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FICAPS to Benefit Investors
For the promotion of venture-capital investments in Mexico, a special tax treatment will be given to persons investing in shares issued by Mexican residents entities not listed on the Stock Exchange ("Promoted Entities"), as well as in loans granted to such types of entities through trusts, the so-called FICAPS, organised under Mexican law, with a Mexican bank acting as trustee. Taxand Mexico reviews FICAPS and benefits to investors as a vehicle to invest through.
The main tax advantage of the FICAP regime is that trust is considered a transparent vehicle for tax purposes. This means, that the trust beneficiaries will be subject to income tax in accordance with the specific regime of each investor. For instance, if investors / beneficiaries of the FICAP are non-Mexican investors, they may get access to treaty benefits, reduced withholding tax rates, or even tax exemptions, due to the characteristics of the beneficiaries or the type of income.
Another relevant benefit is that the FICAP is not obligated to make monthly payments of estimated taxes, primarily income tax and single rate business tax. This represents an interesting tax deferral tool.
The FICAP is a very flexible vehicle, which can be used to reach very complex investor agreements, to determine investment objectives and to isolate the ownership of assets in a trustee entity.
It is required by law that at least 80% of the trust property must be invested in shares issued by Promoted Entities or granting loans to such entities. The remainder must be invested in securities issued by the Mexican Federal Government registered at the National Registry of Securities and Intermediaries or in shares of debt-instrument of mutual funds.
It is worth mentioning that such shares cannot be sold before at least two years have elapsed as of the date of their acquisition and the maximum term of the trust is 10 years. In addition, at least 80% of the income obtained by the FICAP in the fiscal year must be distributed to its beneficiaries no later than two months after the end of such year.
If the FICAP does not comply with the aforementioned requirements and keeps specific accounting records, the trustee shall be obligated to determine the net income or loss of the business activities performed in such vehicle in each fiscal year. On behalf of the trust beneficiaries as a whole, the trustee must also comply with several obligations, including that of making monthly payments of estimated taxes.
Your Taxand contacts for further queries are:
Manuel Tamez Zendejas
T. +52 (55) 5201 7403
Raymundo I. Dom?nguez Mar?n
T. +52 (55) 5201 7416
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