How are partnerships taxed?

Partnerships are taxed as corporations. Under federal law, all entities that are legally considered ‘moral persons’ are subject to income tax law and value added tax (VAT). These taxes are paid annually, at the end of the fiscal year. State and local governments generally impose taxes on real estate. Some states also levy taxes on salaries and wages, generally paid by the employer.

Partners pay taxes for income based on the dividends that they receive. VAT law generally works in favour of partnerships since these taxes are often returned as the partnership usually is not the last consumer (who is ultimately responsible for this tax).

Mexico has approximately 60 income double tax treaties in force.

A partnership is subject to tax when the business’s main management is in Mexico.

Reporting and transparency requirements

To what extent must partnerships, LLPs and similar structures file accounts and other documents and information with a government agency?

All types of entity (either corporations or partnerships) must comply with the same accounting norms and regulations. However, some are more strictly regulated than others. For instance, public corporations must file quarterly transparent and audited reports. On the other hand, partnerships, if unlimited, are not subject to audited accounts.

The public registry contains documents regarding general partners’ meetings (if published) and the formation of partnerships. However, information regarding financial or accounting conditions generally remains private, unless a specific topic has been discussed in a meeting and made public.

Ownership and membership

Can anyone be a partner, and, if not, who can and cannot? Can bodies corporate or other partnerships own a partnership?

Partners must be individuals or entities that have the legal ability to trade and the capacity to exercise their rights. While it is not legally prohibited for other partnerships or corporations to be a part of a partnership, this is rare because of the complications associated with the partners’ unlimited responsibility in a partnership.

In general partnerships, all partners must respond unlimitedly and jointly. In limited partnerships, certain partners can have different levels of responsibility, depending on the applicable law. If a person’s name appears in the partnership’s name, they must respond unlimitedly and jointly and cannot agree to limited liability.

Execution of documents

How do partnerships and LLPs execute documents? Must all partners sign? Can the partnership or LLP sign in its own name?

Partnerships will usually appoint a legal representative to execute documents. If there is no legal representative and all of the partners are also administrators, an administrators’ meeting will be held. During an administrators’ meeting, a decision will be made by unanimous consent or majority vote and a delegate will be appointed to execute the resolution in the partnership’s name.

Following the execution of documents (by one of the above-mentioned methods), the partnership – and thus the partners – will be legally bound by the obligations therein.

Law stated date

Correct on:

Give the date on which the above information is correct.

August 2020.