Categoría: News and Blogs

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What types of properties are there in Mexico?

Monday, November 6, 2023  

By Madison Ashley, Bridgewater State University student and legal Intern, she is currently a member of the Research Center of SIL MEXICO, and Thorvald Pazos Casas – Law degree from the Universidad Regional del Sureste, postulant attorney in criminal, civil, agrarian, and tax matters, and currently a research attorney and part of the Research Center of SILMEXICO.

 

In Mexico, throughout its history and its intricate relationship with the land, there has been a long struggle for the recognition and equitable distribution of this right, a battle that has been fought since the times of Independence and the Mexican Revolution. As a result of this struggle, land ownership is a protected and regulated right in the Political Constitution of the United Mexican States, which grants it a special status and treatment.

The legal system in Mexico is based on the Roman-Germanic system, which implies the existence of a written law and doctrine as a source of law, being the Mexican Constitution the cornerstone of this system. Article 27 of the Constitution, which is found in the dogmatic section of the Constitution, recognizes the right to property as fundamental. The aforementioned provision recognizes that there is public, private, and social property in the national territory.

Article 27 of the Mexican Constitution states that “ownership of the lands and waters within the boundaries of the national territory is vested originally in the nation, which has had, and has the right to transfer title thereof to private persons thereby constituting private property” (Kelly, 1994). This means Mexico holds the legal basis of the land and its control of what constitutes private ownership and private possession.

From the foregoing, it is worth mentioning that the main regulation of property is found in the Mexican Constitution, and is supported by secondary laws for its legal regulation and tenure. Such as, in the case of private property, the Federal Civil Code or that of the states; for social property, there is the Agrarian Law; and for public property, it is based on the National Property Law.

The Kinds of Property in Mexico

There are three types of property in Mexico: private, social, and public.

Private

Refers to property that originated from the original ownership of the nation and was transferred to private individuals or entities. It is the right of individuals or legal entities to enjoy and dispose of their property, subject to the restrictions established by law. The Federal Government has the power to expropriate private properties that are considered notable due to their characteristics and manifestations, following the provisions of the law.

Agrarian

Also known as social, belongs to various agrarian groups and is subdivided into two categories: ejido property and communal property. Since 1992, with the enactment of the Agrarian Law, voluntary transition to full ownership is allowed, which means that through a certification process, it can be converted into private property and, therefore, be susceptible to sale. The key distinction in social property is based on the origin of land tenure. The ejido arose as a result of the allocation of land by the State to a group of peasants who lacked land and needed it for their subsistence. On the other hand, the agrarian community has its origin in the recognition by the State of land that belonged to a group of peasants since ancient times or in the restitution of land if they had been dispossessed of it in the past.

This difference is fundamental since the ejido is created as a measure to distribute land to those who need it, while the agrarian community recognizes the historical rights of a group of peasants over the land they have occupied and worked for generations. The two concepts reflect different approaches to land policy and its history in Mexico.

Public

Refers to the buildings and territory under the jurisdiction of the entities and agencies of the different levels of government (Federal, State, and Municipal). These properties are subject to regulations established by the General Law of National Assets in the federal government and by the laws of patrimony or assets of the federal entities. Access to and use of these public spaces are restricted and regulated, which means that to use a public space it is necessary to obtain a concession, and private individuals can only access public property through these concessions.

Several types of taxes involve property in Mexico. These include acquisition tax, annual property tax, rental income tax, value-added tax, capital gains tax, and income tax. Acquisition tax is paid for any property that is purchased; the tax levels differ, but it can range anywhere from 2% up to 4.5% of the value of the property at the time of purchase (Ortega, 2023).

References

  • History of the National Agrarian Registry of Mexico. (2022, April 19). Mexicanist. https://www.mexicanist.com/l/history-of-the-national-agrarian-registry-of- mexico/
  • Kelly, J. (1994). Article 27 and Mexican Land Reform: The Legacy of Zapata’ s Dream ARTICLE 27 AND MEXICAN LAND REFORM: THE LEGACY OF ZAPATA’S DREAM*.
    https://scholarship.law.nd.edu/cgi/viewcontent.cgi?article=1693&context=law_faculty_scholarship:~:text=Article%2027%20of%2
  • 0the%20Mexican%20Constitution%20states%20that%20%22%5Bo%5D
  • Ortega, O. (2023, April 17). Tax Implications of Owning Property in Mexico [2023 Policies]. RivieraMayaCozy.com – Your Place for Best Real Estate Deals in Rivera Maya.
    https://rivieramayacozy.com/tax-implications-owning-property-mexico/
  • Real Estate Law | Mexico | Global Corporate Real Estate Guide | Baker McKenzie-Resource Hub.(n.d.).
    Resourcehub.bakermckenzie.com.
    Retrieved
    November 3, 2023,
    from https://resourcehub.bakermckenzie.com/en/resources/global-corporate-real-estate-guide/latin-america/mexico/topics/real-estate-law:~:text=Land%20i tself%20in%20Mexico%20is
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TYPES OF SCAFFOLDING

Thursday, November 2, 2023 By Jessica Hernández Sales Assistant  

Scaffolds are structures that are used in construction sites as a tool to reach certain heights or areas of difficult access to perform the necessary work. In addition to fulfilling this function, scaffolding must be correctly assembled to ensure the protection of the person carrying out the work, otherwise, this may cause falls of people or materials, as well as collapses. They are platforms with stable surfaces and are available in different materials and sizes.

Trestle scaffolding

It is the simplest scaffolding that exists, characterized by being A-shaped. It is used in constructions that do not exceed 4 meters in height due to the simplicity of its structure. It is used as an auxiliary for simple tasks such as painting tiny houses.

Cross brace scaffolding

This is the standard scaffolding, also known as scissor scaffolding, it is very easy to transport and low cost. It is not approved for outdoor use, so it is more commonly used indoors.

European scaffolding

It is the type of approved scaffolding, besides being modern, it complies with all current European safety standards. It has non-slip platforms, trapdoor and ladder to facilitate access to each of the different levels or heights of the scaffolding. Its stability is ensured by assembled diagonal and horizontal bars.

Suspended scaffolding

These are mobile structures suspended from the ceiling, roof, or beam. They are ideally used to perform work from 20 meters in height and allow the user to change levels. It is commonly seen in window cleaning jobs in large buildings.

Multidirectional scaffolding

They are resistant and versatile. Their main characteristic is that they are capable of forming frames that adapt to any position and shape, even curved. They allow work levels to be varied every 0.50 meters while maintaining all safety elements. Their use ranges from simple projects to the most complex and industrial uses.

Mobile scaffolding

They are very stable and efficient for working in smooth and flat environments. They are composed of simple, manageable, and light pieces that facilitate their assembly, disassembly, and displacement.

Self-erecting platform scaffolding

Systems whose platform operates electrically on 1 or 2 masts. It has a control panel and an overload locking system.

 

It is important to choose the type of scaffolding according to the task to be performed, this will result in faster and more efficient work. Also, you will protect the lives of the workers and those who pass around the work site. At SILMÉXICO we advise you about the ideal type of scaffolding for your new development. Contact us at info@silmexico.com to receive advice on your construction process.

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CERTIFICATE OF FREEDOM OF LIEN

Monday, October 30, 2023 By Jessica Hernández Sales Assistant  

The certificate of freedom of encumbrance is the document that guarantees the legal certainty that the property purchased or to be purchased does not have any debts or legal situations in relation to the Ministry of Finance or financing institutions. 

In addition to other documentation, this is one of the most important documents requested when promoting a property for sale. This document grants the certainty that the property can be sold and given freely to the new owner, without it being a guarantee for any loan, or seized.

Where is the Certificate of Freedom of Lien processed?

In Oaxaca, this certificate is issued by the Public Registry of Property and Commerce. To obtain it, you must first fill out an application form, which includes information such as: 

    • Data of the applicant
    • Name of the owner or registrant
    • Name of the property
    • Complete location: measurements, boundaries, surface, and registry antecedent.
    • Name, signature of the applicant, and date of presentation

Likewise, the payment corresponding to the antecedent of the inscription before the Public Registry of Property and Commerce must be made, this varies according to the state in which it is processed. 

The approximate time to have it is five to eight working days in regular conditions, although the process can be accelerated by paying an extra fee.

Do you have doubts about this or other legal procedures related to the purchase and sale of real estate? Come to SILMÉXICO to receive advice from our legal team.

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CONSTRUCTION MACHINERY

Monday, Wednesday, October 25, 2023 By Jessica Hernández Sales Assistant at SILMÉXICO  

In the construction industry, different equipment is used during the beginning, in the middle, and at the end of the work to facilitate the work. Having the right tools and machinery will ensure the efficiency of the processes in the different stages of construction, in addition to preventing the physical integrity of the workers from being put at risk. Whether you are looking for machinery to buy or rent for your project, you should know their types and functions, and based on that choose the ones that fit your needs. In the following blog, we share with you about construction machinery and its types.

The size and characteristics of the machines vary according to the activity you are looking for them to perform, among which we find:

    • Excavation of land in which the settlement of the foundations of various structures will be made.
    • Soil displacement to shape the land on which roads or highways will be set.
    • Loading and unloading of construction material.
    • Mining activities.
    • Separating some part of the soil layer with the objective of transforming the terrain according to the project to be executed.
    • Now, machinery owes its classification to its different sizes, which is why it is divided into heavy, semi-heavy, and light.

Heavy Machinery

As their name indicates, these are of a great size and weight, all of them must be operated by a person with high knowledge in their handling, and following the corresponding security norms. In this category we can find:

Bulldozer

It has a powerful front shovel and is mounted on rails or tracks. This machinery is mainly used for heavy-duty work such as excavation, land leveling, soil piling, etc.

Excavator

This is the most important heavy machinery used in the construction industry. Their main use is excavation; however, they can also be used for other purposes, such as demolition, river dredging, etc.

Mini excavator

It is a small industrial equipment. It is their size that makes them practical and useful for a variety of jobs. It helps to prepare the ground, excavate, and remove debris in hard-to-reach places. Even on uneven terrain. The mini excavator is a versatile machine that is also used on farms, in confined environments; but it is especially useful in civil construction because of its compact size and ease of transport.

Backhoe

It has a bucket at the front and a digging arm at the rear, which allows them to perform a variety of tasks.

Examples include excavation, demolition, material moving, asphalt removal, and road paving, among others.

Motor graders

It is a self-propelled construction machine with wheels. It incorporates an adjustable blade located between the front and rear axles to cut, move or flatten the ground.

Skid steer loader

Also known as a skid-steer loader, it is an extremely compact type of tractor. It has a loader arm attached to its front end.

Also, unlike most of the above machines, the skid steer loader is light, small and very agile.

Articulated trucks

These are motor vehicles consisting of two or more interdependent structures connected by a hydraulically assisted axle. This allows the truck to maintain its connection between the tractor and the trailer. The articulated truck is mainly used to transport construction materials such as sand, cement blocks, rubble, etc., in quantities that exceed the capacities of a traditional truck and in terrain where other vehicles would get stuck.

Semi-heavy machinery

Unlike the previous ones, these have a smaller dimension, they are used to remove a smaller amount of soil compared to heavy machines. In turn, they can be used to excavate land that is not too deep or to load medium-weight elements.

They include the following:

    • Construction dumpers
    • Small excavators
    • Small cranes

Light machinery

These are of much smaller size and are used to perform tasks that do not require so much demand, are subdivided into pneumatic that operate on the basis of compressed air and electricity, some examples are:

    • Water pumps
    • Compressors
    • Vibrating machines
    • Steel cutters

Are you about to start your project and have doubts about the materials and equipment you need? At SILMÉXICO our expert construction team will guide you from start to finish. For more information write to info@silmexico.com and one of our specialists will contact you.

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Canada-Corporation-What-Why-How

Monday, October 23, 2023 By Shannon Lam- Legal Assistant at SILMEXICO

Canada offers a favorable business environment for entrepreneurs and foreign investors. When starting a business in Canada, it is essential to choose the right business structure that aligns with your goals, taxation preferences, and potential liability concerns. In this guide, we will explore the main types of companies that can be created in Canada, their characteristics, advantages, disadvantages, tax implications, and approximate costs.

I. SOLE PROPRIETORSHIP

A sole proprietorship is the simplest form of business structure, owned and operated by a single individual. It requires no formal registration, making it the easiest and most cost-effective option to start a business in Canada.

 ADVANTAGES

Sole proprietorships are easy and quick to set up with minimal paperwork and you would have direct control over business decisions. Additionally, the business income is taxed as personal income, potentially resulting in lower tax rates. And finally, there are fewer regulatory and reporting requirements.

DISADVANTAGES

There is unlimited personal liability; the owner is personally responsible for all business debts and liabilities. There is also limited access to capital, as the business relies on the owner’s resources.

TAX ADVANTAGES

The business income is taxed at the individual’s marginal tax rate, allowing for potential tax savings in certain scenarios.

APPROXIMATE COSTS

The cost of creating a sole proprietorship is minimal, usually consisting of business registration fees (varies by province) and any necessary business licenses.

II. PARTNERSHIP

A partnership is formed when two or more individuals or entities agree to carry on a business together, sharing profits and losses based on their agreed-upon partnership agreement.

 

ADVANTAGES

It’s relatively simple and cost-effective to set up compared to corporations. There are shared responsibilities and resources among partners.

 

DISADVANTAGES

There is unlimited personal liability for each partner. And partners may face conflicts if there is a lack of clarity in the partnership agreement.

 

TAX ADVANTAGES

It has pass-through taxation which allows partners to report business income on their individual tax returns, potentially leading to lower overall tax rates.

 

APPROXIMATE COSTS

The cost of creating a partnership typically involves registration fees and legal expenses to draft a partnership agreement, which can vary depending on the complexity of the arrangement.

III. CORPORATION

A corporation is a legal entity that exists separately from its owners (shareholders). It is formed by incorporating under federal or provincial laws.

ADVANTAGES

It has limited liability for shareholders, as their personal assets are generally protected from the company’s debts and liabilities. It’s also easier access to capital through the issuance of shares.

And it has a perpetual existence, even if shareholders change.

DISADVANTAGES

Unfortunately, it is more complex and costly to set up and maintain compared to other business structures. There is also increased regulatory and reporting requirements. They are subject to double taxation: Corporations are subject to corporate income tax, and shareholders also pay personal income tax on dividends received.

TAX ADVANTAGES

The ability to retain earnings within the corporation at a lower tax rate, known as the small business tax rate, can provide tax deferral benefits. Some tax planning opportunities for business owners to minimize overall tax liabilities.

APPROXIMATE COSTS

The cost of incorporating a corporation includes registration fees, legal fees for drafting the articles of incorporation, and ongoing annual maintenance costs.

IV. LIMITED LIABILITY PARTNERSHIP (LLP)

An LLP is a hybrid business structure that combines elements of a partnership and a corporation. It provides limited liability protection to its partners (similar to a corporation) while maintaining the flexibility of a partnership.

ADVANTAGES

It is a limited liability for partners, shielding personal assets from the partnership’s liabilities. It has pass-through taxation similar to a regular partnership.

DISADVANTAGES

It is more complex and expensive to set up compared to a regular partnership. And it is not available in all provinces in Canada.

TAX ADVANTAGES

Pass-through taxation allows partners to report business income on their individual tax returns.

APPROXIMATE COSTS

Creating an LLP involves registration fees and legal expenses for drafting the partnership agreement and LLP documentation.

V. COOPERATIVE (CO-OP)

A cooperative is a business owned and operated by its members, who pool resources to achieve common goals. Co-ops can be incorporated or unincorporated.

ADVANTAGES

There is democratic control, with each member having equal voting rights, regardless of their financial contribution. Members share in the profits and decision-making process. Cooperative principles emphasize community and social benefits.

DISADVANTAGES

It has limited access to external funding and capital compared to other business structures. Additionally, there are more complex governance structures due to member involvement.

TAX ADVANTAGES

Co-ops may be eligible for certain tax incentives or deductions, depending on their activities and objectives.

APPROXIMATE COSTS

The cost of creating a co-op includes registration fees and legal expenses for incorporating and drafting the necessary cooperative documents.

VI. CHOOSING A PROVINCE FOR INCORPORATION

Selecting the province to incorporate can influence your business in various ways, including tax rates, regulations, and access to resources. It is essential to consider these factors and consult with legal and financial professionals to make an informed decision.

VII. FOREIGN INVESTORS’ PREFERRED COMPANY TYPE

Foreign investors often choose to create a subsidiary of an existing foreign corporation or incorporate a Canadian subsidiary. This option provides the advantages of limited liability protection while leveraging the parent company’s existing resources, reputation, and expertise. Additionally, a Canadian subsidiary can benefit from tax incentives, grants, and government support available to Canadian companies.

CONCLUSION

When deciding on the type of company to create in Canada, it’s crucial to evaluate your business objectives, financial capabilities, and risk tolerance. Each business structure has its advantages and disadvantages, and the optimal choice will depend on your specific circumstances. Seeking professional advice and understanding the legal and tax implications can help you make an informed decision and set your business on a path to success in the Canadian market. Remember that the business landscape is constantly evolving, so staying up-to-date with the latest regulations and industry trends will be essential for long-term prosperity.

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WHAT IS PERMACULTURE?

Permaculture
Permaculture
Thursday, October 19, 2023 By Jessica Hernández Sales Assistant

In an increasingly developed world, the need arises to seek a balance between large industries and buildings, and the conservation of our natural environment with the animal and plant species that inhabit it. As a result, society has discovered alternative ways of life and construction that have as their axis the respect for Mother Nature and the rational and conscious use of the resources she provides us. One of these concepts is permaculture, which we will discuss below.

Meaning and origin of the term

The word is the result of a contraction: in the origin of permaculture it was applied to refer to “permanent agriculture”, but later it was extended to the concept of “permanent culture”. In addition, the term was first used by scientists David Holmgren and Bill Mollison in 1978. Since its inception, permaculture has been seen as a possible solution to the current environmental and social crisis. Thus, it ranges from sustainable agriculture to the construction of ecological and greenhouses, as well as a greater use of natural resources as an energy source (Aquae Fundación, 2021).

Permaculture zones

Elements of Permaculture

It is said that there are 2 types of permaculture; a rural one that contributes to better conservation of resources such as water and fertile soils in rural areas, and an urban one that is focused on the redesign of cities and their houses with the aim of generating a positive impact.

In turn, permaculture is just a concept that encompasses different branches such as ecological-environmental design, ecological engineering, construction, integrated water resource management, sustainable architecture, and agricultural systems.

Also, permaculture is based on 3 ethical principles:

    • Care of the earth: this principle seeks the conservation of soil, forests and green areas in general, as well as water.
    • Care of people: refers to the satisfaction of basic human needs using existing natural resources, always seeking individual and collective care.
    • Fair distribution of surpluses and capacities: surpluses are redistributed, so that waste must be properly recycled in order to be returned to the ecosystem again. It is also about sharing with future generations some of the wealth and resources that the planet is giving us in the present, setting limits to consumption and reproduction.

Permaculture also has 12 design principles:

    • Observe and interact
    • Capture and store energy
    • Obtain a yield
    • Applying self-regulation and accepting feedback
    • Use and value natural resources and services
    • Stop reproducing waste
    • Design patterns in detail
    • Integrate rather than segregate
    • Use slow solutions
    • Value diversity
    • Use the edges and value the marginal
    • Respond creatively to change

Zones

Permaculture follows the classification of zones as an intelligent way of organizing the human environment according to the regularity of its needs, the care of plants and animals. The most frequented zones throughout the day should be located in the zones close to the home, i.e. zones 1 and 2. Those that are visited somewhat less frequently in zones 3 to 5.

Zone 0

The house or home in the center. This is the starting point for the people who live here to save effort to reach the rest of the zones, in the same way covering their water needs and taking advantage of natural resources such as sunlight. This is an attempt to create a sustainable model where people can live and work. This zone is an informal designation since Bill Mollison does not define it in any of his books.

Zone 1

This is the area closest to the house. The elements that you want to establish in this zone should be those that need to be visited more frequently, such as vegetable gardens where there are plants that will be used daily, such as parsley, lettuce, strawberries, etc. You can also place an area for organic waste such as a compost bin.

Zone 2

This area is used to locate perennials that require somewhat less frequent maintenance than in zone 1. An occasional visit for weed control or pruning. Fruit trees, pumpkins, etc. can be located here. It is also an ideal place to place honeycombs or large compost bins.

Zone 3

The area where the main crops should be established as a business. After the establishment of this zone, it requires a minimum of maintenance such as irrigation and weed control thanks to mulching which is a cover that can be composed of straw, plant debris, or pine bark to protect the soil from the sun and prevent moisture from evaporating easily. Mulching will mean that you will only need to visit this area once or twice a week.

Zone 4

This zone should be a semi-wild forest area. It is intended for foraging, gathering wild food (such as mushrooms), and firewood.



Zone 5

Zone 5 should be a totally wild area with no human intervention except observation of nature and its cycles. This zone will help preserve bacteria, fungi, and insects that will help the above-mentioned zones (Ross, 2005).

Layers

    1. Layers are one of the tools used to design functional ecosystems that are sustainable and of direct benefit to humans.

      In general, there are seven recognized layers in a food forest:

      • tree canopy
      • understory layer
      • shrub layer
      • herbaceous layer
      • soil surface
      • rhizosphere
      • vertical layer

      Another concept used in permaculture is the so-called edge effect, which is the effect of juxtaposition of opposing environments within the same system. It is considered that it is precisely in the places where the opposites meet that intense productivity takes place (Aquae Fundación, 2021).

       

      Permaculture is shown as an alternative to the accelerated industrial life of cities, promoting the welfare of all its members. It recognizes community support instead of competition, promoting the harmonious existence of all living beings.

REFERENCES:

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WHAT IS A RESTRICTED ZONE TRUST?

By Edith Reyes – Student of Public Accounting and Finance at Universidad La Salle, she is currently a member of the Real Legal Research Center and the Legal Department of SIL MÉXICO.

Mexico is a great tourist attraction whose gastronomy, culture, traditions, and beaches stand out.  In recent years, the coastal area has become the preferred destination of residence for foreign tourists, captivated by the majestic views of the beaches. 

However, they face a big problem since it is not possible for them to acquire direct ownership of this land because it is a “Restricted Zone”, this does not mean that it is totally impossible for them to enjoy this as a residence since Mexican laws allow foreigners to acquire properties in this zone through a legal figure called restricted zone trust, but what is the restricted zone, what is the restricted zone trust, what is the restricted zone trust?

The restricted zone is the strip of one hundred kilometers along the borders and fifty kilometers along the beaches, which for no reason may foreigners acquire direct dominion over these lands and waters, as established in Article 27 of the Constitution, section I. 

Now, once the concept of restricted zone is understood, we can go deeper into the restricted zone trust, this is a legal figure, called a contract whose objective is that foreign persons may obtain the use or enjoyment of a real estate property located within what the law establishes as Restricted Zone.

This contract is made up of four essential figures which are:

  • The settlor: 

Understanding the settlor as the person who contributes to the real estate, i.e., the seller of the land (BBVA, 2020).

  • The fiduciary:

The fiduciary can be any credit institution authorized by law, which is going to acquire the domain (BBVA, 2020).

  • The trustee: 

This is the person who has the right to the use and enjoyment of this real estate, also known as the foreign buyer.(BBVA, 2020).

  • The trust property:

It is the real estate on which the trust is constituted.

In order for the trust to allow the use and enjoyment of the trust property, without constituting real rights over it, a permit from the Ministry of Foreign Affairs is required for the credit institutions to acquire as trustees, rights over real estate located within the restricted zone.

In order for these rights of use and exploitation to be granted, the trustees must be foreign individuals or legal entities, as provided in Article 11 of the Foreign Investment Law.

Article 12 of the Foreign Investment Law establishes that the term “use and utilization of real estate” refers to the rights of use or enjoyment of such real estate, including, if applicable, the obtaining of fruits, products, and, in general, any yield resulting from the operation and lucrative exploitation, through third parties or the fiduciary institution.

This figure regulated by Mexican regulations, which confers personal rights of use and enjoyment, represents a great opportunity for people of different nationalities whose objective is to reside or invest and enjoy the benefits that it generates, as long as it is carried out within the required legal framework. It is considered a great legal tool of acquisition since it allows the foreigner to enjoy this type of trust for an initial period of 50 years, extendable, which makes it without a doubt the ideal way to enjoy the wonderful views that the Mexican beaches offer in addition to entering an infinite horizon of gastronomic delicacies and incredible traditions that undoubtedly elevate lifestyle to the maximum.

 References::

  1. Cámara de Diputados del H. Congreso de la Unión. (1917). Constitución Política de los Estados Unidos Mexicanos. https://www.diputados.gob.mx/LeyesBiblio/pdf/CPEUM.pdf
  2. BBVA. (2020). Fideicomiso de Zona Restringida. https://www.bbva.mx/content/dam/public-web/mexico/documents/empresas/fideicomisos-bbva/zona-restringida/conceptos-basicos-fideicomiso-zona-restringida.pdf
  3. Cámara de Diputados del H. Congreso de la Unión. (1993). Ley de Inversión Extranjera. https://www.diputados.gob.mx/LeyesBiblio/pdf/44_150618.pdf



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WHAT IS THE IMPORTANCE OF REVERSION RIGHT IN TRUSTS?

SM-CI-2023-316

By Thorvald Pazos Casas – Law degree from the Universidad Regional del Sureste, is a postulant attorney in criminal, civil, agrarian, and tax matters, and is currently a research attorney and part of the Research Center of SILMEXICO.

Currently, one of the main and beneficial legal vehicles used to carry out large real estate projects and businesses is through trusts, within this attractive legal tool we can highlight the so-called right of reversion, however, what is it, how is it stipulated and what benefits does it provide?

According to the definition provided by BANCOMEXT, reversion is understood as; 

“Act by which the ownership of the assets or rights remaining in a trust at the time of its extinction is returned or retransferred to the original owner”.

The right of reversion refers to the power or right of the settlor to recover the assets contributed but not disposed of to the trust under certain conditions within a specific period of time, this right can be established at the time of the creation of the trust and is subject to the terms and conditions of the trust.

There are several types of reversion rights, among which the following stand out: 

    • TOTAL: Without conditions or reservations, in this case, the trustor exercises it and the trustee complies with the instruction.
    • CONDITIONED: Under certain conditions for the trustor to exercise this right. If you did not obtain the building permits within the first three months of the creation of the trust.
    • PROHIBITED: Due to the type of trust (in guarantee, in restricted zone, transfer of ownership) the parties agree that the settlor will NOT have this right.

How is the reversion right stipulated?

The stipulation of the right of reversion must be in writing and can be agreed upon at the time the trust contract is executed or subsequently by means of a trust amendment agreement.

At the time the contract or agreement is executed, this reservation must be identified in the clause referring to the patrimony, which will explain the manner in which the trustor may request the reversion of its assets or rights.

Legal basis.

It finds its nature in several legal ordinances, among which we highlight the following:

Fiscal Code of the Federation:

Article 14, section V. The contribution of the real estate made by the trustor will not be considered as alienation, as long as he/she reserves the right to reacquire the trust property from the trustee, either at the time of the execution of the contract or in a subsequent act.

At the moment this repurchase right is lost it is considered alienation, when a person decides to “reserve the right of reversion of the assets contributed to the trust”, he is simply agreeing that he has the power to request the trustee to return to him part or all of the assets that he previously transferred in property or rights.

If the return is partial and does not hinder the achievement of the trust’s objectives, the trust will remain in force. However, if the return, even if partial, makes it impossible to achieve said objectives, the trust will be extinguished, in accordance with the provisions of Article 392, Section II, of the General Law of Credit Instruments and Operations (LGTOC).

It is important to remember that, according to Article 381 of the LGTOC, the assets contributed to a trust must be destined to lawful and specific purposes (which must also be feasible, according to Article 1827, Section I, of the Civil Code of the Federal District, which applies in a supplementary manner in commercial matters). Therefore, if the return of assets, even in part, makes these purposes unattainable, the trust is extinguished.

Benefits of the right of reversion

    1. Control and Protection of the Settlor: The reversionary right allows the settlor to maintain essential control over the assets contributed to the trust. This is especially valuable when the settlor desires the ability to recover the assets in the event of specific circumstances, such as defaults, legal or economic changes, or any eventuality. 
    2. Tax Benefits: From a tax point of view, the right of reversion is essential. According to the Income Tax Law (ISR) and municipal legislation, as long as the trustor retains the reversion right, it is not considered that a disposal of assets has occurred. This implies that no taxes are immediately generated at the time of the contribution to the trust, which can be beneficial from a tax perspective.
    3. Flexibility: The right of reversion can be adapted to the specific needs of the settlor and changing circumstances. It can be established on a whole, conditional, or even prohibited basis, depending on the objectives and agreements between the parties involved. This provides flexibility in asset planning and management.

Therefore, the right of reversion mainly guarantees, controls, and protects the trustor against any eventuality, and as far as tax matters are concerned, the Income Tax Law (ISR) and some municipal legislations consider that the alienation of assets has not occurred as long as the right of reversion has not been lost.

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US – Corporation – What – Why – How

Monday, October 02, 2023, By Shannon Lam- Legal Assistant at SILMEXICO
Legal department

In the United States, there is a wide variety of types of corporations that can be created. These corporations pose opportunities for both entrepreneurs and foreign investors. The six types of corporations are sole proprietorships, partnerships, corporations, limited liability companies, S corporations, and C corporations.

I. SOLE PROPRIETORSHIP

Sole proprietorships are unincorporated businesses owned by a single individual. In a sole proprietorship, the owner retains complete control over the business and is responsible for any of its debts and obligations.

ADVANTAGES
One of its advantages is that it is simple to establish and operate. This is because they do not have to formally register their business. They are, however, required to register their business name and procure the proper licenses and permits.


DISADVANTAGES
Some of the disadvantages are that there is limited growth potential and personal liability. It is not uncommon for sole proprietors to struggle in the process of raising capital and scaling their business.

Since the owner is solely responsible for all of its debts, liabilities, etc., their personal assets are also at risk in the case that their business liabilities exceed what they are able to pay.

TAX ADVANTAGES
Though, one of the main perks of having a sole proprietorship is that you are only taxed on an individual level. This is called pass-
through taxation. The owner reports their profits on their individual income tax return and gets taxed at their individual tax rate while avoiding corporate income taxes, or double taxation.

APPROXIMATE COSTS
Generally, the costs of establishing a sole proprietorship are low. Fees typically consist of licensing and failing costs.

II. PARTNERSHIP

Partnerships are relationships between two or more persons conducting trade or business. These partners commit to sharing profits and losses, as well as contributing their personal assets and capital.

ADVANTAGES
The advantage of a partnership is that it is collaborative. Unlike a sole proprietorship, you are working alongside multiple partners,
and therefore have access to their network and expertise. With all of these individuals involved, there are expectations. Each partner typically signs an agreement that outlines their rights, responsibilities, and expectations in the partnership.

DISADVANTAGES
Working with multiple people can also have its disadvantages. In a partnership, similar to a sole proprietorship, there is unlimited
liability, and the partners are jointly liable. Additionally, there can be disagreements that arise when it comes to decision-making.

III. CORPORATIONS

A corporation is a legal entity, separate from its owners, that can be entered into contracts, incur debt and have its shareholders elect a board of directors to manage its business.

ADVANTAGES
Some advantages are that it has limited liability, meaning shareholders do not have to take on the burden of the businesses’ debts, and that they live on in perpetuity, meaning they can exist forever regardless of ownership changes.

DISADVANTAGES
The disadvantages are that they do get double taxed, so they have to pay both corporate income taxes and individual taxes based on the dividends that they receive, and they have to follow an abundance of formalities and regulations that have to be strictly followed.

TAX ADVANTAGES
Some of its tax advantages are that owners

IV. LIMITED LIABILITY COMPANY

A limited liability company, more popularly known as an LLC, is a business structure that consists of members as opposed to owners. There is no maximum to the number of members that an LLC can have. You might come across an LLC with a single member.

ADVANTAGES
Some of its advantages are that it has limited liability and flexible management. LLCs are able to be managed by their members or
elected managers.

DISADVANTAGES
The disadvantages are that its members may have to pay self-employment taxes on their share of profits and that they have to adhere to certain legal formalities.

TAX ADVANTAGES
Like sole proprietorships and partnerships, they also have pass-through taxation. LLCs can actually elect to be taxed as a corporation, partnership, or as part of the owner’s tax return. The decision of tax classification is usually done to benefit the members.

APPROXIMATE COSTS
LLCs are costly to form and maintain, in comparison to sole proprietorships and partnerships, with many of the same fees mentioned previously.

V. S CORPORATION

S corporations are corporations that have limited liability and additional tax benefits. Shareholders of S corporations report
income and losses on their personal tax returns, meaning their taxes are assessed at their individual income tax rates. To quality
to be an S corporation, you must meet the requirements as follows:
1. Be domestic
2. Have allowable shareholders (U.S. citizens and residents can be shareholders of an S corporation)
3. Does not exceed 100 shareholders
4. Have only one class of stock
5. Has to be an eligible corporation (cannot be insurance, domestic international sales, etc)

ADVANTAGES
Its advantages are that it’s a limited liability and, like corporations, members can classify themselves as employees to reduce self-employment taxes.

DISADVANTAGES
The disadvantages are its stock ownership restrictions and its cost of maintenance. It can only have one class of stock and no foreign ownership is permitted. The fees to create and maintain S corporations are high since you have to incorporate your business and pay the on-going administrative fees.

TAX ADVANTAGES
Luckily, S corporations have pass-through taxation.

APPROXIMATE COSTS
As mentioned earlier, forming and maintaining a S corporation can be costly.
Some costs include accounting, bookkeeping, filing, and administrative fees.

VI. C CORPORATION

C corporations are legal entities that are taxed separately from their owners. They are referred to as C corporations because they follow the regulations in Subchapter C of the Internal Revenue Code. They are different from S corporations in that they are required to pay both federal and state taxes.

ADVANTAGES
Their advantages are that it is a limited liability, it lives on in perpetuity, and raising funds is simpler with its unlimited shareholders. If they require any funding or capital, then they can sell their stock.

DISADVANTAGES
They are subject to double taxation, but they can reduce this by reinvesting their profits back into the business.

TAX ADVANTAGES
Alternatively, they have a flat rate of taxation and shareholders can identify as employees and take a salary, however, if they were to receive dividends then they would be taxed twice.

APPROXIMATE COSTS
Forming and maintaining a C corporation can be costly with many fees being similar to those of standard corporations.

VII. STATE-SPECIFIC BENEFITS

Now, forming a business in specific states can be more advantageous than others. Two states that hold many business benefits are Delaware and Nevada.


DELAWARE
Delaware is a popular state for incorporating corporations for a couple of reasons. Firstly, they offer a variety of corporate structures, which allows for some flexibility. Secondly, they value privacy. Shareholders are not required to disclose their names in public filings, unless they choose to do so. Thirdly, judges in Delaware are well-versed in business matters, since this is what they primarily deal with, and it allows for more consistency in legal proceedings.

NEVADA
Nevada is known for its favorable tax environment. They do not have state corporate taxes and their extensive asset protection laws can be attractive to companies with significant assets. Instead of corporate taxes on income, they tax corporations’ gross receipts. And like Delaware, they also value privacy and allow businesses to nominate officers and directors, which is helpful in the case that a business wants to maintain discretion.

VIII. WHAT TYPE OF COMPANY DO FOREIGN INVESTORS CHOOSE TO CREATE?

Most foreign investors choose to create LLCs in the United States. This is because of their liability protection, pass-through taxation, and operational flexibility. As a foreign investor, it is important that the business is straightforward and that the complexities are kept low so it can run as streamlined as possible. Because, unlike domestic investors, they will not always be familiar with that country's regulations and laws, and may not be able to handle erupting business issues in person.

References:
Business structures. Internal Revenue Service. (n.d.). https://www.irs.gov/businesses/small-
businesses-self-employed/business-structures
Crail, C. (2023, June 3). Why incorporate in Delaware? Benefits & Considerations. Forbes.
https://www.forbes.com/advisor/business/incorporating-in-
delaware/#:~:text=The%20most%20famous%20reason%20Delaware,not%20pay%20corporat
e%20income%20tax.
The Nevada Advantage. Nvsos.gov. (n.d.). https://www.nvsos.gov/sos/businesses/the-nevada-
advantage

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STUDY OF SOIL MECHANICS

Friday, September 29, 2023, By Jessica Hernández, Real estate advisor and marketing analyst in SILMÉXICO

In a previous post, we talked about soil classification and how important it is to identify them when planning a construction project. To do this, it is necessary to carry out a soil analysis, which will be discussed below. 

Soil analyses allow us to know the chemical, physical, and mechanical characteristics of the land where the work will be carried out, the layers or strata that make up the soil as well as its depth.

The study of soils or soil mechanics is made up of 3 stages:

1. Exploration and land testing

In this first stage, a reconnaissance of the site is carried out, strategic points are explored and soil samples are taken, which will be analyzed later in a second stage in the laboratory. These samples are taken through various techniques and tools such as:

    • Calicata: to make excavations of small or medium depth in chosen points of the ground. This seeks to have a direct view of the terrain that is generally not seen, for its characterization and analysis.
    • Penetrometer: consists of the penetration of the soil with the introduction of this tool into the ground, which generally has a conical shape.

Probes: Through these, the ground is drilled with a cylindrical probe that extracts the soil trapped inside the cylinder. As the samples are taken, they are placed in order of depth in boxes, to determine the type of soil at different depths.

2. Laboratory work

In this second stage, all the samples taken in stage 1 are taken to the laboratory for analysis. Laboratory tests will allow us to know issues such as humidity level, consistency limits, pressures, and sky components, among others.

3. Preparation of final report

The last stage consists of writing the final report of the study carried out, in which all the observations, results of the samples, and the characteristics of the land are detailed, whether it is suitable or not to carry out the construction project, it is delimited the amount of weight the soil can support, and recommendations on materials and construction are also issued.

 

Have you ever wondered why the Tower of Pisa is tilted? This was not precisely the design or the intention for this historical and tourist monument, the reason for its inclination is that at the beginning, the work was vertical, but over time it was inclined because it is located on unstable ground and does not have foundations to support the weight of its 56 meters high. That is why the study of soil mechanics is important, it allows the land to be prepared according to the structure that is intended to be built, which will determine whether or not it can deal with the passage of years, possible telluric movements, etc. Correctly carrying out this study can save lives, as well as preserve large and important buildings.

 

Interested in a soil study for your new project? At SILMÉXICO we have an expert construction team, in charge of carrying out all the relevant work prior to the start of a project. Come to us and get to know about all our services.