Haynes and Boone, LLP
  February 13, 2013 - Mexico

The Infrastructure and Real Estate Trust in Mexico (FIBRA)
  by Luis F. Moreno Trevino, Julio Planas Vidal

After several years of legislative effort in Mexico, particularly in the area of tax, a structure has been established that now makes it attractive for companies to issue, and investors to acquire, securities based on a beneficial interest in an Infrastructure and Real Estate Trust (known by its Spanish acronym “FIBRA”).


FIBRAs are modeled after investment vehicles used in other countries that have worked very effectively, such as the Real Estate Investment Trusts or “REITS” used in the United States. These types of instruments have enabled investors to participate in large real estate projects, with good returns, a favorable tax regime, and low risk.


FIBRAs are trusts whose purpose is to issue investment type securities (i.e., Certificados de Participación Inmobiliarios, or “CPIs”) and raise funds from their placement at the domestic and international capital markets, with the purpose of financing, acquiring and/or developing real estate projects, which may be of an industrial, commercial, residential, and/or hospitality related type. Upon those real estate projects being acquired and/or developed, the trust leases and/or grants any rights of use over the underlying assets, and distributes the income obtained as earnings amongst the owners of the CPIs, that is, the CPIs grant to their holders the right to the revenue stream that may derive from all lease/use payments. The placement of the CPIs by the FIBRA at the Mexican Stock Exchange (or international capital markets) will be backed up by the real estate portfolio comprising the trust assets (along with any lease rights and or funds destined for the financing of the acquisition and/or development of real estate projects). Holders of CPIs will also be able to trade them on the secondary market and earn profit from price fluctuations in the CPIs.


Because of being a-tax driven vehicle, the Mexican income tax law provides the following requirements for aFIBRA to enjoy its preferential tax treatments:

(i) at least 70 percent of the trust underlying assets need be invested in the acquisition, development, financing and leasing of real estate properties, and the balance need to be invested in securities issued by the Federal Government, or in shares of debt-instrument mutual funds,

(ii) real estate properties that are acquired or developed must be leased (i.e., generate income) and held for at least four (4) years by the trust, upon their acquisition or development,

(iii) CPIs are issued for their public or private placement at the domestic and/or international markets (if private, the CPIs need to be acquired by a group of at least 10 investors not related to each other; and none of the investors may own more than 20 percent of the total number of CPIs issued), and

(iv) at least once a year, no later than March 15, the trustee of the FIBRA must distribute 95 percent of the FIBRA’s prior-year-end profits (i.e., taxable income) to the CPIs holders.


In the past, there were inconsistencies in the Mexican tax rules that prevented the FIBRA from being an attractive investment vehicle. These drawbacks have now been eliminated by amending certain provisions of the laws governing the Entrepreneurial Fixed Rate Tax, or IETU, and the Income Tax, or ISR. As a result, once a FIBRA has met the relevant requirements, it will offer various tax benefits, among them:

(i) The deferral of ISR and IETU payments on contributions of real estate into the FIBRA, until the earlier of: (a) the CPIs being sold by their holders; or (b) the trustee selling the properties (after a 4-year term has expired). This benefit allows the person contributing the real estate assets to theFIBRA to transfer them at their commercial value, while raising funds from the public at large by distributing that value through the issuance of CPIs.

(ii) An exemption from having to make provisional monthly payments of ISR and IETU with the obligation by the FIBRA to distribute at least once a year the profits (i.e., taxable income) that will be levied with the ISR. These profits will not cause IETU.

(iii) To perform sale and leaseback transactions with the FIBRA, without paying ISR, until the earlier of (a) the expiration of the lease agreement (limited to a maximum 10-year lease term), or (b) the trustee under the FIBRA sells the real estate properties. This alternative will allow the person contributing already depreciated real estate assets to raise funds from the public at large, while at the same time to generate deductions for their lease payments for purposes of ISR.

(iv) Exemption on payment of ISR and IETU for any income generated by the CPIs, if acquired by foreign pension and retirement funds.

(v) Exemption on payment of IETU on any income obtained by selling the CPIs through the Mexican stock exchange market. For the case of the ISR, the exemption of the sale through the Mexican stock exchange market will depend on the nature of the holder of the CPI (foreign investors, and individuals residing in Mexico).

(vi) The possibility to defer payment of the local real estate acquisition tax, if the local tax code where the real estate asset is located so permits such deferral (i.e., Mexico City).


On another front, the National Commission for the Pension System, CONSAR, amended a series of provisions to their laws to allow investment by pension fund administrators, AFORES, in structured instruments such as those issued by FIBRAs, as well as an exemption in payment of the ISR for domestic private pension and retirement funds for employees, which are established by employers (capped at 10 percent of the fund).


With these reforms, FIBRAs and securities that represent a beneficial interest in FIBRAs, create a vehicle that is invigorating the real estate market in Mexico and offer investors like pension funds, investment funds, and foreign and domestic investors in general, a new and attractive investment alternative.

For more information, please contact:

Luis F. Moreno Trevino
52.55.5249.1821
[email protected]

Julio Planas Vidal
52.55.5249.1852
[email protected]




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