Mexico: New tax on foreign-supplied digital services
The Mexican tax reform for 2020 includes a new requirement to collect value added tax (VAT) on the sale of certain goods and services provided in Mexico.
According to the legislation, revenue from certain digital or e-commerce services provided to Mexican residents from foreign entities that do not have permanent establishment in Mexico, will be subject to VAT.
There are two categories of suppliers that are responsible for collection, reporting and payment of VAT:
- Category one: those that provide downloads or access to images, movies, videos, music, games and other multimedia content, excluding e-books and other electronic publications.
- Category two: those that perform intermediation services between potential sellers and buyers of products and services.
The new law doesn’t differentiate between business to business (B2B) and business to consumer (B2C) transactions, meaning that all suppliers could be subject to the new rules. Affected suppliers must register with the Mexican tax authorities, appoint a local tax representative, provide a local tax address and collect VAT at a rate of 16 percent.
The new rules are set to take effect on 1 June 1 2020.