What’s Changing for Digital Platforms in Mexico
Mexico broadens digital platform tax compliance in 2026 by expanding withholding obligations. The new rules extend VAT and income tax withholdings to business-to-business (B2B) sales and raise withholding rates to ensure platforms capture taxes from a broader range of online transactions.
Timeline: When the New Rules Take Effect
The new withholding requirements take effect on January 1, 2026
Impact: How the Withholding Rules Expand in 2026
Before 2026, Mexico’s platform rules applied only to individual sellers, requiring marketplaces to withhold 50% of the VAT collected (or 100% if the individual seller had not provided a valid tax ID (RFC)) and a 1 % of the seller’s income (with a flat 20% withheld if no tax ID was on file).
From 2026, these obligations expand to business sellers (legal entities): platforms must withhold 50% of VAT and 2.5% income tax when paying a Mexican company that provides a valid RFC. If the seller fails to provide an RFC, the platform will withhold the entire 16% VAT and 20% income tax, mirroring the higher withholding that previously applied to individuals without an RFC.
The income tax withholding rate for Mexican individual sellers will also increase from the current 1% to 2.5%
Cross-border transactions face full VAT withholding
In addition, the reform targets cross-border transactions: digital platforms are now required to withhold 100% of VAT on sales transactions located in Mexico by foreign sellers (non-residents with no permanent establishment) and likewise withhold the full VAT when sale proceeds are paid into a foreign bank account.
These expanded rules ensure that whether transactions are domestic or involve foreign elements, the platform will remit a much larger portion of VAT and income tax to the authorities, closing gaps in compliance and deterring tax avoidance schemes.
What platforms and sellers need to do next
Digital platforms should update their withholding logic to reflect the expanded scope, correctly distinguishing between individuals and legal entities, validating RFCs, and applying full withholding where required, including payments to foreign bank accounts. Sellers should ensure their RFC and payment details are accurate and up to date.
