A C-Corp is a tax haven?
A C-Corp is a tax haven?

In Mexico, there are rules designed to detect when holders of capital invest in places where the payment of taxes is null or low. In this regard, article 176 of the Income Tax Act states that if the tax rate is less than 75% of the Mexican rate, which is 30%, anywhere in the world with a tax rate for Income Tax less than 22.5% shall be deemed a preferred tax regime (REFIPRE).

In the United States, as a result of the 2018 reform, the corporate tax decreased from 35% to 21%, therefore, as of the 2018 calendar year, companies or individuals with shares in a U.S. company, shall analyze if they are under a REFIPRE assumption, if this was the case, an informative return shall be filed during the month of February, reporting the income obtained from the immediately prior fiscal year subject to REFIPRES.In certain cases, the term for filing this return may be deferred to May 31, 2019. Failure to file this return may cause, in an extreme scenario, incarceration from 3 months to three years.

It is important to mention that in the case of C-Corp, if there is proof that there is no effective control from a company or individual shareholder, they will not fall under the REFIPRE assumption.

Contact us, at JA Del Río we can advise you!