As businesses around the world look for recoveries and new opportunities, we are already seeing signs that 2021 could be the biggest year ever for M&A transactions. However, deciding on the right market for your expansion can be tough. There are countless factors to take into consideration before you can ensure a return on investment and commit to operating in a country on the other side of the world.
According to The World Bank, Mexico is the second-largest economy in South America and the 15th-largest economy in the world. It has a GDP of $1.15 trillion and purchasing power parity at around $2.45 trillion. The free trade agreement contributed more than 90% of Mexico's exports, with over 45 countries including the US, China, Japan, and the European Union. This network of 13 treaties provides Mexico access to 61% of the world’s GDP and over 50% of global trade, which is phenomenal. The country’s export trading mainly revolves around oil, silver, vegetables, cotton, coffee, fruits, and has recently emerged as a major manufacturing hub for auto parts and electronics. Prudent monetary policies, sensible fiscal policy, and structural reforms have improved Mexico’s macroeconomic performance and bolstered the economy.
Regarding taxes, the main taxes applicable to companies doing business in Mexico are Income-tax (ISR), Value Added Tax (IVA), Excise Tax (IEPS), and social security fees, which must be paid on behalf of employees. Notwithstanding, there are also other relevant taxes such as Real Estate Transfer Tax (ISAI). All the above taxes could be fined in more detail in our Mexico Country Profile.
To set up a business entity, there are 3 different main corporation options, which are Stock Company (S.A.), Limited Liability Company (S. De R.L.), and Stock Investment Promotion Company (S.A.P. I). In our comprehensive country profile, we will list out all the requirements for setting up the entity, as well as local regulations on employment, to provide you a full detailed process. Subsidiary and branch office setup, on the other hand, requires a significant amount of time, money, emails, and travelings, which is often a lengthy and expensive process. Therefore, when hiring employees in Mexico, hiring via an Employer of Record (EOR) is a faster and often more effective option – especially when starting up in a new country.