may acquire qualified business property in the Restricted Zone via the irrevocable long term title transfer (Mexican) bank trust or by direct title in the name of their Mexican incorporated entity (subject to the limited of foreign investment per the company activity see LISTINGS above ).

2. OUTSIDE THE RESTRICTED ZONE

Foreigners may directly acquire real property outside the Restricted Zone, provided that it is qualified for private ownership and then only subject to the limitations of use, means of holding and size permitted by law (see the Qualified information).

Real Estate Qualified for Foreign Investment. Is that which is not within those limiting areas (physical location: Restricted Zone , Ejidos and similar Ejidos and similar ) or used for those limiting activities (business/commerce see: Agrarian, Ranching, Farming , Forest, and Limiting List ) restricted to Mexican Government ownership or Mexican individuals sole ownership, and the ownership of which is permitted by either 1. Direct title to the foreign individual, 2. via a Mexican incorporated entity of one type or another (as may be required by specific law) or via a long term irrevocable title transfer (Mexican) bank Trust, as the case may be.

(C) TRUSTS

A mechanism was created by the Foreign Investment Law which permits 1.) the foreigner to hold title indirectly (via long term irrevocable title transfer Mexican bank trust) of real estate inside the Restricted Zone , which was not possible before, and 2.) the foreigner the alternative of holding title to real estate outside the Restricted Zone rather than directly.

The trust concept is also used to provide stock ownership to foreign investment, where they could not go before (due to limitations of ownership in certain companies by foreigners): i) A 20 year trust may be set up for specific activities reserved for Mexican investors or where the foreign investment must otherwise stay at or below 49% ownership. This trust must be approved by the National Commission on Foreign Investment, since it is to be for improving the financial or operational condition of the company by influx of cash capital or capitalization of the company's liabilities. At the end of the 20 years, the trust assets (the stock) is to be sold to qualifying investors (i.e. Mexicans). ii) Neutral Investment Trusts may be set up by publicly traded Mexican companies in Mexico, in order to acquire foreign capital through the public placing of certificates representing it's stock (if they are offered in the U.S., they will most likely be "ADR"s - American Depository Receipts).

(D) INCORPORATED ENTITIES

This law permits the foreigner a legal vehicle ( Incorporated Entities ) by means of which to participate in those business activities that are restricted to less than 100% by the Limiting List.

(E) "T" and "N" STOCK

The "T" stands for "Tierra" (Land) which indicates that the company was setup to hold farming/ranching land and the foreigners may acquire ownership of this series of stock (which Series does not exceed 49% of the total corporate ownership/capital.

The "N" stand for "Neutro/a" (Neutral) which indicates that this stock does not have any voting rights but does have company ownership rights and dividend rights. This is used when the company wants/needs further foreign capital investment but has reached it's limit of foreign ownership of shares of stock per the Limiting List.

(F) NATIONAL REGISTRY OF FOREIGN INVESTMENT

The Foreign Investment Law foresees the existence of a National Registry of Foreign Investment, wherein foreign investment in Mexico (in Mexican trusts and Mexican incorporated entities) is registered. As well, foreigners ( foreign individuals and foreign entities) are to also be registered at this Registry when they: 1. Acquire or lease assets (for business) in Mexico; 2. They establish, open or operate a business, branch or agency in Mexico; 3. Lease a business in Mexico; or acquire trust rights on certain trusts (relative to business or business assets) in Mexico.

(G) CALVO CLAUSE

This is a conceptual waiver that the Mexican government uses in general terms regarding foreigners that acquire rights in Mexico (like real estate) or that do business in Mexico. It basically states that the foreigners will consider themselves as Mexican nationals regarding the rights and obligations they acquire in Mexico and will not request that their foreign government intervene upon their behalf in such matters.

The Federal Mexican government presently has agreement terms for foreigners that is an extended version of the original Calvo Clause that it is using.

(H) RENTAL BY FOREIGNERS OF REAL ESTATE

Foreigners do not require a permit from the Ministry of Foreign Relations/Affairs of Mexico to rent (obtain in rental) real property located inside or outside the Restricted Zone for periods no greater than 10 years; nor for periods greater than 10 years outside the Restricted Zone . However they do need this permit if the rental is for more than 10 years and the rental property is located in the Restricted Zone.