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The Ultimate Guide To
Employment in Mexico

Mexico Facts

Population size: 128,632,004
Currency: Mexican peso (MXN)
Capital city: Mexico City
Languages spoken: Spanish
Ease of Doing Business: 47

Employing in Mexico: What You Need to Know

Employment in Mexico is regulated by the Federal Labor Law (FLL), which outlines the appropriate rights and obligations of both employees and employers. The labor laws pursue a “stability principle” which seeks to find balance between the employee and employer. There is greater emphasis on the employee, emphasizing on permanency and continuity of the employment relationship. Additionally, the Federal Social Security Law along with the FLL governs the primary issues of employment in Mexico.

Labor unions in Mexico also pay an important role as they serve to protect the common employment rights for the employees they represent. There are large labor unions that exist in Mexico, where collective labor contracts are typically signed with the employer’s representatives and are reviewed every two years.

Key Factors to Consider When Employing in Mexico

  1. Contracts

    Individual contracts

    Under Mexican Labor Law, an individual employment contract (Contrato de Trabajo) allows an individual to engage in subordinated personnel services for an employer in exchange for a salary.  The contract covers the obligations that bind both the employee and the employer for the duration of the employment relationship. The employment contract may be verbal or written, and while there is no prejudice against the employee if there is no signed agreement, a written one is highly advised for issues arising in litigation.

    The following information must be included in Mexican employment contracts:

    • Information of the employee (Nationality, gender, age, marital status)
    • Term of the employment
    • Services rendered by employee
    • Location where the services will take place
    • Salary amount, terms and payment dates
    • Training references
    • Holiday entitlement
    • Other working conditions
    • Any collective agreement information

    There are several forms of individual contracts:

    • Specific project contract: The contract exists for the purpose of completing a certain project for a limited-time service.
    • Specified term contract (Por tiempo determinado): The contract exists only for the term specified, and is only valid under certain circumstances, such as the nature of the work requires it, when the purpose is to temporarily replace another employee, or other cases specified in the Labor Law.
    • Indefinite term contract (Por tiempo indeterminado): The contract is set for any continuous projects requiring an uncertain period of time, or may be used for non-continuous arrangements such as periodic or seasonal activities which recur throughout the year.
    • Trial period contract: The contract is used to verify that the employee meets the qualifications for the position of interest. The trial period may not exceed 30 days, but can be extended up to 180 days for those applying for management or director positions.
    • Initial training contract: The contract is used for employees who wish to train or acquire skills under the guidance of the employer to carry out the activities that will be required of them. The maximum term of the labor relationship is three months, extending up to six months for employees in management, director or specialized technical positions.

    Collective Labor Contracts

    Collective bargaining agreements (CBAs) may be entered into by the employee, which typical entails the agreement made by one or more labor unions and one or more employers/employers’ unions to establish the conditions where work will be carried out. The contract entered into by the labor unions and employers’ unions will establish the compulsory terms for the relevant industry or state.

    The CBAs outline terms and conditions of employments, such as benefits, compensation, work shifts, training and positions. These terms will be valid if they comply with the minimum mandatory rights granted by the FLL, they do not contradict such laws and is filed before the Labor Court.

    Foreign Employees

    There are certain conditions for employers which must be noted when entering into employment contracts with foreign workers:

    • 90% of the entity’s employees must be Mexican nationals
    • All employees in positions that require highly technical skills must be Mexican nationals, unless the position requires very specific know-how that can only be obtained by foreigners, who may only work temporarily
    • All in-house doctors must be Mexican nationals

Employee Entitlements

Information Explanation
Statutory Working Hours ?

Statutory requirements for working hours depend on the time which the employee engages with work. The normal working week in Mexico is six days. The following maximum weekly hours are:

  • Day shifts: Eight hours per day, maximum of 48 hours per week.
  • Night shifts: Seven hours per night, maximum of 42 hours per week.
  • Mixed shifts: Seven and a half hours per day, maximum of 45 hours per week.

 

Specific Regulations about Overtime ?

Employees who work in excess of the above statutory limits are considered working overtime. For the first nine hours of overtime worked per week, they are entitled to double their regular wages. Any subsequent hours worked by the employee are given three times the regular wages.

Working on Sundays ?

Employees who work on Sundays are entitled to a bonus 25% of their regular daily wages.

Medical Leave ?

Under the FLL and Social Security Law of 1997 (SSL) the employee is entitled to time of due to sickness. For temporary incapacity, the employee is entitled to 52 weeks of leave, extendable up to another 52 weeks. For permanent partial incapacity and permanent total incapacity, the employee is entitled to permanent leave and receives payment from the IMSS, where the amount is established according to the FLL.

All cases of illness or injury must be accompanied by a certificate from the IMSS, where granting of sick leave and entitlement granted depends on the type of illness, the degree of incapacity and the judgement of the IMSS.

Annual Leave Accrual Entitlement ?

Employees are not compelled to work on mandatory holidays, although may choose to work on these dates and are entitled to three times the normal rate of pay.

The annual holiday leave afforded by Mexican employees are relatively scarce in terms of minimum mandatory rights of the FLL. Paid vacation is based on employee seniority, and begins at 6 paid weekdays per year for workers who have been employed for one year. Paid vacation days per year increases by two for every additional year of employment. After the fifth year of employment, vacation entitlement increases by two working days for every five years of service.

Some companies may offer more generous leave entitlements, such as personal days in addition to annual leave for issues such as family or personal emergencies.

 

Maternity Leave in Mexico ?

A pregnant employee is entitled to six weeks of maternity leave prior to the date of birth and six weeks for maternity leave after the birth of the child. The FLL allows four of the six weeks of the maternity leave prior to birth be transferred to the leave after birth. A female employee is also entitled to rest periods for lactation for the first 6 months of the child’s birth.

The Mexican Social Security Institute (IMSS) pays for the employee’s registered salary during maternity leave, capped at 25 times the minimum daily wage. The employer pays for the difference for any salary in excess of this cap.

A male employee is entitled to a leave of absence of five full paid days for the birth or adoption of a child.

 

Employment Termination

Information Explanation
Severance / Redundancy Pay ?

If the employee’s contract is terminated without just cause, the employee is entitled to a severance payment as compensation from the employer, consisting of:

  • Three months’ full pay including bonuses, premiums and commission
  • 20 days’ full pay per year of service with the employer
  • “Seniority bonus” of 12 days’ pay
Termination of Employment ?

Employment agreements may be terminated through several methods, including:

  • Mutual agreement
  • Death of the employee
  • Incapacity of the employee to continue work
  • With cause termination
  • Termination upon end of project or fixed-term contract

Mexican legislation requires that for the employer to terminate the employment contract, a “just cause” (causa justificada) must be provided for any behavior of an employee that may warrant termination. Employees with more than 20 years of service with one employer may only be terminated if the just cause is particularly serious and renders the employment relationship impossible to continue. Some examples of “just cause” termination reasons include:

  • Use of false documentation to secure employment
  • Lack of honesty or demonstrating violence, threats or injury towards another employee
  • Acts of harassment or sexual harassment
  • Intentional damage of employers’ property
  • Negligence that causes damage to property
  • Immoral acts in the workplace
  • Disclosure of trade secrets or confidential information

Termination due to Collective Redundancies

Collective redundancies occur when the workplace ceases to operate or permanently closes a department or area of business. The employer must notify the relevant Conciliation and Arbitration Board and must obtain prior authorization to enact the collective redundancies.

Statutory Notice Period Employer With Cause ?

There are no statutory notice periods for employment contracts in Mexico. The employer is required to notify the employee in writing of the date and cause of dismissal, or must notify the relevant Conciliation and Arbitration Board no later than five days after the date of termination. Termination by employee must terminate the contract within 30 days of the “just cause” events, and may be entitled to statutory bonuses and severance payments as if they were dismissed without just cause.

Statutory Notice Period Employee With Cause ?

The employee may terminate the employment contract for just cause for certain types of employer behavior, including:

  • Misleading terms for the job position
  • Lack of honesty
  • Reducing the employee’s pay
  • Directing violence, threats or harassment towards the employee
  • Allowing serious danger to the employee

Probation

Information Explanation
Probation Period ?

Probationary periods are allowed for any employment relationships that are indefinite in term, and are expected to last for more than 180 days. The probation is used to verify that the employee meets the requirements and holds the knowledge needed to perform the work of the position.

The duration of the probationary period may be up to 30 days, and may be extended for up to 180 days for employees in managerial, technical or directorial positions.

Pension

Information Explanation
Pension Requirements ?

Employees in Mexico are covered by the Social Security Law, administered by the Mexican Institute of Social Security (IMSS) who is responsible for administering social security insurance benefits and the collection of contributions. Both the employer and employee is required to contribute to social security, although the employer makes much larger contributions and has the responsibility of withholding the employee’s contribution.

Most companies in Mexico provide their employees with a personal pension plan, where the employee may contribute a certain amount of their salary to the pension plan while the company and Mexican government must pay additional contributions.  The employer typically pays 2% of the weekly salary into the employee’s individual account in a general retirement program, payable to the IMSS.

The pension products are administered by all Mexican banks, which invest the social security contributions into approved stocks and investment funds. Alternatively, employees may enter into a private insurance scheme with the employer as part of the employment package, which may be preferred over the Mexican Social Security System as it covers a wider variety of more expensive treatments.

The rates for social security payments that apply to the employee’s consolidated income can be found here.

All workers employed in Mexico must be registered with and contribute to the following institutions that deal with different social security insurance benefits:

  • Mexican Institute of Social Security (IMSS): Provides medical services, child day care, accident and sickness compensation, pregnancy benefits and disability pensions.
  • National Workers’ Housing Fund Institute (INFONAVIT): Provides subsidized housing to employees as well as loan
  • Retirement Savings Program (SAR): Provides employees with retirement benefits when they reach 65 years of age.

GEO Solutions or DIY Employment in Mexico?

Companies entering Mexico must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or Mexican Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Mexican entity established that can run payroll.

A DIY approach will typically be delayed until there is a properly incorporated company ready to run payroll and may be a costly option.  Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Outsourcing Employment Through a GEO Employer of Record Service

Using Shield GEO Employer of Record Services in Mexico

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Mexico. For companies which intend to employ their staff directly through their incorporated Mexico entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Mexico.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Mexico.

The Shield GEO solution is an attractive alternative where

the company is looking to employ staff quickly

the company doesn’t have an appropriately incorporated entity in Mexico

the company wants to work within a defined budget

the company wants to limit its initial commitment in Mexico

the company needs help with tax, employment, immigration and payroll compliance in Mexico

Shield GEO can contract directly with the company to employ and payroll their staff in Mexico. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

Payroll

Payroll Mexico
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ?

Mexican peso (MXN)

 
Grossed income Tax Rate (%)
$0 - $5,952.84 pesos 1.92
$5,952.85 - $50,524.92 pesos 6.40
$50,524.93 - $88,792.04 pesos 10.88
$88,793.05 - $103,218.00 pesos 16.00
$103,218.01 - $123,580.20pesos 17.92
$123,580.21 - $249,243.48 pesos 21.36
$249,243.49 - $392,841.96 pesos 23.52
$392,841.97 - $750,000.00 pesos 30.00
$750,000.01 - $1,000,000.00 pesos 32.00
$1,000,000.01 - $3,000,000.00 pesos 34.00
$3,000,000.01+ pesos 35.00

The above tax rate is applicable to resident individuals, which is progressive up to 35%.

Nonresident employees on temporary assignments of less than 183 days hired by nonresident foreign firms are exempt from income taxes, while those who have worked for longer than a year are subject to the following tax:

  • MXP 0 – 125,900: 0%
  • MXP 125,901 – 1,000,000: 15%
  • MXP 1,000,001+: 30%
Tax Returns Supplied

Yes

Employers Social Security and statutory contributions

The Social Security Rate levied on employers is 7.58%. This is composed of retirement pensions, healthy and maternity insurance, occupational risk, day-care, disability and life insurance, and unemployment and old age insurance.

Employees Social Security and statutory contributions

The Social Security Rate levied on employees is 1.65%. This comprises of contributions to disability and life insurance and contributions to unemployment and old age.

Payroll and Tax in Mexico

Mexican legislation on taxes for foreign employees are not as stringent, although are typically higher given the high levels of social security in the Mexican tax system. Salary earned abroad is exempt from tax in Mexico if the Mexican resident works continuously abroad for at least six months, while non-resident employees are only subject to income taxes from Mexican sources. There are some notable consideration with Mexican tax laws that foreign employers must be aware of, such as the different social security contributions, the VAT and withholding tax.

Your Payroll Options in Mexico

Information Explanation
Remote Payroll ?

A remote payroll in Mexico is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Mexico. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Mexico is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in Mexico under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Mexico may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Mexican payroll and can fulfil all tax, withholding tax and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Mexican employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in Mexico to a GEO, like Shield GEO. This is possible for both foreign workers and Mexican nationals. This is the easiest, fastest and safest way to payroll staff in Mexico.

Shield GEO manages all aspects of payroll for workers in Mexico, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with pay slips.

Read more about outsourced payroll and employment through Shield GEO.

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Tax Figures

Information Explanation
Corporate Income Tax ?

The corporate tax rate is 30%.

Income Tax Rate ?
Grossed income Tax Rate (%)
$0 - $5,952.84 pesos 1.92
$5,952.85 - $50,524.92 pesos 6.40
$50,524.93 - $88,792.04 pesos 10.88
$88,793.05 - $103,218.00 pesos 16.00
$103,218.01 - $123,580.20pesos 17.92
$123,580.21 - $249,243.48 pesos 21.36
$249,243.49 - $392,841.96 pesos 23.52
$392,841.97 - $750,000.00 pesos 30.00
$750,000.01 - $1,000,000.00 pesos 32.00
$1,000,000.01 - $3,000,000.00 pesos 34.00
$3,000,000.01+ pesos 35.00

The above tax rate is applicable to resident individuals, which is progressive up to 35%.

Nonresident employees on temporary assignments of less than 183 days hired by nonresident foreign firms are exempt from income taxes, while those who have worked for longer than a year are subject to the following tax:

  • MXP 0 – 125,900: 0%
  • MXP 125,901 – 1,000,000: 15%
  • MXP 1,000,001+: 30%
Payroll Tax ?

There is payroll tax in Mexico which is levied at the state level. The rate ranges between 1% and 3% of salaries and is withheld by the employer.

Sales Tax ?

There is payroll tax in Mexico which is levied at the state level. The rate ranges between 1% and 3% of salaries and is withheld by the employer.

Withholding Tax ?

Mexico imposes withholding tax (WHT) on certain classes of income paid to non-residents:

  • Dividends: 10%
  • Interest: 4.9 – 40%
  • Royalties: 5%/25%/35%
  • Branch remittance tax: 10%

Mexico has entered into double tax treaties with many countries that may reduce the tax liability on foreign-source income generated by foreigners.

Other Tax ?

Tax on production and services: Manufacturers and wholesalers of certain goods are charged a tax on production and services, such as alcoholic beverages and tobacco. The rates vary by product.

Real property tax: Ownership of real property is taxed at the municipal level.

Time to prepare and Pay Taxes ?

286 hours

Time required to start a Business ?

8.399999619 days

Immigration and Work Permits in Mexico

Mexican immigration law does not permit any non-resident worker from engaging in business in Mexico without a valid visa, so compliance with these requirements must be ensured before hiring foreign workers. The foreign national may enter Mexico, typically on a temporary basis, and must holds an authorized visa, although the Mexican immigration authorities have substantial discretion in applying immigration law and regulations. Immigration agents currently have formal authority to carry out an inspection review to request information from foreigners entering Mexico, such as an invitation letter from a Mexican company.

There are three categories of foreign nationals according to Mexican immigration policy: unrestricted, regulated and restricted which apply different rules for each category. The issuance and supervision of visas and entry/exit of foreigners into Mexico is regulated by the National Institute of Immigration (Instituto Nacional de Migración, INM) as well as Mexican consulates.

Use Your Own Company?

Process:

1. Issuance of job offer

The employer must issue a job offer for the foreign employee that states that the foreign national will assume a position in the company in Mexico for the purposes of work. Under the Federal Labor Law (FLL), the employer must ensure that at most 10% of the business entity is composed of foreign nationals, and that any technical positions occupied by foreign employees cannot be filled by a Mexican national. In addition, the employer must ensure that the hired foreign national must train Mexican employees in their area of expertise.

The offer letter must state general information on the position, such as activities, the duration of the work and salary.

The employer must also provide a “Proof of Registry” certificate as evidence that the employer has permission from the government to hire foreign workers. This certificate is obtained during the incorporation process. Under Articles 194 and 195 of the Rulings of the Immigration Law, the National Immigration Institute (Instituto Nacional de Migración, INM) is allowed to perform routine verification visits to confirm that the employer has immigration compliance to sponsor foreign nationals.

Documents required by Employer:

  • Employer Registration Certificate (Constancia de Inscripción de Empleador)
  • List of all employees rendering services in Mexico
  • Bank statements/tax statements indicate all corporate income taxes are paid

 2. Application for work permit

The employer must submit an application for a work permit to the INM for each foreign employee that will be hired, accompanied by the relevant documents. The INM will analyse the application and company on a case-by-case basis, taking into consideration the employee’s nationality, nature of work, and other factors. The INM determines the approval status within 30 to 45 days, and upon a successful application an approval notice is sent to the foreigner and employer.

The employer and the employee should await the approval of the work permit before proceeding with other arrangements.

Documents required by Employer:

  • Permit application form
  • Copy of the Articles of Incorporation and amendments
  • Proof of payment of quarterly taxes
  • List of company employees and their nationalities
  • Copy of the legal representatives’ identification
  • Letters of support signed by the legal representative
  • Notarized letter confirming the employee’s employment

Documents required by Employee:

  • Original university diploma or transcript, notarized and affixed with an Apostille
  • Copy of the employee’s and family member’s full passports, all pages
  • 5 color ID photos
  • A utility bill for confirmation of residential address
  • Current resume
  • Confirmation of job offer letter, including title, description and salary information
  • Birth certificates with Apostilles affixed of employee and family
  • Marriage certificate with Apostille

Time: 30 – 45 days

Cost:

  • 1 year: $3,519 pesos
  • 2 years: $5,272 pesos
  • 3 years: $6,678 pesos
  • 4 years: $7,914 pesos

3. Visa application and interview with Consulate

Once the work permit has been approved, the INM will notify the local Mexican consulate that the employee’s work permit has been approved. The employee must submit the necessary documents to the consulate along with the visa application. Once the documents have been approved, the consulate will schedule an appointment for an interview to approve the visa.

It should be noted that the employee will require the results of a medical examination before the date of the interview, so it is the responsibility of the employee to be examined at least five days before the interview.

Certain nationalities are exempted from visa on certain migratory categories, so the consulate should be consulted prior to application.

Documents required by Employee:

  • Visa application form
  • Approval notice from INM
  • Biographic Data questionnaire completed online
  • Medical exam certificate
  • Original and photocopy of birth certificate
  • Original and photocopy of proof of termination of all previous marriages
  • Valid and original passport
  • Four passport-sized photographs

Time: 1 – 3 business days

Cost: Dependent on visa type and consulate. Approximately $2, 565 pesos (U.S consulate)

4. Travel to Mexico

Once the interview process is cleared, the employee may collect the work permit and visa from the consulate. The next step is to travel to Mexico.

Upon landing, the Migration Official at the port of entry will determine the duration of stay in Mexico for the foreign national depending on their visa type. Tourists and business visitors are allowed up to six months’ stay, including the Visitor Visa with Permission to Engage in Lucrative Activities (visitante con actividades lucrativas). Any employee staying longer than 180 days must apply for temporary or permanent residence.

Upon arrival, individuals visiting Mexico for less than 180 days on a leisure or business visa must obtain a landing card, known as a Forma Migratoria Multiple (FMM) and must be kept until departure.

5. Registration in Mexico

When the employee and their family arrive in Mexico, each member must register with the INM within 30 days. Family members are granted a dependant visa and must apply for work permits separately if they wish to work.

Once the employee registers their presence in Mexico, they may commence the employment arrangement for the time specified with the employer.

Time: 5 – 8 days

Use the Shield Geo Solution?

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Mexico

Category Description of Visa
Non-Working Tourist Visa

This is known as the “Visitor Visa without authorization to perform activities remunerated in Mexico”. This category of visa applies to foreigners who intend to stay in Mexico for a short duration and do not have permission to engage in activities to receive remuneration in Mexico.

The foreign national may stay in Mexico up to 180 days with this visa. There is no option to extend the visa or convert it into a working visa.

Nationals from certain restricted countries are required to apply for this category at a Mexican consulate or embassy prior to travel into Mexico. Non-restricted nationals may enter Mexico without a visa by completing a Multiple Immigration Form (FMM) at the port of entry.

Foreigners who are classified as tourists or businesspersons are grouped into this category as they may not engage in work for remuneration, although may engage in limited business activities such as business meetings, conferences and negotiations. Examples of permitted activities include conventions, fairs, expos, education, or visits of an informative nature.

Documents required:
– Valid passport
– 1 passport size photo
– Copy of birth certificate
– Voter registration card
– Proof of finances, e.g. bank statements
– Proof of education, e.g. school diploma
– Proof of employment, e.g. pay slips

Cost: US$17 – US$30. In some circumstances, the fee is included in the flight price under taxes and fees.

Time: Up to 3 weeks depending on nationality.

Working Visitor Visa

This is known as the “Visitor Visa with authorization to perform activities remunerated in Mexico (vistante con actividades lucrativas)”. The working visitor visa is the most common type of visa for the employment of foreign nationals on a temporary basis.

The foreigner may stay in Mexico for up to 180 days with permission to be remunerated in Mexico for activities carried out in the country. There is no option to extend the visa or convert it into a working visa.

This visa can only be obtained through the Mexican consulate or embassy with the approval of the National Immigration Institute (INM).

Documents required:
– Authorization letter from the INM
– Visa application form
– Valid passport
– 1 passport size photo
– Proof of finances, e.g. bank statements
– Proof of education, e.g. school diploma
– Proof of employment, e.g. pay slips

Cost: US$190

Time: 2 days

Temporary Resident Visa

Also known as the “Residente Temporal” visa, this visa is applicable to employees who intend to stay in Mexico for more than 180 days but less than 4 years, and may involve work that is remunerated or not. This visa is typically issued for employees who have a longer term arrangement with a Mexican employer.

The visa is issued only for the purpose for obtaining a Residente Temporal permit. Within 30 days of arriving in Mexico, the visa holder must apply for the Temporary Resident Permit. The employee is granted unlimited entries and exit from Mexico.

Typically, the temporary resident permit will only be granted to those who have investments in Mexico, have been invited by a Mexican company to engage in work activities, has real estate in Mexico or have family in Mexico.

If the purpose of the temporary resident visa is to engage in work with remuneration, the application must be submitted to the INM for approval. Otherwise, non-remunerated activities may be applied through a Mexican Consulate or Embassy.

The validity duration for the Temporary Resident visa depends on the intended length of the foreign worker’s assignment in Mexico. Any temporary visa issued for less than four years may be renewed up to a maximum of four years. Renewal requested must be made 30 days prior to the expiration date. The temporary Resident visa may not extend past four years, although it may be changed to a Permanent Resident visa upon request.

Documents required:
– Visa application form
– Valid passport
– Photocopy of migratory document
– 1 ID photo
– Invitation from a public or private institution
– Authorization letter from the INM
– Proof of finances, e.g. bank statements
– Proof of education, e.g. school diploma
– Proof of employment, e.g. pay slips

Cost:
$1,000 pesos processing fee
– Up to one year: $3,130 pesos
– Up to two years: $4,690 pesos
– Up to three years: $5,940 pesos
– Up to four years: $7,040 pesos

Time: 1 – 10 business days

Permanent Resident Visa

Also known as the Visa de Residente Parmenente, the Permanent Resident Visa allows foreigners to remain in Mexico for an indefinite period of time. It is suitable for employees who are seeking permanent residency status in Mexico or those who are seeking eventual Mexican Citizenship.

There are certain requirements to be granted a Permanent Resident visa, including family connections in Mexico, sufficient monthly income to support themselves or have 4 years of regular status as Temporary Resident.

Both the Temporary Resident visa and Permanent Resident visa allows the renewal of the visa within 55 days of expiration if the visa holder is not in Mexico during expiration.

This visa can be applied for in person at a Mexican Consular office.

Documents required:
– Visa application form
– Valid passport
– Photocopy of migratory document
– 1 ID photo
– Invitation from a public or private institution
– Authorization letter from the INM
– Proof of finances, e.g. bank statements
– Proof of education, e.g. school diploma
– Proof of employment, e.g. pay slips
– Proof of relationship with a Mexican citizen if required

Cost: $4,289 pesos

Time: 3 – 4 weeks

Setting up a company in Mexico

When setting up a company you may want to consider these factors:

  1. Business Factors

    The business environment of Mexico is relatively easy to operate in for foreign companies, where initiatives have been launched to facilitate the incorporation process for companies, such as one-stop shops and introducing more lenient minimum capital requirements. Mexico has close economic ties to the United States and Canada, where active encouragement for foreign investment has increase investment activities between these countries with Mexico as well as the rest of the world. It must be noted that Mexico’s historically high levels of corruption and high crime levels have raised security concerns for foreign companies which pose as an issue for incorporation. These factors must be considered, in addition to:

    • The industry and type of business that will be conducted
    • Nationality of the headquarters / individuals (s)
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability.  It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

  3. Language

    The official language is Spanish in Mexico, although up to 100 Native American languages are still spoken among indigenous Mexicans. A majority of Mexicans are monolingual Spanish-speakers. A second language among many educated Mexicans is English, with many Mexican citizens having a degree of fluency in English. It is unsurprising due to the geographic proximity with the United States, where many Mexican and American nationals transit the border frequently.

Foreign companies investing in Mexico may use different structures as investment vehicles to incorporate. Under the Foreign Investment Law of 1993 and the North American Free Trade Agreement (NAFTA), a majority of economic activities in Mexico are 100% open for foreign investor participation. Most notably are the infrastructure and financial services sectors which have traditionally been reserved for Mexican investors and the government.

The legal provisions governing the incorporation of companies are Federal in nature, meaning that all company incorporations in Mexico are uniformly regulated by the Mexican Law Governing Commercial Companies, or the Ley General de Sociedades Mercantiles (LGSM). The tax treatments applicable to the different types of companies are largely uniform in nature in Mexico.

The primary types of companies utilized are:

  • Limited Liability Stock Corporation (Sociedad Anónima, S.A.)
  • Limited Liability Company (Sociedad de Responsabilidad Limitada, S.R.L.)
  • Branch succursal
  • Representation Office

Limited Liability Stock Corporation

PLC

Also known as the Sociedad Anónima (S.A.), this is the most common type of business entity used in Mexico. The business operates under a company name and ownership of the company is in the form of shares in the capital of the company. Much like limited liability companies, the liability for each shareholder is limited to the portion of their own capital contributions.

In the S.A., the directors are personally responsible for the prudent management of the company, and are not required to be shareholders. The S.A. issues stocks to their shareholders, which may be transferable and are considered a negotiable credit instrument.

Some procedures must be performed with the Ministry of Foreign Affairs, and may require approval from the National Foreign Investments Commission in certain cases.

Liability

Limited Liability: Liability of each shareholder is only limited to the capital they have invested in.

Minimum Ownership

The S.A. may be a 100% foreign-owned entity.

Number of Founding Members

There is a minimum of two shareholders as founders and no maximum. The shareholders hold shares that are freely transferable by endorsement.

Minimum Capital Requirements

$50,000 pesos (US$4,500) with 20% available for up-front payment for incorporation, and the rest must be fully subscribed to within one year.

 

Procedure:

1. Online registration and authorization of the company name and draft deed of incorporation

The corporation name must be selected and submitted to the Ministry of Foreign Affairs. The founders obtain authorization for using the company name from the Ministry of Economy (Secretaria de Economia). The company must then elect a notary public that will grant the incorporation deed via filing an online draft of incorporation deed with the Ministry of Economy. The notary public subsequently informs the founders of the appointment to sign the incorporation deed. In some cases, authorization may be required from the Foreign Investment Commission to engage in certain activities.

Time: Less than one day

Cost: none

2. Obtaining a Tax Registry Number (RFC) and filing the deed of incorporation

The company charter and bylaws must be drafted before appearing before a notary public (notario público). The notary public may charge high fees when providing expert advice on drafting the company bylaws. Once this is completed, the deed of incorporation must be signed by at least two shareholders before the notary public. Some notaries have an agreement with the Ministry of Finance and Public Credit to grant the Tax Registration Number as well as the deed of incorporation. The notary then files the notarized deed of incorporation with the Public Registry of Commerce.

The following information is included in the company’s articles and bylaws:

  • Name and type of company
  • Number of shareholders and their information
  • Company’s corporate address
  • Corporate purpose
  • Duration of the company
  • Type and amount of ownership interest
  • Management rules
  • Amount of reserved funds

Time: 2 days

Cost:

$10,500 pesos (notary fees)
$14,899 pesos (registration fees)

3. Registration with the Mexican Social Security Institute (IMSS)

A pre-application must be made with the IMSS in order to arrange an appointment to register the company at the IMSS office. This procedure is used to enroll at least one worker in Social Security. This process is regulated by the Social Security Act and the Regulations of the Law on Social Insurance.

Time: 1 day

Cost: none

4. Registration with the local tax administration (Secretaria de Finanzas del Gobierno del Distrito Federal)

The company must register with the local tax administration. The Tax Registration Number and the company’s postal company are required to register.

Time: 1 day

Cost: none

5. Notifying the local government (Delegación)

The company must notify the local government that a mercantile establishment has been created. This can be done online, and for most business with low-risk activities, a notification record will be provided via e-mail.

Time: 1 day

Cost: none

6. Registration with the National Business Information Registry (SIEM)

The company must register with the National Business Information Registry, or “Sistema de Information Empresarial”. Depending on the company’s purpose and operations, the business will be registered with the appropriate chamber.

Time: 1 day

Cost: $100 pesos – $670 pesos depending on number of employees and company’s activities.

7. Additional registrations

Once the company is incorporated, additional steps must be carried out for the entity to become fully operational, including:

  • Obtaining a federal taxpayer identification number from the Federal Taxpayers’ Registry
  • Enroll in the National Registry of Foreign Investment
  • Obtain an importer’s license
  • Enroll any workers with the Mexican Social Security Institute, Worker’s Housing Fund, Retirement Savings Fund and other institutions
  • Preparing employment agreements or negotiating collective bargaining agreements to employ Mexican and foreign employees

Limited Liability Company

The limited liability company is also known as the Sociedad de Responsabilidad Limitada (S.R.L.). The business operates under a company name and ownership of the company is not represented by negotiable certificates. Contributions to share capital can only be transferable in specific cases under the Mexican General Corporation Law. For tax purposes, it can be considered as very similar to a partnership in other common law countries.

 

In the S.R.L., the directors are personally responsible for the prudent management of the company, and are not required to be shareholders. The S.R.L. allows restricted transferability of partnership shares, although any changes to the partnership composition may cause the liquidation of the partnership. The S.R.L. holds an additional advantage, in that proper structuring of the entity may allow tax advantages by transferring operational losses incurred in Mexico to the parent company.

Liability

Limited Liability: Liability of each partner is only limited to the capital they have invested in.

Minimum Ownership

The S.R.L. may be a 100% foreign-owned entity.

Number of Founding Members

There is a minimum of two shareholders as founders and may have no more than 50 members.

Minimum Capital Requirements

$3,000 pesos divided into “interests” that may be unequal in value and rights.

 

Procedure:

1. Online registration and authorization of the company name and draft deed of incorporation

The partnership or company name must be selected and submitted to the Ministry of Foreign Affairs. The founders obtain authorization for using the company name from the Ministry of Economy (Secretaria de Economia). The company must then elect a notary public that will grant the incorporation deed via filing an online draft of incorporation deed with the Ministry of Economy. The notary public subsequently informs the founders of the appointment to sign the incorporation deed. In some cases, authorization may be required from the Foreign Investment Commission to engage in certain activities.

Time: Less than one day

Cost: none

2. Obtaining a Tax Registry Number (RFC) and filing the deed of incorporation

The company charter and bylaws must be drafted before appearing before a notary public (notario público). The notary public may charge high fees when providing expert advice on drafting the company bylaws. Once this is completed, the deed of incorporation must be signed by at least two shareholders before the notary public. Some notaries have an agreement with the Ministry of Finance and Public Credit to grant the Tax Registration Number as well as the deed of incorporation. The notary then files the notarized deed of incorporation with the Public Registry of Commerce.

The following information is included in the company’s articles and bylaws:

  • Name and type of company
  • Number of shareholders and their information
  • Company’s corporate address
  • Corporate purpose
  • Duration of the company
  • Type and composition of ownership interest
  • Management rules
  • Amount of reserved funds

Time: 2 days

Cost:

$10,500 pesos (notary fees)
$14,899 pesos (registration fees)

3. Registration with the Mexican Social Security Institute (IMSS)

A pre-application must be made with the IMSS in order to arrange an appointment to register the company at the IMSS office. This procedure is used to enroll at least one worker in Social Security. This process is regulated by the Social Security Act and the Regulations of the Law on Social Insurance.

Time: 1 day

Cost: none

4. Registration with the local tax administration (Secretaria de Finanzas del Gobierno del Distrito Federal)

The company must register with the local tax administration. The Tax Registration Number and the company’s postal company are required to register.

Time: 1 day

Cost: none

5. Notifying the local government (Delegación)

The company must notify the local government that a mercantile establishment has been created. This can be done online, and for most business with low-risk activities, a notification record will be provided via e-mail.

Time: 1 day

Cost: none

6. Registration with the National Business Information Registry (SIEM)

The company must register with the National Business Information Registry, or “Sistema de Information Empresarial”. Depending on the company’s purpose and operations, the business will be registered with the appropriate chamber.

Time: 1 day

Cost: $100 pesos – $670 pesos depending on number of employees and company’s activities.

7. Additional registrations

Once the company is incorporated, additional steps must be carried out for the entity to become fully operational, including:

  • Obtaining a federal taxpayer identification number from the Federal Taxpayers’ Registry
  • Enroll in the National Registry of Foreign Investment
  • Obtain an importer’s license
  • Enroll any workers with the Mexican Social Security Institute, Worker’s Housing Fund, Retirement Savings Fund and other institutions
  • Preparing employment agreements or negotiating collective bargaining agreements to employ Mexican and foreign employees

Branch

Foreign companies setting up a branch in Mexico may perform commercial activities in Mexico, which includes income-generating activities. This is particularly useful for foreign companies who wish to establish a limited presence in Mexico without committing to a fully incorporated entity.

The branch is considered a proper legal entity in Mexico, where the branch office may open bank accounts and issue invoices accordingly. For tax purposes, branches are permanent establishments. It must be noted that it is not considered a separate legal entity from its parent company, where the foreign company may be liable for actions of the branch. Branch offices are uncommon in Mexico, so usage of branches may pose some difficulties for doing business with other Mexican companies.

Process:

The company must register the branch with the Foreign Investment Registry

The registration of the branch must be made to the Public Commercial Registry. The company must submit their articles of incorporation and by-laws to the Public Commercial Registry.

Prior authorization of the Mexican Departments of Foreign Affairs and Economy (SECOFI) must be obtained. This step requires proper proof that the parent company has been properly incorporated in the home country, and that the charter and by-laws do not conflict with Mexican laws.

To open a branch office, the company must waive the right to invoke protection from its government for matters related to acquisition of ownership of property in Mexico.

Representation Office

A representation office is established by entities that intend to become established in Mexico in the future, and currently require a representative to perform certain activities. Representative offices are not allowed to engage in commercial operations, and typically deal with information and administrating regarding the company’s activities, products or services of the parent company.

The representative office is different from the branch as it does not allow on-going business activities to be performed, and no revenues may be generated. This method does not subject the company to Mexican income tax, nor is it required to establish a legal presence in Mexico via incorporation.

To set up a representative office, the proper approval from the relevant ministries must be sought, and this procedure may be very lengthy, where establishing a legal, taxable presence is recommended over setting up a representative office.

  • Mexico Employer of Record Overview

Mexico Employer of Record Overview

  • Mexico Employer of Record Overview

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