Foreword by Andrew Chilvers
Despite these uncertain times, expanding overseas can be a key driver for future growth for an ambitious business. International expansion can breathe new life into a company, drive huge value and set it on a path of continued success.
Expanding a business overseas is a strategic opportunity that will help diversify revenue streams, revitalise product development and give high returns on investment. But expanding a business into different jurisdictions takes time – this is a long distance run, not a sudden sprint to the finish line. Furthermore, expanding operations into a new jurisdiction can be fraught with challenges and risks that need to be addressed long before the first boots are on the ground.
For any company turning up in a foreign country, a multitude of tax and legal issues need to be addressed. This can be a labyrinthine experience and not for the faint hearted – but then faint hearted businesspeople seldom set their sights on overseas expansion.
Tax and compliance have to be at the top of any board’s agenda, ensuring the correct steps are taken the moment the company representatives land in-country. It’s pivotal to learn these issues to avoid any costly mistakes from the start.
What are the main government incentives available in your jurisdiction to attract multi- nationals and FDI investment?
The main incentives provided by the Mexican government include foreign trade programs and tax incentives, which jointly allow for businesses to lower the costs of their supply chain and operation of subsidiaries in Mexico. On one side, foreign trade programs provide different types of benefits for the importation of raw material – such as preferential import tariffs, which seek to promote specific industry sectors – as well as temporary importation licenses, which allow businesses to avoid import tax and, in its case, compensatory duties. Along with that, local and federal tax incentives, including the Value-Added Tax (VAT) certification, allow businesses to avoid VAT payments for the purposes of the operation of temporary importation licenses.
In addition to that, Mexican Tax Law provides several other tax incentives, including the promotion of research and development of technology, as well as the production of equipment of power supply for electrical vehicles.
What industries do you feel there are opportunities in for international investors / businesses in your jurisdiction? What factors do you think contribute to inward investment?
The industries with the most foreign investment in Mexico are manufacturing in general, including automotive, mining, aerospace, petrochemical and construction. However, technology development related industries, such as robotics, data mining, artificial intelligence, nanotechnology, e-commerce, internet of things, technology-based services of information technology, as well as other Industry 4.0-related areas, have also become attractive due to the implementation of tax incentives intended to promote technology development, as well as its growing market.
Among the main factors that contribute to the investment in these industries are the multiple free-trade agreements ratified by Mexico, which makes it the second country with the most free-trade agreements with a total of 44 countries. Such free-trade agreements include the United States-Mexico-Canada Agreement which promotes more economic openness, elimination of customs tariffs and more regulation regarding working conditions, such as salary, as well as union-friendly regulatory environments.
Along with the fact that the labour force in Mexico is young, skilled, specialized and growing, its geographic location is also significantly beneficial for commercial purposes, given the proximity with central and south America, as well as with the US. Being bordered by both the Pacific and Atlantic Oceans, its seaports allow for products to be exported to Europe and Asia. Along with that, the internal market of Mexico is also significant, with a population of 126 million people.
Why is it important to hire a local firm to support international expansion? How can you help smooth the process for your clients and overcome common pitfalls?
It is not only important to hire a local firm to support international expansion, what really matters is to hire the corresponding experts on this matter. When facing a business expansion you must hire at least 3 (three) experts: law firm; accountants and import/export tax experts and real estate brokers. These three services will help you to define: what type of Mexican commercial company works better for your business; the way to tribute, import/export according to Mexican tax law and the best place to be located considering logistics of importation and exportation of products.
At Legem Attorneys at Law we have a specific area where business consultants are involved and which is actually our core business. We support the growth of foreign investment in Mexico. We have years of experience implementing strategies of businesses expansion in Mexico, together with national and international business alliances (legal and accounting firms) that allow us to offer an integral service to our clients. Our commitment is to help our clients grow by providing them with opportune legal and business consultant services oriented towards protecting the clients’ personal, economic and commercial interests. In Legem Attorneys at Law we know our business culture and the business culture abroad.