Flash: Mandatory identification of the ultimate beneficial owner

Spanish version

Who is considered an ultimate beneficial owner?

What are the penalties for failing to comply? 

As of January 1^st, 2022, legal entities, settlor, trustees, and beneficiaries regarding Mexican trusts, and other engagement parties concerning contracts, must comply with the obligations to identify, gather, and maintain, as part of their accounting records, the reliable, complete, and updated information of its ultimate beneficial owner (UBO).

Additionally, public notaries or any other person involved within the formation or execution of agreements related to the incorporation of legal entities or in the execution of Mexican trusts are also obliged to identify the UBOs and verify their identity.

The information of the UBO should be provided to the tax authorities when required, and internal measures to properly comply with these obligations must be implemented and documented. Any change of the identity or participation of UBO in a legal entity, trusts, or agreements, must be updated within the following 15 natural days.   

Ultimate beneficial owners are defined as the individual or group of individuals that:  
 

• Directly or indirectly receives benefits of his or her participation in a legal entity or trust; or ultimately, exercises the rights of use, enjoyment or disposal of an asset or service
• Directly or indirectly has control of a legal entity, trust, or legal vehicle

It is considered that a physical individual(s) has control when, through the ownership of shares or titles, by contract or any other legal act, can:

• Impose, directly or indirectly, decisions in the shareholders’ meetings (or equivalent bodies) or appoint or dismiss most of the directors (or their equivalents)
• Maintain ownership of the rights that allow them, directly or indirectly, to exercise the vote of more than 15% of the capital stock (or equivalent)
• Manage, directly or indirectly, the administration, strategy, or main policies of the legal entity

Regarding Mexican trusts, the settlor, trustees, and beneficiaries, or any person involved in the contract that ultimately exercises effective control over the trust is considered a UBO.

To identify a UBO, among the information that should be gathered are name, nationality, country of origin, residence for tax purposes, Tax ID number, contact information, address, e-mail, phone number, etc.

Finally, it is important to mention that, when failing to comply with these new obligations, economic penalties could range between MXN 500,000 (USD 20,000) and up to MXN 2,000,000 (USD 100,000) per UBO, in addition to other possible administrative sanctions.  

We remind you that the Partners and lawyers of the Firm's Corporate Legal Practice are more than willing to work together with you to support you in analyzing the impact of this criterion on your company's operations, as well as in any regularization activity.