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Mexico: Proposals for taxation of digital platforms

Mexico: Proposals for taxation of digital platforms

A proposal concerning the taxation—including the value added tax (VAT) treatment—of services provided by digital platforms (in particular, foreign-based digital platforms) was published by the lower chamber of the Mexican Congress.

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A legislative explanatory statement notes the rapid development of the digital platform business model, as well as the challenges encountered in taxing those that sell goods and services digitally (versus those that sell goods and services from fixed premise locations). The proposal also considers factors identified by the Organisation for Economic Cooperation and Development (OECD) with regard to the taxation of the digital economy.

As proposed, there would be provisions enacted to allow for the appropriate collection of tax and VAT in Mexico:

  • Entities without an establishment in Mexico but that provide services to persons or entities in Mexico through a digital platform would be required to withhold tax or, alternatively, to pay the amount of tax themselves.
  • If the foreign-located digital platform were to withhold tax, the amount of withholding would relate to the total amount paid (including commission for the service provided by the platform as well as the actual price of the service).

The proposal does not, as drafted, provide a transition regime on transactions entered into before the effective date. It would appear that a reasonable amount of time would be needed for financial systems to be revised to reflect the new measures. It is anticipated that during the congressional consideration of the proposal, there could be modifications approved by the Congress.

Read a September 2019 report (Spanish) prepared by the KPMG member firm in Mexico

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