Changes to Mexico’s Digital Taxation

As of the 1st of June 2020, Mexico will be imposing Value Added Tax on all digital services supplied by foreign businesses. No matter the size of the company, if they are providing digital goods to this country, they are required to be VAT registered to maintain their VAT compliance. Besides this, there are several other things business owners will have to do.

 

What is taxed

 

All digital content will have to have Value Added Tax added to them when purchased inside Mexico. Namely, this applies to:

 

  • Images,

 

  • Video,

 

  • Music,

 

  • Movies,

 

  • Text,

 

  • Information,

 

  • Games,

 

  • Online news,

 

  • Other multimedia content.

 

As long as the business is selling this type of media, VAT has to be applied.

 

New requirements

 

These rules make no distinction between B2B and B2C transactions. According to VAT compliance, Value Added Tax must be collected, reported and paid by companies that:

 

  • Provide access to or allow for the download of media and content;

 

  • Act as service intermediates between the seller and the customer.

 

Companies that want to continue providing goods and services to Mexico, must act correspondingly to the changes.

 

Additional obligations

 

There are other rules that businesses must comply with. These are:

 

  • 16% VAT must be applied to all digital services;

 

  • VAT registration now requires an e. signature;

 

  • VAT returns are now monthly;

 

  • Mexican customers that ask for an electronic invoice must receive one.

 

For full VAT compliance, it’s strongly advised for businesses to hire a local tax representative. If these things are picked up during checkout, a customer will be deemed based in Mexico:

 

  • Home or IP address is in Mexico;

 

  • Payment is made through a Mexico-based intermediary;

 

  • Telephone number has Mexico’s country code.

 

Businesses that still want to provide digital goods and services in Mexico should prepare for these new requirements. To be fully compliant, it’s recommended to check in with appropriate VAT services to get further information about the changes.