Mexico’s Congress on 31 October 2019 approved a tax legislative package for 2020—legislation that includes amendments to the value added tax (VAT) law among others.
Concerning VAT, the legislation includes measures that aim to increase the efficiency of VAT collection, and clarify that revenue from certain digital or e-commerce services provided to Mexican residents from abroad, by entities not having an establishment in Mexico, will be subject to VAT in Mexico. In such situations, the test will be whether the recipient of the services is a resident of Mexico.
The term “digital services” is defined under the new measures and includes such items as downloads or access to images, movies, videos, audio, music, games, as well as other multimedia content, but not e-books or electronic versions of newspapers and magazines. The defined digital services also include distance learning, tests, and exercises, online clubs, and other items.
The new measures add a set of registration and reporting obligations for foreigners providing these types of services, as well as rules for calculating VAT derived from the digital operations.
Additionally, the concept of digital intermediation services (that is, services conducted by third parties) is added to the VAT law. The services provided by these intermediaries, whether or not they are residents of Mexico, will be subject to VAT. The intermediaries must provide information to the tax administration about transactions conducted through them and also information about when they collect amounts on behalf of the sellers or service providers. In such instances, there is a requirement for VAT withholding at a rate of 50%.
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