Mexico’s Ultimate Beneficial Owner framework: Challenges and opportunities from a global perspective
Francisco Vilchis Orea
Mexico
by Francisco Vilchis Orea
The strengthening of legal frameworks designed to enhance tax transparency has become a global trend, driven by international bodies such as the Financial Action Task Force (FATF) and the Organisation for Economic Co-operation and Development (OECD). In this context, Mexico formally introduced the concept of the Ultimate Beneficial Owner (UBO) for tax purposes in 2022 through reforms to its Federal Fiscal Code (FFC). These reforms aligned Mexico’s domestic legislation with international standards for combating money laundering, terrorist financing, and tax evasion.
The UBO is defined as the individual who ultimately owns or controls a company, a trust, or any other legal entity, either directly or indirectly. This person is not necessarily the one formally named in corporate documents, but rather the individual who truly exercises control or benefits from the entity’s assets.
The main purpose of identifying the UBO is to bring greater transparency to corporate structures. This measure aims to prevent individuals from hiding their ownership or control of entities to evade taxes, launder money, or finance illegal activities.
The legal provisions set forth in the FFC impose a binding obligation on all legal entities, trusts, and other legal vehicles operating in Mexico to identify, document, and maintain updated records of their UBOs. This legislative shift has prompted both domestic and foreign-affiliated entities to implement more robust compliance programmes, including internal manuals, periodic review processes, and internal policies for UBO identification.
By requiring updated reporting, the Mexican tax authority can identify without a court order who is behind each entity, enabling more efficient and equitable oversight.
Although this obligation has been in force since 2022, its impact has become more pronounced during fiscal year 2025 following the Mexican Supreme Court of Justice ruling upholding its constitutionality, and the release of the Mexican Tax Authority’s master audit and collection plan. Tax authorities have placed this obligation at the core of their audit priorities, creating a heightened compliance environment for business groups with an international presence in Mexico.
Non-compliance may result in penalties of up to MXN 2.2 million (USD 111,500) per unidentified UBO. This highlights the urgency for businesses to adopt strong document management systems and seek specialised legal counsel.
Transparency in corporate structures and ownership chains is no longer merely a matter of local compliance; it has become a strategic element affecting the credibility and long-term viability of companies operating globally.
The UBO framework serves as a bridge between corporate integrity commitments and cross-border regulatory requirements. Proper implementation of these controls not only mitigates fiscal risks, it also reinforces a company’s reputation for compliance in the eyes of investors, business partners, and foreign authorities.
Francisco Vilchis Orea, legal partner at AVP Assurance, is a graduate of the National Autonomous University of Mexico (UNAM), and holds a master’s degree in administrative and fiscal law from the Faculty of the National Bar Association. He has also completed diploma courses in tax Update and criminal tax defence. Contact Francisco.
XLNC member firm AVPMexico City, MexicoT: +52 55 2743 1687
