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Foreign Digital Platforms, Mexican Income Tax and Value Added Tax

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Mario Alfredo Zaldivar Sánchez

Mario Alfredo Zaldivar Sánchez

Mexico Start-up Business Expert, Taxes, Auditing, Accounting on the Cloud, Outsourcing, Expats, Training for business

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Foreign Digital Platforms, Mexican Income Tax and Value Added Tax

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As of June 1, 2020, Mexicans are required to pay the tax established in the “income regime for the sale of goods or the provision of services through the internet, through technological platforms, computer applications and a like”.

Among these businesses activities are included: download or access images, movies, text, information, video, audio, music, games, multimedia content, multiplayer environments, mobile ringtones, online news viewing, traffic information, forecasts meteorological and statistical, those of intermediation between third parties that are bidders of goods or services and the plaintiffs of the same, online clubs, appointment pages, distance learning and test exercises.

The tax will be paid by means of withholding to be made by legal entities resident in Mexico or residents abroad with or without permanent establishment in the country, as well as foreign entities or legal entities that provide, directly or indirectly, the use of technological platforms and computer applications.

INCOME TAX

Income tax withholding will be made from the total income that individuals receives through such means, the rates are as follow:

  • Between 2% and 8% in ground transportation services and shipping of goods
  • Between 2% and 10%, depending on income, for hosting/hotel services such as Airbnb
  • Between 0.4% and 5.4% for sale of goods and services such as Amazon.

SALES TAX

VAT withholding

  • 16% value added tax on all purchase transactions.

Obligations that foreign companies without establishment in Mexico:

  • Enroll in the Federal Taxpayer Registry (RFC) within 30 calendar days from the date digital services are first provided
  • Get the certificate electronic signature for taxes
  • The platforms when making the withholding of the income tax will have to inform the IRS
  • Withhold both the value added tax and income tax, and pay them to the IRS
  • Report on the number of services or operations carried out in each calendar month with the receivers located in national territory that receive their services
  • Classify the invoiced income by type of services or operations, and the number of service recipients, considering the corresponding 16% VAT
  • To send electronically the vouchers corresponding to the payment, including the VAT, must meet the requirements that allow the identification of the service providers and the recipients of these to designate a legal representative
  • Provide an address in national territory for the purposes of notification and monitoring of compliance with tax obligations
  • The Tax Administration Service (SAT) will publish on its website a list of digital platforms registered as a resident abroad
  • In case of not appearing in the list of foreigners who provide services on digital platforms, the operation will have to be taxed by the recipients of the service as import, with 20% withholding income tax and 16% sales tax
  • Taxpayers who register with the Mexican Tax ID (RFC) from the 1st. June they must designate a legal representative and provide an address in national territory

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