Tax Declaration for Digital Service Providers in Mexico
Foreign companies that provide digital services to users in Mexico through applications must pay Value added taxes (VAT) for those services. This law came into effect in June 2020. The largest international companies providing services through digital platforms are already paying and reporting taxes in Mexico.
Physical people and companies that sell goods, provide services, provide lodging, or rental services through tech platforms or applications must withhold income tax (ISR) and value added tax (VAT) for physical persons with business activities that sell goods, and services like lodging.
What digital services are subject to VAT?
- The downloading or access to images, movies, text, information, video, audio, music, games, gambling games, other multimedia content, multiplayer environments, ringtone downloads, online news, traffic information, weather reports, and statistics.
- Intermediation between third parties that offer goods or services and their users.
- Online clubs and dating sites.
- Data storage.
- Remote learning, testing, or exercises.
Who is affected by this measure?
To comply with the norm companies must issue CFDI’s for services or goods sold through digital platforms “foreign residents without a permanent establishment in the country that provide digital intermediation services between third parties and physical persons with business activities that dispose of assets, lend services, or provide the temporary use of goods through the internet and through technological platforms”.
What are the implications for new taxpayers that provide digital services?
- Taxpayers must register in the “Registro Federal de Contribuyentes” (RFC) through the tax authority (SAT) and must have an advanced digital signature. If the taxpayer is already registered, they must update their economic activity.
- Electronic documents in PDF format with the corresponding CFDI documents for the transaction must be issued when requested by the service recipient.
- Pay the corresponding VAT (applying the 16% rate to the charged goods or services within the month) through the electronic declaration. VAT must be presented by the 17th day of the following month.
- Provide information about monthly operations with recipients located in Mexican territory that receive your services, classified by type of service, or operation and their price.
- Show and charge the VAT with the price of your digital services. This must be done expressly and separately.
- When the RFC subscription is complete, a legal representative must be designated before the SAT. An address in Mexican territory must also be designated to receive notifications and to ensure compliance with fiscal obligations of the digital service activities conducted by foreign residents without an establishment in Mexico.
To comply with the current VAT law the SAT will periodically publish the list of foreign residents that are registered in the Federal Taxpayer Registry (RFC). 86 new companies have registered as of March 10th including, Alexa Internet, Amazon Service Europe, Amazon Service International, Airbnb, Booking, Google, HBO, Microsoft Corporation, Nintendo, Facebook, Linkedin, Microsoft Corporation, Spotify and Uber.
Why is it important to know if a digital services provider is registered in the RFC?
This new norm enables and facilitates the Payment of VAT to users that contract services of digital suppliers without a residence in Mexico.
If these companies do not comply with the new tax requirements the contracted services will be considered imports and the final consumer will have to directly pay VAT to the SAT.
EDICOM, over a decade of experience as a CFDI provider in Mexico
In 2010 Edicom was the first Authorized Certification provider (PAC) for the validation of CFDIs certified by the SAT. In 2015 it became the first Digital Document Reception Certification Provider (PCRDD), an alternative to the SAT that was created with the massification of the electronic invoice in Mexico to correct shortcomings and management difficulties due to system saturation.
EDICOM has been helping implement the electronic invoice in Mexico for 11 years, through the development of its own CFDI generation, delivery and reception platform, enabling companies to simplify their processes through the integration of an automated system with their ERP management systems.
EDICOM is ready to implement any technical or legal change to the CFDI immediately and transparently for all clients, and without affecting their commercial operations.