Mexico City, August 13th, 2020.
As a result of the recent Mexican Tax Reform in force as of January 2020, technological platforms owned by non-resident taxpayers with no permanent establishment in Mexico providing directly a digital service within Mexican territory, are subject to Value Added Tax ("VAT").
Also, non-resident technological platforms acting as an intermediary between third parties and customers are required to pay the VAT on the considerations agreed with the third parties for the intermediary services and to withhold the relevant VAT triggered by the third parties.
On July 24th, 2020, a Second Amendment to the General Tax Rules 2020 was officially published, through which certain operating rules for the non-resident technological platforms are established.
In terms of the new operative rules, technological platforms will be able to pay the VAT withheld for the provision of digital services for only one occasion from abroad in U.S. dollars, in accordance with the exchange rate determined on the banking day prior to the payment. The option of payment abroad in U.S. dollars must be submitted to the Mexican tax authorities no later than the 17th day of the month following the withholding of Income Tax ("IT") and VAT.
In addition, an obligation to file a tax return before the Mexican tax authority known as "Informative return of withholdings for the use of technological platforms" was established. This return must be filed to the Mexican tax authority detailing the information of the activities performed by the third parties with its customers as well as the VAT triggered by the third parties. The return should be filed no later than the 10th day of the month following the transactions. Please note that this information shall be filed although the VAT and the payment agreed by the third parties and their customers have not been collected.
The new rules also clarify that in case of a non-resident technological platforms, acting as an intermediary of a third party, refunds or returns any payment made by a customer as a result of a cancellation of a transaction, the non-resident technological platform will be entitled to recover the VAT previously paid to the Mexican tax authority regarding the consideration paid by the third party for the intermediary service.
Furthermore, certain rules were published regarding the individuals operating as providers of goods or services in Mexico through the technological platforms. These rules are related to the determination of provisional Income Tax payments. In some cases, and with certain requirements, individuals will be able to consider the estimate income tax payments as final.
On the other side, VAT triggered by individuals on transactions that were canceled or goods that were returned to providers, must be filed through amended tax returns made by such individuals to cancel the effects of such transactions according to the new operative rules.
Finally, pursuant to Article 18-D of the current VAT Law, non-resident digital platforms (foreign tax residents) providing digital services in Mexico (directly or as an intermediary), are required to register at the Federal Taxpayers' Registry ("FTR"). Therefore, the list of non-resident digital platforms that have already registered on the FTR in compliance with the above-mentioned provision, was recently published on the Mexican Federal Official Gazette on July 9, 2020, including the following platforms:
- Uber B.V.
- Didi Mobility Information Technology PTE. LTD.
- Expedia
- Netflix International B.V.
- AMAZON Services International, INC.
- Bloomberg Finance, L.P.
It is important to emphasize that failing to fulfill the aforementioned informative return or the operative obligations, as well as the failure to register the platform in the FTR due to the provision of digital services in Mexico, can derive in fines that could be imposed by the Mexican tax authorities. Therefore, we recommend reviewing the procedures and applicable rules of operation set forth in the Second Amendment to the General Tax Rules 2020, in regard to the services and goods sold and provided through the digital platforms in order to fully comply with the regulations in force.
The lawyers of the tax practice group of the Firm are ready to assist you to comply with these rules or to advice in this regard.
S I N C E R E L Y,
Gerardo Nieto
Gil Zenteno
Alejandro Barrera
Sergio Barajas
Victor Barajas
Francisco Matus
