This is a thought leadership article which looks at the new taxation and obligations of the digital economy in Mexico.

As of 2020, both the Income Tax Law (“IT”) and Value Added Law (“VAT” or IVA in Spanish.), were reformed, and new requirements were enacted. Thus, foreign digital service providers should be aware of the new requirement to collect VAT on the sale of certain goods and services in Mexico. The tax reform also would require income tax withholding on certain transactions with Mexican individuals.

As a brief background, a VAT rate of 16% is applicable in México to the final price of sale or disposal of goods and merchandise, the leasing of goods and services, the rendering of services and Imports of goods and services.  Exports are considered to be subject to a 0% tax rate.

It should be noted that the VAT is applied to operations but not to income earned, regardless of the person’s address or the manner in which the operation was performed. Furthermore, this tax is calculated for monthly periods rather than for annual periods, as for the IT.

As mentioned, the VAT Law, was modified and has established that the following activities are considered as services, to those that provide:

  • Perform, downloading or accessing images, movies, text, information, video, audio, music, games, including, gambling, as well as other multimedia content, multiplayer
  • Intermediation services between third parties offering goods or services and the persons demanding such goods or services.

environments, obtaining mobile ringtones, viewing online news, traffic information, weather forecasts and statistics.

As an exception, downloading or access to electronic books, newspapers and journals shall not be taxed.

As an exception, intermediation services for the disposal of used movable property shall not be taxed.

c)     Online club services and dating pages.

d)     Distance learning or "test", or exercises.

Additionally, the VAT Law considers that as resident in Mexico would be when:

  • The recipient manifests a domicile within Mexico.
  • The payment is made through a service or a financial service provider, in Mexico.
  • The IP address is in Mexico.
  • The recipient manifests a telephone number within Mexico.

Thus, for companies that do downloads, or online learning, into Mexico will have the following obligations as of June 1st 2020, as follows:

  • To register the company before the tax authorities for VAT purposes only. This process does not create a Permanent Establishment for Income tax purposes.
  • Provide the tax authorities with monthly information (on a trimester or quarterly basis), on every operation performed in Mexico.
  • Compute, and pay the 16% VAT on a Monthly, Cash Flow Basis.
  • Designate in Mexico:
    • Legal Representative, and
    • A Tax and Legal Domicile.
  •  Collect the VAT from the clients in Mexico as established by the Law.
  •   Issue the corresponding Digital Invoice, with the VAT indicated.
  • Obtain the electronic signature before the tax authorities.

Please note, that the tax/legal representative would have to disclose information related to the provider’s transactions with Mexican users/recipients of the digital services, including information related to the number of transactions and transaction amounts by type of service.

Failure to comply with these obligations, would prove to cease and block their business into Mexico.

Businesses should evaluate their systems to identify taxable transactions and reporting obligations. Registration with the authorities will begin June 1st 2020, and should be completed by June 30th 2020, for businesses with operations subject to the rules on June 1st 2020.

The Mexican members of PrimeGlobal are ready to assist any clients that your firm might have to comply with these new obligations.

Content by:

Artemio Ibarra Espino is the Director and President of Administración Empresarial y Organizacional, S.C., which is an independent member of PrimeGlobal. Administración Empresarial y Organizacional, S.C. is a well-recognized and respected international firm of professionals in the areas of public accounting, auditing, business consulting, and tax specialties. The firm began operations in October of 1989, (then, known as Ibarra Espino y Cia., S.C) with the goal of providing technical excellence and professional pro-activity in the work required by the firm's clients.

Learn more

Gómez Romo y Asociados, S.C., is an accountancy firm established in the city of León, Guanajuato (Gto), Mexico, in January 1989 by public accountant, Ernesto Gómez Romo. Since then, the firm has experienced a series of constant, positive changes and today, the organization has grown to employ over 35 full-time people. Our firm's professional associates are experts in each of the areas of the Accompaniment Program for Foreign Investors (PAIE), which serves as a constant support for any international firm. Gómez Romo y Asociados, S.C., provides quality, professional services in Accountancy and Accounting Advice, Audit, Tax Advice, Consulting and Business advisory services. Our experience in working with businesses in the commercial, industrial and services sectors, has allowed us to fully understand the specific needs and challenges of our clients.

Learn more

O&P is a firm in which our collaborators are committed to the company’s ideals and contribute to providing top-quality tax, foreign trade, audit, accounting, financial and consulting services with the highest level of professionalism, thus ensuring our clients’ success.

Learn more

Ortiz, Leos y Cía, S.C., is strategically located in the northeastern part of Mexico, in a region well known as a manufacturing cluster. With over 30 years, our firm has broad experience in tax, legal, audit, due diligence, business process outsourcing and financial reporting. We have strongly geared our practice towards foreign investment, especially in the manufacturing and real estate industries. Among our clients, we work with American, Canadian, French, Korean, German, Chinese and other foreign investment companies. We have great level of experience in the foreign investment maquila industry.

Learn more

With more than 10 years of experience, QuAdrans Law and Finance is a highly trained and certified legal and accounting consulting firm, with accountants and consultants whose experience and dedication complement to offer an integral service, satisfying the needs of companies and individuals, whether domestic or foreign. We are a global firm that protects your assets, providing services related to the areas of corporate, real estate, litigation, as well as tax and accounting services; we also have attestation services.

Learn more

Founded in 1970, with over 40 years experience and as one of the largest CPA firms in Mexico, we combine deep industry knowledge, comprehensive accounting and advisory services, and a strong commitment to personal service. We have over 180 people located throughout Mexico so that we can direct these resources to your best advantage. We have the ability to help you in other languages, and with a diverse operation ranging from Mexican to international application of principles in companies operating in Mexico.

Learn more

We initiated our professional activities in May 1959, when our first project was carried out.  In 1967, a professional partnership was formed under the present name, when Messrs. Eugenio Sisto Velasco, Rodolfo Olmedo Zorrilla and Norberto Agramonte joined the firm.  From that date through 1980, the firm enjoyed sustained growth. Our future growth outlook is very interesting, as we consider that during all these years we have built a solid professional reputation throughout the country, which can be seen from the growing demand for our services.

Learn more

Traust Accounting is the effort of more than 100 people working along with your team. Our firm began in 1973, under the personal name of CPA Jesus Mario Treviño Sepúlveda. In 1983, we became the Office Sepúlveda Treviño S.C., and have been growing ever since. Today, we bring the experience of over 40 years in business to the accounting industry, helping companies and individuals make the best decisions in matters related to tax, audit, accounting and finance.

Learn more

By processing data and integrating financial statements, we become an extension of your organization achieving costs reduction, optimizing of the use of the resources and providing on time and accurate financial information for better decision making. We have more than 25 years of widely varying experience as a group of certificated professionals committed towards the need for a new economic and business order.Given the continuous tax, accounting, legal and labor amendments implemented by the corresponding authorities each year, the expertise, capacity and preparation degree needs in such disciplines must be permanent, therefore our specialist are certificated in different areas.

Learn more