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Mexico Tax Reform 2020 – Focus On Digital Taxation

Mexico’s Congress approved a bill to impose VAT on digital services supplied by foreign businesses.

This will come into effect on 1 June 2020 and the VAT rate imposed will be 16%. The scope of this plan includes online sales to customers based in Mexico.

This new tax reform does not distinguish between B2B and B2C transactions and therefore, this rule would apply to all suppliers. The provisions appear to focus on B2C and the below will be subject to the rules, with the supplier will be responsible for the collection, reporting and payment of VAT.

  1. Those that provide for the downloads or access to images, text, information, movies, news online, video gaming, weather, online learning and other multimedia content;
  2. Those that have inter-mediation services between potential sellers and buyers of goods and services.

Some of the main points coming from this new bill are:

  • Foreign digital service providers will be obliged to register for VAT in Mexico, obtain a tax identification number and remit the tax;
  • Foreign digital service providers will have to appoint a tax representative in Mexico;
  • VAT returns will be monthly

For businesses with operations subject to the new rules, registration with the authorities will begin on 1 June 2020 and should be completed by 30 June 2020.

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