June 2, 2020

Mexico Requires North American Companies to Collect and Remit VAT on Digital Services

The Mexican Tax Administration Service (SAT) and Finance of Ministry has published new requirements, in their Digital IVA Regulations, saying that non-Mexican digital service providers need to report Mexican value-added tax (IVA) on income earned from digital platforms, websites and other methods.

Digital IVA Regulations state that services performed in Mexico now include services performed with assistance from digital platforms. Bottom line is the regulations impact U.S. and Canadian sellers providing digital goods and services such as: digital streaming (audio, pics, video), intermediation services (linking service providers with customers), news, traffic, weather, dating sites, teaching, testing, exercise, data storage, ringtones etc. in Mexico.

Digital IVA Regulations affect both Mexican inbound and outbound transactions:

Inbound transactions: U.S. company provides digital services to Mexican clients, subject to standard Mexican IVA rates for those services, and the US company is required to remit the IVA to the tax authorities.

Outbound transactions: Mexican businesses are required to itemize IVA on invoices and remit the standard amounts to the SAT. This creates compliance burdens for Mexican and non-Mexican companies doing business locally.

To stay IVA compliant, foreign companies servicing Mexican customers through the online sales of goods and services must add IVA to the cost of purchases or treat current pricing as IVA inclusive.

Additionally, non-Mexican intermediary companies (without a Mexican permanent establishment) are required to state the price of the digital goods with IVA separately stated on the invoice. IVA of 8% is applied to private customers and 16% is applied to electronic invoices and payments to companies (without a Mexican tax ID).

Euro VAT Refund is happy to answer questions and assist with IVA filings, reviewing invoices and all other VAT/IVA management. Please contact us today to discuss how these new regulations affect your digital business.


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