Mexico has introduced Value Added Tax on foreign providers of digital or electronic services from 1 June 2020. There is no VAT registration threshold, and non-residents must appoint a local tax agent. In addition to providers of electronic services, Mexico also makes provision for withholding VAT by intermediation services for providers to Mexican consumers. Where a foreign provider or intermediary is not registered for VAT, payment providers must withhold VAT on payments to them.
Check VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.
What digital services are subject to Mexican VAT?
The following services provided by foreign providers via electronic marketplaces or similar platforms are now liable to VAT:
- Download or streaming video and music
- Texting and ring tones
- Online gaming
- Online newspapers and journals
- Dating websites or other membership forums
Note, e-books are not included within the scope of the digital VAT obligations.
Determining if VAT due in Mexico
VAT is due if the consumers residency and consumption of the service can be shown to be in Mexico. Providers may rely on the following evidence to demonstrate this:
- Payment via Mexican bank or payment provider
- Billing address of the customer
- Country code of customer phone number
- IP address for laptop, mobile phone or other device
Registering for VAT
Eligible providers must register with the Mexican Federal Taxpayers Registry (RFC), which publishes a list of providers every six months. They will provide the provider with a unique digital signature. A local tax agent is required. Filings of VAT due and payments are made on a monthly basis. This should show VAT transactions, and VAT calculations.
Intermediaries VAT obligations
Any platform or intermediary acting as a facilitator for foreign providers has VAT obligations. Firstly, they must register with the tax office as a withholding agent. There is a simplified intermediary reporting regime for those with incomes below MXN 300,000.
They must withhold the VAT if no evidence of a VAT RFC registry entry is provided. If there is one in place, 50% VAT is still withheld for payment directly to the tax authorities. The must be remitted to the tax office by the 17th of the month following the collections. They are obliged to provide simplified VAT invoices.
North America VAT on digital services
|Comments (click for details)||Rate||Implementation Date||Threshold||Comments|
|Canada British Columbia||7%||Apr 2021||C$10,000|
|Canada Manitoba||7%||Dec 2021||B2C; accommodation sharing|
|Canada Quebec||9.98%||Jan 2019||C$30,000|
|Canada Saskatchewan||6%||Jan 2019||Nil for non-residents|
|United States||Up to 10%||2018+||Varies by state|