Mexico will start charging two taxes on foreign digital services from June
Source：LABS
From：Taiwan Trade Center Mexico
Update Time：2020/06/13
The Mexican government has officially announced the implementation of two new taxes on non-resident digital services providers to take effect on June 1st: a Value-Added Tax (VAT) on the services provided, and the Mexican Income Tax (ISR) over profits earned from the operation in the country. Big platforms such as Netflix, Uber, and PlayStation already said that it will affect their prices or operations in the country.
The changes to the VAT Law were approved and enacted last December. The law expands the scope of both VAT and ISR, which are already applied to local companies, for international digital services providers, and establishes charging conditions for foreign digital platforms such as Airbnb, Netflix, Spotify, Uber, DiDi, among others.
In Mexico, the VAT rate is 16% applied on the price of the service provided, in local currency. By law, digital service platforms must apply this rate on services provided each month and must detail the amount of tax collection in their payment order. As for the ISR, rates depend on the type of operation that generated taxable income for the non-resident entity:
- 2% to 8% for digital platforms engaged in transportation/delivery services;
- 2% to 10% for digital platforms engaged in hosting/accommodation services;
- 0.4% to 5.4% for digital platforms engaged in selling goods and providing other services.
According to the new Mexican law, VAT will be collected from a variety of foreign digital services, including downloads or access to images, films, text, information, video, audio, music, games, in addition to other multimedia content, online news, traffic information, weather forecasts and statistics, marketplaces, online clubs and dating pages, distance learning, tests or exercises.