Mexico VAT on digital and e-services
Mexico imposed Value Added Tax on non-resident providers of electronic or digital services to consumer on 1 June 2020.
VAT is levied on both B2B and B2C transactions. The underlying supplier or the facilitating marketplace (intermediary) will be responsible for registering for VAT, charging and remitting the tax due.
Taxable digital services in Mexico
Income on the following electronic-based supplies is liable to VAT in Mexico:
- Download and streaming media, music or films etc;
- E-learning (automated);
- Online societies or clubs; and
- Dating sites
Note: electronic books and online news is exempted from VAT.
Determining the location of consumer
Providers are required to identify if the consumption of the service takes place in Mexico. It may use the following determinates from the consumer:
- Local telephone number
- Local IP address
- Payment is provided from Mexico
- Local marketplace or intermediary involved
VAT reporting for digital services
Mexico expects foreign providers or intermediaries (see below) to register with the tax authorities. They are obliged to appoint a locally resident fiscal representative through which filings are made. Filing of returns and transaction details are required on a monthly basis.
The e-service provider does not need to produce full VAT invoices. Instead, they issue VAT vouchers. This changes to full invoices from 2021.
Foreign intermediaries withholding VAT
Where foreign intermediaries, online marketplaces etc, facilitate the sale of non-resident providers’ e-services, they must withhold 50% of the VAT due. This requires the individual consumer to provide the intermediary with their Mexican tax code. Where this is not provided, the intermediary must withhold 100% of the VAT due on the transaction.
Foreign intermediaries have to report monthly on their service providers’ underlying transactions. They are responsible for issuing payment receipts to the consumers. There is a simplified intermediary reporting regime for those with incomes below MXN 300,000.
Income withholding tax
In addition to VAT, there is also income withholding rules on non-resident providers of digital and gig or sharing economy services. Foreign platforms facilitating services such as ride-sharing or house letting are obliged to withhold a proportion of the income due to a Mexico-resident provider of the service. Rates vary according to the type of service and the income of the provider.