In a Mexican SOFOM, a Compliance Failure Is a Tax Event

A note on quotations. Every provision that decides something in this guide is quoted in the original Spanish. That is deliberate: the Spanish text is what your Mexican counsel, notary or tax adviser can check. The English around it is our reading.

Lending in Mexico requires no authorization. That is where the misreading starts.

A foreign investor looking to deploy credit in Mexico soon finds a sentence that appears to settle everything. It is the first paragraph of article 87-B of the Ley General de Organizaciones y Actividades Auxiliares del Crédito (LGOAAC):

"El otorgamiento de crédito, así como la celebración de arrendamiento financiero o factoraje financiero podrán realizarse en forma habitual y profesional por cualquier persona sin necesidad de requerir autorización del Gobierno Federal para ello."

Granting credit, financial leasing and factoring may be carried out habitually and professionally by any person, without needing authorization from the Federal Government. That is accurate and it is literal. No banking licence, no application, no years of process.

From there to concluding that the SOFOM is a light vehicle with few obligations and built-in tax advantages is a short step. It is the step worth not taking, and this guide explains why.

Only a company with a current registration is a SOFOM

The second paragraph of the same article is the one almost nobody reads as carefully as the first:

"Para todos los efectos legales, solamente se considerará como sociedad financiera de objeto múltiple a la sociedad anónima que cuente con un registro vigente ante la Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros, para lo cual deberán ajustarse a los requisitos siguientes:"

For all legal purposes, only a sociedad anónima holding a current registration with the national commission for the protection of users of financial services counts as a SOFOM. Five requirements follow, quoted here in full:

"I. Deberán contemplar expresamente como objeto social principal la realización habitual y profesional de una o más de las actividades de otorgamiento de crédito, arrendamiento financiero o factoraje financiero; II. En forma complementaria a las actividades mencionadas, podrán considerar como parte de su objeto social principal, la administración de cualquier tipo de cartera crediticia, así como otorgar en arrendamiento bienes muebles o inmuebles, siempre que así se encuentre contemplado en sus estatutos, en cuyo caso se considerarán como ingresos provenientes de su objeto principal, los ingresos, documentos o cuentas por cobrar que deriven de dichas actividades en tanto éstos no excedan del treinta por ciento del total de los ingresos de la sociedad; III. Deberán agregar a su denominación social la expresión "sociedad financiera de objeto múltiple" o su acrónimo "SOFOM", seguido de las palabras "entidad regulada" o su abreviatura "E.R." o "entidad no regulada" o su abreviatura "E.N.R", según corresponda; IV. Deberán contar con el dictamen técnico favorable vigente a que se refiere el artículo 87-P de la presente Ley, tratándose de sociedades financieras de objeto múltiple no reguladas, y V. Los demás que establezca la Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros mediante disposiciones de carácter general."

Note the word that appears twice. Vigente. Current registration. Current favourable technical opinion.

And note what the statute actually says, which is not that the company loses benefits. It says that only a company meeting those conditions is considered a SOFOM at all, for all legal purposes.

This is not an operating requirement. It is a condition of the figure's legal existence.

What hangs from it: four tax regimes, one threshold

The reason a SOFOM appears in international structures is not regulatory. It is fiscal, and it rests on a definition.

Article 7 of the Ley del Impuesto sobre la Renta (LISR) lists the entities that make up the financial system for income tax purposes. It includes SOFOMES only where the receivables arising from the activities that must constitute their principal corporate purpose represent at least 70% of total assets, or where the income from those activities represents at least 70% of total income. Excluded from the calculation are assets or income deriving from credit sales of the company's own goods or services, from credit card sales, and from third-party financing.

Four distinct consequences, across three statutes, depend on clearing that threshold.

First, VAT on interest. Article 15, fracción X, inciso b) of the Ley del Impuesto al Valor Agregado (LIVA) exempts interest received or paid by "las sociedades financieras de objeto múltiple que para los efectos del impuesto sobre la renta formen parte del sistema financiero" on lending, factoring and discount.

Read that slowly: a VAT exemption conditioned on an income tax test. For a lending business, VAT on interest is not a detail. It consumes the spread.

Second, thin capitalisation. Article 28, fracción XXVII of the LISR denies deduction of interest on debts with foreign related parties exceeding three times equity. But:

"No se incluirán dentro de las deudas que devengan intereses a cargo del contribuyente para el cálculo del monto en exceso de ellas al triple de su capital contable, las contraídas por los integrantes del sistema financiero en la realización de las operaciones propias de su objeto…"

Third, the limit on deducting net interest. Fracción XXXII of the same article denies deduction of net interest exceeding 30% of adjusted taxable profit, and applies only where accrued interest exceeds twenty million pesos, an amount shared across the group. Its carve-out:

"Lo señalado en esta fracción no será aplicable a las empresas productivas del Estado, ni a los integrantes del sistema financiero en la realización de las operaciones propias de su objeto."

Fourth, withholding on interest paid abroad. Article 166, fracción II, inciso a) of the LISR sets a rate of 4.9% on interest arising from, among others, "préstamos u otros créditos a cargo de instituciones de crédito, sociedades financieras de objeto múltiple que para los efectos de esta Ley formen parte del sistema financiero o de organizaciones auxiliares de crédito".

Note the preposition: a cargo de, owed by. Debts of the SOFOM. That is the case of a vehicle funded with credit from abroad, which is how nearly all of them are funded.

Four regimes. One threshold. And that threshold sits inside a definition which itself presupposes that the company is a SOFOM, which returns us to the current registration.

The 30% and the 70% are the same line, written in two statutes

Return to fracción II of article 87-B. It allows income from administering loan portfolios and from leasing assets to count as principal-purpose income only insofar as it does not exceed thirty per cent of the company's total income.

And article 7 of the LISR requires principal-purpose income to represent at least seventy per cent of total income.

Thirty plus seventy.

These two provisions draw the same line from two different statutes, with two different consequences. Exceeding 30% in complementary activities means simultaneously losing the ability to count them as principal purpose under the financial statute, and falling below 70% under the tax statute. A single drift in the revenue mix breaks both at once.

We describe this because it is in the texts. We do not attribute intent to the legislature: we have read nothing confirming the overlap is deliberate.

For whoever runs the company, the practical consequence is that revenue mix is not an accounting matter. It is a variable to be watched as seriously as non-performing loans.

Who you lend to sets the rate

This is where the structure is won or lost, and the difference runs to double digits.

The clean case

The SOFOM lends to third parties, funds itself with credit from abroad, and the foreign lender is not a related party. The requirements of article 166 are met. Domestic withholding on the interest the SOFOM pays abroad is 4.9%.

Where that holds, the treaty is not even needed: the ceiling it would set sits above the rate already applying.

The related-party case

The same article 166 contains a limitation that switches the benefit off:

"Las tasas establecidas en las fracciones I y II de este artículo, no serán aplicables si los beneficiarios efectivos, ya sea directa o indirectamente, en forma individual o conjuntamente con personas relacionadas, perciben más del 5% de los intereses y son: 1. Accionistas de más del 10% de las acciones con derecho a voto del deudor, directa o indirectamente, en forma individual o conjuntamente con personas relacionadas, o 2. Personas morales que en más del 20% de sus acciones son propiedad del deudor, directa o indirectamente, en forma individual o conjuntamente con personas relacionadas."

And it defines, for that purpose, its own broad concept:

"Para estos efectos se consideran personas relacionadas cuando una de ellas posea interés en los negocios de la otra, existan intereses comunes entre ambas, o bien, una tercera persona tenga interés en los negocios o bienes de aquéllas."

Three points a quick reading misses.

The limitation switches off fracciones I and II, not only the second. The 4.9% falls and so does the 10%. The payment goes to the residual in fracción V, which refers to the maximum rate of the tariff in article 152 of the same statute: 35%.

Both elements of each numeral are required together. Receiving more than 5% of the interest and the corresponding shareholding.

And this article's definition of related persons is its own. It is not the transfer pricing definition. It is enough that one holds an interest in the other's business.

Where the lender sits

If the limitation bites and domestic withholding rises to 35%, the treaty then matters, because it sets a ceiling.

Article 11 of the Convention between Mexico and the United States of America, paragraph 2, caps source taxation at:

"a) 4.9 por ciento del importe bruto de los intereses provenientes de: (i) préstamos otorgados por bancos, incluyendo los bancos de inversión y de ahorro, e instituciones de seguros; (ii) bonos u otros títulos de crédito que se negocien regular y sustancialmente en un mercado de valores reconocido; b) 10 por ciento del importe bruto de los intereses si el beneficiario efectivo no es una persona de las mencionadas en el inciso a) y los intereses son: (i) pagados por bancos, incluyendo los bancos de inversión y de ahorro; (ii) pagados por el adquirente de maquinaria y equipo al beneficiario efectivo que sea el enajenante de dichos bienes en una venta a crédito; y c) 15 por ciento del importe bruto de los intereses en los demás casos."

Article 11 of the Convention between Mexico and the Kingdom of Spain, in the text incorporating the Protocol signed in Madrid on 17 December 2015, caps at:

"a) 4,9 por ciento del importe bruto de los intereses en el caso de intereses pagados por un préstamo de cualquier clase, concedido por un banco o cualquier otra institución financiera, incluyendo bancos de inversión y bancos de ahorro, y compañías de seguros, así como los intereses pagados sobre bonos y otros títulos de crédito que se negocien regular y substancialmente en un mercado de valores reconocido; b) 10 por ciento del monto bruto de los intereses en todos los demás casos."

Two differences, both in the text.

The residual. Spain caps at 10% in all other cases. The United States caps at 15%. Five points on every coupon.

And the 4.9% limb is drafted more broadly in the Spanish convention. The United States reserves it to loans granted by banks and insurance institutions. Spain extends it to loans granted by a bank or any other financial institution.

A third consequence follows, and it is worth reading slowly. The 10% limb of the United States convention requires, beyond the beneficial owner not being a bank or insurer, that the interest be paid by banks. A SOFOM is not a bank. So a United States lender that is neither bank nor insurer, lending to a SOFOM, does not fall in limb b) and goes to limb c): 15%. The same lender resident in Spain falls in limb b) of the Spanish convention: 10%.

Two warnings, both important.

A treaty does not create a rate. It caps taxation at source. Where the domestic provision already sits below the cap, the treaty adds nothing.

And these caps are subject to beneficial ownership analysis and to the effects of the Multilateral Instrument, which we do not analyse in this guide and which must be reviewed case by case before structuring anything.

If the SOFOM lives inside your group, the answer is the regulated one

Here the foreign investor's intuition points the wrong way.

The reform published in the Diario Oficial de la Federación on 12 November 2021 added to fracción XXVII of article 28 of the LISR a paragraph carving an exception out of the thin capitalisation carve-out:

"Lo dispuesto en el párrafo anterior no será aplicable tratándose de sociedades financieras de objeto múltiple no reguladas, que para la consecución de su objeto social, realicen actividades preponderantemente con sus partes relacionadas nacionales o extranjeras."

That is: an unregulated SOFOM lending mainly to its own group lost the protection. One lending to third parties keeps it, and whether it is regulated or not makes no difference there.

And the exception expressly targets the unregulated entity. The regulated one is not within its terms.

What makes that reading actionable is that regulated status is not merely a consequence of having a bank in the group. It is an election. Article 87-B of the LGOAAC lists among regulated SOFOMES "aquellas que obtengan la aprobación de la Comisión Nacional Bancaria y de Valores en términos del artículo 87-C Bis 1 de esta Ley, para ajustarse al régimen de entidad regulada", which then places them under that Commission's supervision.

So an investor who arrives convinced that "unregulated" is always the simple, cheap route, and who plans to finance his own Mexican group, faces a calculation he almost never makes: accepting supervision in exchange for keeping the deduction on the interest he will pay every month.

Which is better depends on the case. What does not depend on the case is that the question exists.

The chain: compliance holds the opinion, the opinion holds the registration, the registration holds the rate

Return to requirement IV of article 87-B, the current favourable technical opinion, and read the article it points to.

Article 87-P of the LGOAAC:

"Las sociedades financieras de objeto múltiple no reguladas deberán tramitar ante la Comisión Nacional Bancaria y de Valores, previo a su registro, la emisión de un dictamen técnico en materia de prevención, detección y reporte de actos, omisiones u operaciones que pudiesen ubicarse en los supuestos de los artículos 139, 148 Bis o 400 Bis del Código Penal Federal."

The application must include, among other things:

"b) La designación de aquellas estructuras internas que funcionarán como áreas de cumplimiento en la materia; c) Manifestación bajo protesta de decir verdad respecto de que cuentan con un sistema automatizado que coadyuve al cumplimiento de las medidas y procedimientos que se establezcan en las disposiciones de carácter general a que se refiere el artículo 95 Bis de la presente Ley…"

And the paragraph that closes this guide's argument:

"Para la renovación de dicho dictamen la Comisión Nacional Bancaria y de Valores considerará el cumplimiento que dichas sociedades den a lo dispuesto por el artículo 95 Bis de la presente Ley, así como a las disposiciones de carácter general que de éste deriven."

Article 95 Bis is the anti money laundering regime of the unregulated SOFOM. It requires measures and procedures for prevention and detection, reports to the Ministry of Finance through the Comisión Nacional Bancaria y de Valores, accounting records of every client transaction, retention of identification records for at least ten years, and immediate suspension of dealings with anyone on the confidential blocked persons list.

Now line the links up.

Compliance with article 95 Bis is what the Commission will weigh when renewing the technical opinion. A current opinion is a requirement of registration. A current registration is what makes the company a SOFOM for all legal purposes. Being a SOFOM that forms part of the financial system is what holds up the VAT exemption, the thin capitalisation carve-out, the 30% carve-out and the 4.9% rate.

From which follows the sentence that orders this guide. In a SOFOM, an anti money laundering compliance failure is a tax event.

Not reputationally, not indirectly. By chain of provisions, each link quoted above.

The corollary is the one almost no foreign investor hears in time. The compliance function and the automated system are not administrative overhead. They are what preserves the rate. And the automated system is declared under oath at the initial application, before registration, not when the operation matures and the budget allows.

One last detail of article 95 Bis connects to whoever signs. The general provisions must be observed by the company and also "por los miembros del consejo de administración, administradores, directivos, funcionarios, empleados, factores y apoderados respectivos", and the text states that the company and those individuals are responsible for strict compliance. The Commission's sanctions may be imposed on both.

What this guide does not tell you

No peso amounts. Article 95 Bis expresses fines in days of salary and, in one passage, in days of the general minimum wage in force in the Federal District, a reference predating the Unidad de Medida y Actualización. We do not convert those ranges into money, because we have not verified the applicable conversion or the current value.

No renewal period. Article 87-P does not say for how long the technical opinion is granted. It refers to general provisions of the Comisión Nacional Bancaria y de Valores that we have not read. If someone tells you it renews every so many years, ask for the source.

No tesis. We do not cite criteria of the Poder Judicial de la Federación that we have not read in the official source.

And no Multilateral Instrument or beneficial ownership analysis. The treaty caps quoted here are subject to both, and both are resolved case by case.

A note on currency. The LISR text we consulted carries a header amendment published on 1 April 2024, and the article 28 provisions cited carry markers of 18 November 2015, 9 December 2019 and 12 November 2021. The LIVA provision carries a 12 November 2021 marker. The LGOAAC carries a header of 14 November 2025, a procedural harmonisation reform, and its last substantive amendment was published on 26 March 2024. The Spanish convention is cited in the text incorporating the Protocol of 17 December 2015. Confirm every provision in the version in force on the day you rely on it.

Companion analysis

Does your SOFOM still hold the rate?

Tell us three things: whether the registration and the technical opinion are current, how the revenue mix splits between lending and complementary activities, and who funds the vehicle and from where. A lawyer will tell you which of the four regimes is exposed in your case and what to check before the next interest payment.

A lawyer replies within one business day. Sending this does not create an attorney-client relationship.