Legal questions to settle first

This is a map of what to ask, not legal advice. Every specific below must be confirmed with counsel in the country you are entering, against the text in force on the day you act. That is not a hedge. The expensive mistakes are made by companies that never knew which question to put.

Branch, subsidiary, or distributor with no local entity

Selling through a distributor without an entity is the lightest option: no payroll, no local tax filings, no statutory accounts. What it costs is control: in several markets the permission to sell attaches to the local party, not to you. For products in scope of Chile's Superintendency of Electricity and Fuels regime, UL Solutions states that the SEC certificate holder must be a local Chilean representative. If that holder is your distributor, replacing them means dealing with the certificate too.

A branch is the foreign company itself operating locally. In Mexico, Article 17 of the Foreign Investment Law requires foreign legal entities intending habitually to carry out acts of commerce in Mexico to obtain authorisation from the Ministry of Economy. Two general resolutions published in the Official Gazette on 25 March 2020 replace that authorisation with a filing for most foreign entities, and they have different scopes. One covers entities incorporated in a country with a free trade agreement with Mexico that contains an investment chapter, and it lists seventeen countries. The other covers entities from any WTO member that intend to supply a service, on the basis of national treatment under Article XVII of the GATS. Neither is an exemption that requires nothing: the entity files a sworn declaration through the Ministry of Economy's SAJIE portal, and the stamped acknowledgement with its folio number is what the Public Registry of Commerce accepts. Both resolutions were still cited as the legal basis on the ministry's current procedure sheets when we last checked in August 2026.

This distinction matters for a Danish company. Denmark is not on the free trade agreement list. A Danish entity establishing a branch to supply a service qualifies under the WTO resolution. A Danish entity establishing one to carry on habitual acts of commerce in goods falls outside both, and still needs the Article 17 authorisation, which carries a fee and a fifteen working day decision period with approval by positive silence. Most published summaries flatten the two resolutions into one and lose this. What a branch does not do is separate liability. The parent is directly exposed.

A subsidiary costs more to form and maintain and needs local officers and accounting. It contains liability, holds its own registrations, and can be sold or wound up.

Our position: a subsidiary in the country you have committed to, distributors everywhere you are still testing. A branch carries the administrative burden of a subsidiary with none of the separation, so it earns its place only where a regulated sector or procurement rule requires it.

Formation, tax registration, banking, in that order

The sequence is incorporation, tax registration, bank account, then hiring and invoicing. Each step depends on the last, so a delay anywhere moves the launch.

The step that slips is the bank. Formation timetables are predictable; bank onboarding is not. The bank is applying its own anti money laundering and know your customer policy to a foreign-owned company with no local trading history, and correspondent banking pressure has made banks more conservative, not less. Expect apostilled parent documents with certified translations, beneficial ownership traced to named individuals, and sometimes a legal representative appearing in person with a local tax number and resolved immigration status.

Two things follow. Settle the legal representative and residency question at incorporation, because that person is on the critical path for both tax registration and the bank. And ask counsel and the bank in writing what they need before you incorporate.

Sales people in country before you have an entity

This is the most common way a European company acquires a tax liability it did not budget for: hire a country manager on a European contract, let them take orders, defer the entity to next year.

In Mexico, the 2020 tax reform widened the permanent establishment rules for dependent agents. PwC's Worldwide Tax Summaries describes one arising where a person habitually carries out the principal role leading to the conclusion of contracts executed in the name of or on behalf of the non-resident, transferring rights or granting temporary use of property, or committing it to provide a service. An agent presenting as independent can still create one if they act exclusively or almost exclusively for related non-resident parties. Note what the test turns on: the role in reaching a signature, not formal signing authority.

The consequence is local tax on attributed profit, local filings, and exposure for years already closed in your accounts.

Our position: if someone in country is paid by you and sits closer to the order than to the brochure, treat the entity as a precondition of the hire. If the role is genuinely market research only, write down what they may not do and check it a quarter later.

Employment law, where European assumptions break

The assumption that breaks most often is that a role can simply be made redundant. Ending an employment relationship is harder to justify and more expensive than in Denmark, the Netherlands or Sweden, and it is settled rather than declared.

Mexico's Federal Labour Law sets out a closed list of causes for termination without liability: dishonesty, workplace violence, harassment, four unexcused absences in a thirty-day period and others. Where the cause is not on that list, Article 48 gives the worker the choice between reinstatement and an indemnification of three months' salary, together with back pay from the date of dismissal, which is capped at twelve months with interest running after that.

The twenty days per year of service that most summaries quote is not automatic. Article 50 pays it only where Article 49 relieves the employer of the duty to reinstate, which covers employees with under a year's service, positions of trust, domestic and casual work, and roles involving direct and permanent personal contact, or where the worker resigns with just cause under Article 52. Employers often pay it regardless, to close out the reinstatement risk, but budget it as a negotiating position rather than a statutory floor.

On top of either route sits the seniority premium in Article 162, twelve days of salary per year of service, payable whether or not the dismissal was justified. This is the one component that is capped. Article 486 fixes the daily wage used to calculate it at twice the general minimum wage for the geographic area where the work is performed, with a floor of one minimum wage under Article 485. The cap reaches the seniority premium only through the cross-reference in Article 162, so it does not apply to the three months or to the twenty days, which both use the integrated daily salary defined in Article 89. Reading the cap as a cap on severance generally is a common and expensive error.

In Chile, Article 163 of the Labour Code provides 30 days of the last monthly remuneration per year of service, capped at 330 days, which is 11 years, per the Dirección del Trabajo. Chile is also reducing the maximum ordinary week from 45 hours to 40 over five years: 44 hours from April 2024, 42 from 26 April 2026, 40 in 2028, per DLA Piper. Check shift patterns against the current step, not the end state.

Budget termination as a probable cost for your first three hires. Ask counsel what fixed-term or service arrangements exist and what the reclassification risk is. Colombia and Guatemala have their own arithmetic; do not carry a Mexican figure across a border.

Certification and labelling is a country obligation

There is no regional approval. Chile's SEC regime ties the certificate to a local holder while accepting testing from laboratories abroad under SEC-recognised mutual recognition agreements. In Colombia, INVIMA sanitary registration governs health-related categories, and the US Department of Commerce reported on 27 May 2025 that a new registration platform was rolling out in phases, beginning on 8 May 2025 with food and alcoholic beverages and reaching cosmetics, cleaning products and medical devices later. Mexico's NOMs are a separate regime.

Ask three questions per country and product: who may lawfully hold the certificate, whether foreign test data is accepted, and what happens to it if the holder is your distributor and you part company.

Register your trademarks before you appoint a partner

Mexico, Colombia, Chile and Guatemala are all first-to-file trademark jurisdictions, according to Corsearch. Use of a mark in Europe gives you nothing there. In Mexico the registry is IMPI.

The failure is specific. You brief four candidate distributors, share the brand and the literature, then find that one of them, or a third party watching the category, has filed your mark. Recovery is then a proceeding or a purchase. File in each target country before partner conversations begin, in the classes you will trade in, and have the agreement say the partner will not register your marks or anything confusingly similar.

Take this list to a lawyer in each country and ask what it is missing.

Common questions

Do I need a local entity to sell in Latin America?

Frequently not, for straightforward exporting. In every market we cover, a foreign company can sell to a local importer of record without incorporating. What an entity buys you is the ability to import in your own name, hold your own certifications and employ locally, and the point at which those become worth their compliance cost is the real question.

What is the right order for setting up in a Latin American market?

Formation, then tax registration, then banking, in that order, and expect the bank account to be the slowest step by a wide margin. Starting the sequence in parallel with commercial work rather than after it is what keeps an entry on schedule.

Does putting a salesperson in country create a tax liability?

It can. Every market we cover treats a dependent agent who habitually concludes contracts as creating a taxable presence, and using an employer of record does not change that, because the test looks at what the person does. A support or information role generally stays outside it.

When should I register my trademark in a new market?

Before you appoint a partner, not after. Mexico, and most of the region, operates first to file, so a distributor who registers your brand owns it there until successfully challenged. It is the cheapest insurance in the entire entry and it is the item most often skipped.