Last Update: January 29, 2024
Growing your Mexican Business: Expanding Your Business Activities
Congratulations! Your Mexican business in Mexico is booming, and now you’re looking to expand the services that your company offers. You and your shareholders have decided to add more services and even open a new branch in another city.
Stop! Before you start expanding your business, give your accountant a call. Because he or she definitely needs to know that you will be increasing or changing your income activities.
The topic of business activities comes up quite a bit in the field of Mexican accounting. Sometimes, a client will begin receiving income for an activity that they have not registered with SAT. This occurs most often as businesses grow or as people expand their opportunities by offering multiple services under one company umbrella. However, it is critical that any increase or decrease in income-generating activities via your company be properly reported to SAT.
Below are some of the common questions that come up when we discuss increasing business activities with clients:
Why do we need to notify SAT which business activities we will be offering through our company?
It is important for SAT to know what your business activities are to ensure the proper taxes are being applied. Most businesses will be liable for income tax and sales tax (with some exceptions) but there are other taxes that are specific only to certain industries. For example, hotel & lodging taxes are only applied to businesses that offer lodging, where as a company which imports alcohol will be susceptible to a specialty customs tax.
Is there an unlimited number of activities we can offer? For example, if I own a condo through a corporation that I rent for income, but I also offer personalized tours and, can I receive income for both services into the same business and same bank account?
There is no limit to the number of activities your business can engage in, as long as they are outlined in your incorporation documents (acta constitutiva). Additionally, an estimated income percentage must be identified for each reported activity.
For legal entities, it is also important for these activities to be listed in their bylaws. Please consider that there may be activities subject to special regulations requiring a certain percentage of Mexican investment or reserved exclusively for Mexican investment or the state.
What do I need to do if I want to add or change the activities that my company offers?
You should contact your accountant, and they will assist you with the process to increase or decrease obligations (Aumento o Disminución de Obligaciones). In case there are any activities to add to your bylaws, you should contact your lawyer to make the necessary amendments.
What happens if I receive income for an activity that I have not registered with SAT?
If it is a one-time activity that will not be repeated, there is no need to notify SAT other than to report the income to SAT and pay any applicable taxes.
If it is a regular activity that will generate income monthly and you have not completed the process to increase your activities with SAT, you can receive a fine from SAT, even if you pay any applicable taxes. All regular activities that your corporation participates in must be on file with SAT.
Is there anything else I should know about my business activities and SAT?
All income you generate must have a corresponding factura created, even when the income is generated by activities with the general public. We also advise you to have all the legal documentation that may support your transactions, providing material evidence for the tax office. Your accountant is aware of this and will ensure that your company properly manages all your activities and income.
And remember, while your Mexican accounting firm may not be the first thing you think of when considering expanding your business, you should consider your accountant and your corporate attorney as important partners in the financial health of your business.
If you would like more information about how Mextax can help you expand your business activities, please contact us.
