VAT Guide for Businesses with Customers in Mexico

VAT Rates in Mexico

The standard VAT (Impuesto al Valor Agregado (IVA))rate in Mexico is 16%, with some services exempt from Mexican VAT, such as mortgage fees, education, and public transport.

VAT Registration Thresholds in Mexico

• VAT registration threshold for domestic established sellers: No registration threshold
• VAT registration threshold for non-established sellers: No registration threshold
• VAT registration threshold for non-resident suppliers of Digital Services: No registration threshold

Mexican VAT Number Format

The Mexican TIN is known as the RFC (Federal Taxpayers Register). This number is used for all tax purposes.

• Individuals:
  • Format: the RFC consists of 13 digits with the following structure - xxxx-yyyyyy-zzz (x = letters, y = numbers, z = alphanumeric). x = first letter of the first surname x = first vowel of the first surname x = first letter of the second surname x = first letter of the first name yy = last two numbers of the year of birth yy = two numbers of the month of birth yy = two numbers of the day of birth zzz = alphanumeric digits randomly assigned
• Businesses:
  • Format: the RFC consists of 12 digits with the following structure - xxx-yyyyyy-zzz (x = letters, y = numbers, z = alphanumeric) xxx = firsts three letters of the company name yy = last two numbers of the year of incorporation yy = two numbers of the month of incorporation yy = two numbers of the day of incorporation zzz = alphanumeric digits randomly assigned

Mexico VAT ID Validation

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VAT on Digital Services in Mexico

In June 2020, Mexico introduced special rules for foreign digital service providers. Mexico imposes VAT on non-resident providers of digital services for both B2B and B2C transactions. Non-resident providers should register for VAT and apply for an RFC number from the Mexican Tax Administration Service (SAT).

VAT Rate: Typically 16% VAT applied to the sale of affected digital services

Taxable digital services in Mexico

• Downloading or accessing images, films, text, information, video, audio, music, games, gambling, and other multimedia content, multiplayer environments, obtaining mobile phone ring tones, viewing online news, traffic information, weather forecasts, and statistics.
• Intermediation between third parties offering goods or services and those seeking them.
• Online clubs and dating sites.
• Distance learning or teaching

Will your business need to pay VAT on digital services in Mexico in 2023?

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Marketplace & Platform Operator Rules in Mexico

A foreign intermediary (i.e. electronic platform or marketplace) in the supply of goods or services should register with the SAT and obtain an RFC, regardless of where the supplier and recipient are located.

Intermediaries should also have the following obligations:

1. Publish on their website, application, or platform the VAT applicable to the goods and services they offer as intermediaries.
2. In some scenarios, withhold 50% (i.e. an individual with an RFC who is a Mexican resident) or 100% (i.e. a supplier who does not provide an RFC) of the VAT.
3. Issue and deliver the appropriate invoices (withholding and standard).
4. Remit VAT at source by the 17th of the following month
5. Report client information to the SAT by the 10th of the following month.

Invoice Requirements in Mexico

The following information should be included on invoices in Mexico:

• Document & general transaction information
  • Invoice data such as e-invoice version (CFDI 4.0), invoice number, date and time of issue, document type, export (yes or no)
• Supplier information
  • Supplier name, RFC, tax regime, and postcode
• Customer information
  • Recipient name, tax regime, and postcode
  • RFC (if applicable)
• Financial transaction information
  • Transaction details, such as description, quantity, unit key number, product or service key number, unit value, net amount, and whether the supply is subject to any type of tax
  • Tax and amount descriptions, such as which tax applies, rate, tax amount, and the total amount
  • Payment type (e.g. cash, cheque) and method (single payment or installments),
  • Currency

E-Invoicing & Digital Reporting for Mexico

Since January 1, 2014, electronic invoicing and digital reporting are mandatory in Mexico for all types of transactions, including B2C, B2B, B2G, and cross-border.

However, foreign digital service providers should not be required to issue Mexican e-invoices. This exception was introduced with the implementation of the Digital Services Regime in June 2020.

From April 1, 2023, Mexican e-invoices (CFDI) should be issued in the CFDI version 4.0 format.

Learn more about E-Invoicing and Digital Reporting in Mexico

Governmental Body Responsible for E-Invoicing and Digital Reporting in Mexico

The Mexican Tax Administration Service (SAT) is the governmental body responsible for e-invoicing and digital reporting in Mexico

VAT Payments and Returns in Mexico

Full VAT Returns

Mexico has simplified VAT returns for non-resident taxpayers supplying qualifying digital services in Mexico.

Penalties in case of late filings or misdeclarations

In the case of the late filing of VAT returns and payments, the Mexico tax authority should enforce the following penalties:

• If the tax is not paid on time, the amount will be adjusted for inflation up to the date of actual payment, plus surcharges (1.47% per month) and a penalty between 55% and 70% of the adjusted amount.