|Standard VAT Rate||Digital Reporting Requirements / E-invoicing||VAT on Cross-Border Electronically Supplied Services||Tax Authority Website|
|16%||Yes||Yes||Mexican Tax Administration Service (Servicio de Administración Tributaria)|
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 Rates||Rate Type||Description|
|16%||Standard Rate||Applies to all taxable supplies, with certain exceptions.|
|8%||Reduced Rate||Public performances consisting of theater and circus shows|
|0%||Zero rate||Supply of medicines, water, and animals|
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.
- 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
- 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
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?
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:
- Publish on their website, application, or platform the VAT applicable to the goods and services they offer as intermediaries.
- 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.
- Issue and deliver the appropriate invoices (withholding and standard).
- Remit VAT at source by the 17th of the following month
- 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),
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.
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
|VAT Return Name||there is no specific form, return is done through the SAT software|
|Filing deadline||The deadline should vary depending on the sixth digit in the taxpayer's RFC number. From the 17th day of the month following the reporting month, the following number of days should be added to determine the filing deadline - one working day should be added if the sixth digit of the RFC is 1 or 2, two working days if the sixth digit is 3 or 4, three working days if the sixth digit is 5 or 6, four working days if the sixth digit is 7 or 8 and five working days if the sixth digit is 9 or 0.|
|Payment deadline||Same as the filing deadline|
|Payment currency||Mexican Peso (MXN)|
|Local VAT acronym||“Impuesto al Valor Agregado” (IVA)|
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.