Legal Requirements for Opening a Representative Office in Mexico
Introduction
Establishing a representative office in Mexico is a strategic option for foreign companies that wish to explore the market, promote their products, or coordinate operations without directly engaging in commercial activities. However, even though a representative office is not considered a commercial entity under Mexican law, it must comply with several legal, fiscal, and administrative obligations.
This guide explains the legal framework, registration process, and key compliance requirements for setting up a representative office in Mexico, with reference to current regulations issued by the Secretaría de Economía, SAT, and Public Registry of Commerce (RPC).
1. What is a Representative Office in Mexico?
A representative office (oficina de representación) is a non-commercial extension of a foreign company established in Mexico. It acts as a liaison between the parent company and Mexican partners or clients, primarily conducting:
- Market research and analysis
- Public relations and promotional activities
- Coordination of regional operations
- Support and communication functions
According to Article 251 of the Ley General de Sociedades Mercantiles (LGSM), representative offices cannot engage in profit-making activities, sign contracts for commercial gain, or issue invoices in Mexico.
For companies interested in conducting business transactions or hiring local staff, it may be preferable to establish a subsidiary or branch. (See internal link: How to choose the ideal type of entity for your foreign company in Mexico).
2. Legal Framework
The establishment of representative offices in Mexico is governed by:
- Ley General de Sociedades Mercantiles (LGSM) – defines the forms of business entities and the possibility for foreign companies to have representation.
- Código de Comercio – regulates registration requirements for foreign entities in the Public Registry of Commerce.
- Ley del Impuesto Sobre la Renta (LISR) – defines permanent establishment rules, determining when a foreign presence is subject to taxation.
Although representative offices are not subject to income tax, they must avoid performing any activity that could be considered a “permanent establishment” (establecimiento permanente) under Article 2 of the LISR.
For additional context on compliance once your entity is registered, see: Key obligations for foreign companies newly constituted in Mexico.
3. Steps to Open a Representative Office in Mexico
Step 1: Draft and legalize corporate documents
The parent company must prepare and legalize the following documents:
- Certificate of incorporation and bylaws
- Board resolution authorizing the creation of the representative office in Mexico
- Appointment of a legal representative in Mexico
- Power of attorney, duly apostilled and translated into Spanish by a certified translator
(Reference: gob.mx)
Step 2: Register before the Ministry of Economy (Secretaría de Economía)
All foreign companies seeking to establish any type of presence in Mexico must register with the Registro Nacional de Inversiones Extranjeras (RNIE) within 40 business days of starting activities.
This process includes submitting corporate documents, proof of domicile in Mexico, and details of the company’s intended operations.
(Reference: economia.gob.mx)
Step 3: Registration in the Public Registry of Commerce (RPC)
Even if the representative office is not a legal entity, it must be recorded in the Public Registry of Commerce of the corresponding jurisdiction to formalize its local presence.
The legal representative in Mexico acts on behalf of the parent company and is authorized to receive notifications, sign non-commercial documents, and liaise with authorities.
(Reference: rppc.gob.mx)
Step 4: Obtain a Tax Identification Number (RFC)
The Servicio de Administración Tributaria (SAT) requires all foreign entities operating in Mexico, even for non-commercial purposes, to obtain an RFC (Registro Federal de Contribuyentes).
This allows the representative office to:
- Rent an office space
- Hire employees (administrative staff only)
- Comply with reporting obligations to the RNIE
For a detailed breakdown, see internal link: How to obtain the RFC and bank account for a new foreign company in Mexico.
(Reference: sat.gob.mx)
Step 5: Open a Corporate Bank Account (Optional)
Although not mandatory for all representative offices, many foreign companies choose to open a local bank account to handle operational expenses, payroll, or administrative payments.
To learn about the process, refer to internal link: How to obtain the RFC and bank account for a new foreign company in Mexico.
(Reference: commenda.io)
4. Tax and Employment Considerations
- A representative office must not generate income in Mexico. Any commercial activity could trigger tax obligations.
- The parent company remains fully responsible for the actions of the office.
- Salaries paid to local administrative employees must comply with Mexican labor laws and be registered with IMSS and INFONAVIT if applicable.
- If the office provides technical or advisory services, SAT may consider it a permanent establishment, making it taxable in Mexico.
To understand labor and outsourcing implications, see internal link: What services can be outsourced vs. in-house in Mexico.
5. Annual and Reporting Obligations
Representative offices must comply with:
- Annual update before the RNIE, reporting operational status and assets in Mexico.
- Address or representative changes must be reported within 40 business days.
- Accounting and payroll records (if applicable) must be maintained locally.
- Tax filings may be required for employee withholdings or administrative expenses.
(Reference: rnie.economia.gob.mx)
6. Duration and Termination of Operations
The parent company may close the representative office at any time by submitting a formal notice to the Ministry of Economy and Public Registry of Commerce, along with a declaration that no taxable activities have been conducted.
All local contracts (lease, payroll, utilities) must be terminated, and the RFC should be cancelled with SAT.
For related processes, see internal link: Steps to close or liquidate a company in Mexico correctly
7. Common Mistakes to Avoid
- Conducting commercial activities without formal incorporation (this violates Article 2 of the LISR).
- Failing to register with the RNIE within the 40-day period.
- Not apostilling or translating foreign documents properly.
- Omitting tax registration (RFC), which may prevent contractual or administrative actions.
8. Advantages of Opening a Representative Office
- Legal low-cost entry into the Mexican market
- Ability to study market conditions before full expansion
- Simplified accounting and reporting requirements
- No corporate tax obligations if activities remain non-commercial
For long-term investment strategies, see internal link: Advantages of nearshoring for North American companies in Mexico.
External References
- IMPI and Ministry of Economy – Foreign Investment Procedures
- SAT – Registro Federal de Contribuyentes (RFC)
- Registro Nacional de Inversiones Extranjeras (RNIE)
- World Bank – Doing Business in Mexico
Conclusion
Opening a representative office in Mexico is a strategic way to establish a legal and administrative presence while maintaining operational flexibility and avoiding immediate tax exposure. Nonetheless, compliance with registration, tax, and labor obligations is crucial to prevent future legal complications.
For companies planning a gradual market entry, this structure provides the ideal framework to evaluate the Mexican market before committing to a full subsidiary or branch.
