Mexico VAT

Value added tax (VAT) is known as Impuesto al Valor Agregado (IVA) in Mexico. As in other countries and regions with VAT systems, it is a consumption tax levied on the value of goods and services at each stage of production and distribution.

VAT was introduced in Mexico in 1980. The standard rate of VAT in Mexico is currently set at 16%. There’s also a reduced rate of 8%. See below for more on VAT rates.

In Mexico, VAT is administered by the Ministry of Public Finance and Credit based in Mexico City.

A number of goods and services are exempt from VAT in Mexico. These include residential land and buildings, and construction services such as hydraulic, sanitary, electrical, and metal installations for residential use (depending on compliance with certain reporting requirements).

Publications such as books, newspapers, and magazines are also exempt, as well as lottery and gambling tickets, securities transactions, and goods produced by charitable organisations.

Public and private educational services are exempt in Mexico. Urban, suburban, and metropolitan area public land transportation is also exempt (not including services offered through digital platforms), as are services by charitable entities, certain types of insurance, and certain types of interest payments.

There is no threshold for registering for VAT in Mexico. Businesses that supply taxable services or goods in the country must register for Mexican VAT.

This includes foreign companies with a permanent establishment (PE). Foreign companies without a PE may not register as a non-resident trader, and cannot reclaim Mexican VAT.

Once registered, a business will receive a VAT registration number that establishes them in the Mexican tax system as a legal business. Overseas businesses will need to appoint a local tax representative.

VAT returns, detailing sales and purchases, must be submitted on a monthly basis. Returns must be filed by the 17th of the month following the period end, and any tax due paid by this date too.

Returns are filed electronically only.

VAT credits may be rolled over into future months, but may also be credited back.

Annual returns also must be submitted. In addition, monthly purchase listings must be submitted (Declaración Informativa de Operaciones con terceros).

Foreign residents, whether they have a PE or not, providing digital services in Mexico must register with the Mexican tax authorities and get a Mexican tax ID.

They must calculate and collect VAT due on their services and remit to the authorities every month. Digital services in Mexico include:

• Downloading images, film, text, information, audio, video, music, games, and other such content

• Mediation between third parties regarding the offer of digital goods or services

• Online clubs, online dating sites, and online learning

  
  

Foreign residents providing digital services in Mexico must register a Mexican legal representative.

When issuing invoices, companies must include the following information:

• Name, address, and tax ID number of the supplier

• Date and place of issue

• Description (including quantities) of products or services

• Customer details

• Details of customer documentation for imports

• Pricing and VAT details

• Central Bank of Mexico exchange rate if in a foreign currency

  
  

Credit notes, to revert claimed VAT, must contain all of the same information.

Tourists visiting Mexico can claim back a portion of their VAT with Mexico’s refund scheme.

The following conditions must be met:

• The claimant is a non-resident of Mexico, typically on a tourist visa

• The claimant will take their purchased goods back home with them

• The purchase must be at least MXN 1,200 and must be made with a credit or debit card