Action 1 of the OECD's BEPS (Base Erosion and Profit Shifting) project titled "Addressing the tax challenges of the digital economy" aims to identify the challenges of the digital economy regarding the application of international tax rules.
In Mexico, it was decided to amend the Income Tax Law ("LISR") and the Value Added Tax Law ("LIVA") starting from the fiscal year 2020 to adapt taxes to this type of activity and introduce two different forms of taxation depending on the type of tax.
Income Tax:
Legal persons who sell goods or provide services over the internet, through technical platforms, computer applications, or similar means are subject to taxation.
However, the tax liability is through a withholding tax, which is performed by legal entities residing in Mexico or abroad with or without a permanent establishment in the country, as well as by foreign legal entities or individuals using the mentioned platforms or applications.
a) For the provision of land transportation services for passengers and delivery of goods, the withholding rate is 2.1%.
b) For the provision of accommodation services, the withholding rate is 4%.
c) For the sale of real estate and related services, the withholding rate is 1%.
Obligations of users of digital platforms:
Legal entities residing in Mexico, foreign entities with or without a permanent establishment in Mexico, or other foreign legal entities or individuals earning income through legal persons conducting business via digital platforms are subject to the following tax obligations:
- Apply for registration in the RFC (applies only to foreign legal persons without a tax presence in the country).
- Appoint a legal representative with the tax authority and provide an address within the country for the purpose of reporting and monitoring compliance with tax obligations.
- Obtain the e-firma (electronic signature).
- Issue CFDIs (electronic invoices) stating the payment amount and withheld tax no later than five days after the month in which the withholding was made.
- Submit a customer list within 10 days of the following month for transactions involving the sale of real estate and related services.
- Pay the total withheld tax no later than the 17th of the following month.
- Maintain records of withholding tax evidence and its remittance.
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