© grant thornton setting up a distribution business in mexico: considerations for u.s. and foreign...
TRANSCRIPT
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Setting up a Distribution Business in Mexico: Considerations for U.S. and Foreign Investors
Andrew SpeerGrant Thornton LLP
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WHAT TYPE OF DISTRIBUTION BUSINESS?
A. Wholesale to Maquila/PITEX customers
B. Wholesale to non-Maquila/PITEX
C. Retail
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• Can invoice from U.S. & incorporate a Mexican company to provide warehouse services– Advantages
• Easier to coordinate with parent than buy/sell operation• Provides greater flexibility for income distribution and tax
planning
– Requirements• Incorporation of company• Standard licenses• Service Maquila license• Operating agreements• Transfer pricing support
WHOLESALE DISTRIBUTION TO MAQUILA/PITEX CUSTOMERS
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U.S. Parent
Mexican Sub
U.S. Customers
Mex Customers
Invoice (B)
Shipment
Invoice (A)
WHOLESALE DISTRIBUTION TO MAQUILA/PITEX CUSTOMERS
Shipment
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• Warehouse structure complications
– VAT Issue: May be unable to recover import VAT
– Invoicing Issue: Sales within Mexico subject to Mexican invoice rules
WHOLESALE DISTRIBUTION TO NON-MAQUILA/PITEX CUSTOMERS
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• Wholesale Distribution requirements:– Incorporation of 2 companies
•Company number one: – Import licenses– “NOM” compliance– Mexican invoicing system– Transfer pricing support
•Company number two:– Mexican invoicing system
WHOLESALE DISTRIBUTION TO NON-MAQUILA/PITEX CUSTOMERS
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• Wholesale Operations– 1st Company performs import duties &
warehousing– 2nd Company buys from import company &
sells to customer
• Limits impact of invoicing requirements that state first hand, wholesale import sales must provide detailed customs information on invoice
WHOLESALE DISTRIBUTION TO NON-MAQUILA/PITEX CUSTOMERS
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Parent
Customer Service
Customer
Shipment + Invoice
WHOLESALE DISTRIBUTION TO NON-MAQUILA/PITEX CUSTOMERS
Import & Warehouse
Shipment + Invoice
Shipment + Invoice
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RETAIL DISTRIBUTION
• Difficult to implement warehouse operation for same reason VAT recovery reason as wholesale operations
• Retail invoices do not require customs information, however
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RETAIL DISTRIBUTION
• Requirements:– Incorporation of one company– Import Licenses– “NOM” compliance– Transfer Pricing Support
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Parent
Mex Company
Shipment
+
Invoice
RETAIL DISTRIBUTION
Product + Invoice
Customers
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Incorporation• Licenses• Operating Agreements• Labor Issues• Administration• Customs• Taxes
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Incorporation: 4-8 weeks– Articles of incorporation / Corporate
Purpose– Powers of attorney– Notarization– Taxpayer i.d. number
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Obligatory licenses– Importer registration– Foreign investor registration
• Licenses that may be required– Service maquila license and RECIME
registration – Padron Sectorial– Environmental Permits– “NOM” compliance
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Operating agreements that may be required– Warehouse agreement with third party– Intercompany warehouse agreement
(earnings stripper)– Equipment lease agreement (earnings
stripper)– Employee lease agreement
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Labor issues– Collective bargaining agreement with
unions– Individual labor agreements– Human resources procedures consistent
with Mexican law– Mandatory profit sharing of 10%
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Administration– Accounting– Payroll– Tax filings– Audit requirements
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Customs requirements– Customs agent– Duties, possible NAFTA benefits– “NOM” requirements
• Benefits under Service Maquila license• Provide customs classification number
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GENERAL REQUIREMENTS / ISSUES WHEN ENTERING THE MEXICAN MARKET
• Tax requirements– Income tax
•U.S. considerations•Mexican considerations
– Value Added Tax (VAT)– Asset Tax– Profit sharing “Tax”
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QUESTIONS?