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As from 1 June 2020, the Mexican Government requires that all the digital platforms in Mexico, such as Amazon, Mercado Libre, Airbnb, etc, withhold a percentage of their users’ sales as a tax payment.

Digital platforms are requesting all their users provide them their RFC, that is their Mexican taxpayer registry number. For now, only individuals are liable for this retention. Corporations will keep reporting their taxes as before.

It is important to clarify that when receiving income in Mexico for a commercial activity such as rent from a property or the sale of an item, you are obliged to pay taxes for such income. The two main taxes are IVA or VAT (Value Added Tax) and ISR (Income Tax). To be able to pay these taxes, it is necessary to have an RFC number.

You are required to pay these taxes as long as one or more of the following is true:

  • The business operation happens inside Mexico.

  • The payments are made through a digital platform located in Mexico.

  • They are requested from within Mexico.

  • A Mexican code phone number (+52) is used.

What are my obligations?

  • To be registered with an RFC.

  • To obtain your FIEL (advanced electronic signature)

  • To provide your tax information to the digital platform.

According to the new reform, if any natural person does not provide his tax information, the digital platform will be required to retain 16% of IVA (Value Added Tax) and 25 % of ISR sales tax.

If you provide an RFC, according to the platforms sales earned income, they are required to withhold 8 % of VAT and ISR from 0.4% to 10% of the income.

If you do not have an RFC, Mextax can offer you a solution according to your profile:

  • If you have a temporary or permanent residency in Mexico, we can help you get an RFC as an individual very quickly, and to provide your commercial activity accounting.

  • If you wish to have a Mexican company, we can assist you, from creating the company to making the monthly and annual statements.

  • If you would rather obtain a company ready to use for a limited amount of time, there is also a special solution for you.

FAQ

1. What is an RFC?

It is the tax identification number in Mexico. RFC stands for Federal Taxpayers Registry. It identifies the contributors that carry out commercial activities, whether this is done as an individual or as corporation. The RFC number can be obtained only with Mexican residence or the incorporation of a Mexican company.

2. If I pay taxes in Mexico do I also have to pay them in my country?

Not necessarily. There are several treaties in Mexico and other countries to avoid paying the same taxes twice. Contact us for more information.

3. Once I have created my Mexican company, what fiscal obligations do I have?

  • Register at the RFC if you have not already.
  • Request the FIEL (the Advanced Electronic Signature). We can assist you in this process.
  • Issue CFDI – facturas (electronic invoices).
  • Use an Electronic Accounting System, according to the stablished in the CFF rules (Federal Fiscal Code) with capacity to generate XML.
  • Submission of provisional or definitive payments of certain taxes.
  • Submission of provisional taxes and annual corporate statement.
  • Submission of DIOT (Informative Statement of Third Parties Operations) if you are subject to VAT (Value Added Tax).

4. What taxes are paid in Mexico?

The federal taxes are: IVA or Vat (Value Added Tax) equal to 16% and the ISR tax (Income Tax) equal to 30%. These are the taxes every commercial activity provider must pay.

There are also state taxes that must be covered according to the activity of each enterprise, like the payroll tax if there are any employees, or the lodging tax if lodging activities are carried out.

5. How frequently are corporate statements made?

Monthly statements and payments must be carried out, along with an annual statement.

6. If I have an enterprise in Mexico but it is not active yet, should I make a corporate statement?

Yes. Even when the company is not generating income or expenses, the statements must be made in a timely manner to avoid any penalty from the authorities.

7. Does Mextax pay taxes for me?

No. Once the statement is done, your enterprise accountant notifies you whether you must pay taxes or not, and the company administrator should carry out the payments.

8. Can I make the statements myself or should I hire an accountant?

The most advisable thing is to hire an accountant, especially if you are a foreigner and do not have knowledge of Mexican fiscal laws. An accountant will make sure the accounting is registered the right, legal and practical way. An accounting team can help you reduce the tax payment making deductions and find potential problems.

9. Are all my enterprise’s expenses tax deductible?

Yes, if they are related to the company’s activities and a CFDI (electronic invoice) has been issued for such expenses.

10. What happens if I stop using my Mexican company, should I liquidate it?

Not necessarily. You can also suspend it for up to two years.

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