Mexico: VAT and digital services, foreign residents without permanent establishment
Mexico: VAT and digital services, foreign residents
Rules have been issued concerning how to address the value added tax (VAT) with regard to customer refunds, discounts, and cancelations of services provided by digital platforms of foreign residents not having a permanent establishment in Mexico.
The rules—published on 29 May 2020—follow the 2020 tax reform introduction of VAT with regard to digital services provided through an online platform. Read TaxNewsFlash
Refunds to customers of amounts collected by platforms operating as intermediaries of digital services
The rules address the treatment of customer refunds of goods or cancelation of services when the digital platforms operate as intermediaries. In these situations, the digital platform is to refund the amount collected (VAT included) to the customer. If the amount of VAT related to the customer refund has already been remitted to the tax administration (Servicio de Administración Tributaria—SAT), the platform then may reduce, over the following months, its VAT remittances to the SAT by the amount of the customer refund (no VAT included) from the total of transactions subject to VAT, by applying the general VAT rate of 16% and until the VAT remittances reflect the applicable customer refunds. This reduction mechanism will be possible only if the platform has a Mexican tax identification (ID) number and issues an expense receipt (CFDI egreso) that: (1) includes the Mexican tax ID of the customer; and (2) reflects the transaction’s gross amount and the VAT amount separately.
Cancelations, customer refunds, and discounts of services by individuals that provide services on digital platforms
In instances of service cancelations, customer refunds or service discounts for which the digital platform imposed VAT, individuals providing such services may reduce the amounts reported to the SAT (no VAT included) on an amended VAT return for the corresponding month, thereby effectively canceling completely or partially this transaction. This mechanism is available if the individual issues a corresponding expense receipt (CFDI egreso) with the gross amount of the transaction reported and VAT separately stated. In instances of service cancelations, the corresponding invoice must also be canceled.
Cancelations, customer refunds, and discounts of services by individuals that provide services on digital platforms that use VAT withholdings as final payment
For service cancelations, customer refunds or service discounts when the individual treats the VAT withholdings by the digital platform as a final payment, the VAT refund will be processed, as follows:
- For refunds and discounts, the corresponding expense receipt (CFDI de egreso) must be issued.
- For cancelations, the corresponding receipt must be cancelled.
- A refund request must be filed with the SAT that includes specific documentation: (1) the processing file 6/PTL; (2) the receipt made or cancelled; and (3) a receipt of withholdings and payments issued by the digital platform or the VAT return, as appropriate.
For more information, contact a KPMG tax professional in Mexico:
Antonio Zuazua | +52 (81) 8122 1938 | azuazua@kpmg.com.mx
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