When talking about international operations, overseas structures, or investments outside of Mexico, there's a key concept that often goes unnoticed but can have very serious tax implications: REFIPRES. In this article, I explain what they are, how to identify them, and what to do if you're operating with one.

What does REFIPRE mean?

REFIPRE is the abbreviation for Preferential Tax Regime, and refers to those countries or tax systems abroad where it is paid very little or almost no income taxThe Income Tax Law (article 176) establishes that a regime is considered preferential when it is paid less than the 75% of the ISR that would correspond in Mexico for the same income.

It's not just about the typical "tax havens," like the Cayman Islands or Belize. You can also apply to special regimes within well-known countries, such as certain areas in the United Arab Emirates, or even certain legal structures in the United States (such as an LLC in Delaware that doesn't pay taxes because it's a transit tax).

Why does the SAT care about this?

Because if a Mexican (individual or legal entity) earns money through a company, partnership, trust or other entity located in a REFIPRE, the SAT can force him to pay taxes in Mexico on that income, even if you haven't received them yet.

This is because Mexican law seeks to prevent taxpayers from using these countries to defer paying income tax or hide income. That's why there is a rule that These earnings must be accumulated in Mexico as if they had already been collected.

How do you know if you are operating with a REFIPRE?

There is no official list published by the SAT. In reality, you or your accountant should perform an analysis comparing how much income tax you would pay in that country versus what you would pay in Mexico. If the tax is less than 75%, then you are in a REFIPRE (Taxpayer Refund Policy), and tax obligations are triggered.

Also, if you have control or significant participation in a foreign entity, and it operates in a REFIPRE, the rule may also apply even if you have not received profits or dividends.

What happens if you have a company in a REFIPRE?

You have several important tax obligations:

• Keep separate accounting for income from REFIPRES.
• Accumulate that income in your annual tax return in Mexico, even if you haven't received it.
• Submit additional information returns.
• Adequately document the business purpose of the structure (Article 5-A of the Tax Code).
• Apply transfer pricing rules if there are transactions with related parties.

If you fail to comply, the SAT may reject deductions, presume fictitious income, and apply fines.

Which structures usually fall under REFIPRES?

Some common examples:

• Companies incorporated in Belize, Cayman Islands, United Arab Emirates, BVI, Panama or Andorra.
• Foreign trusts or foundations that accumulate income without paying it out.
• LLCs in the United States that do not pay taxes in that country or in Mexico.
• Digital platforms or services where income remains in a foreign entity with a low tax burden.

Care should also be taken with instruments such as SAFE (Simple Agreement for Future Equity), which if signed with entities in REFIPRES, must be analyzed in great detail to avoid tax risks.

Example of a common scheme with REFIPRE: alert for Mexican companies

One of the schemes that the SAT reviews the most occurs when a Mexican company provides services in national territory, but payments for those services They are not received directly in Mexico, but are diverted through a foreign company located in a REFIPRE.

Then, that money is repatriation to Mexico in the form of:

• Capital contributions
• Intercompany loans
• SAFE agreements (simple investment agreements)
• Purchase of shares
• Other financial instruments

This type of structure often lacks real economic substance and generates a high fiscal risk, since it can be interpreted as a simulation to avoid paying taxes in Mexico.

Conclusion

Using entities or structures in low-tax countries may seem attractive, but if not managed properly, they can result in fines, surcharges, and even extensive tax audits. Holding income abroad is not illegal, but must be done with knowledge and compliance.

If you have any doubts about whether you are operating under a REFIPRE or want to regularize your situation, it's best to review the case with an advisor specializing in international taxation. Tax ID Mexico We help individuals and corporations evaluate their structures and comply with all Mexican tax obligations.

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