Digital Platforms Tax Compliance Mexico

In June 2020, to combat the challenges of the emerging digital economy, Mexico implemented tailor-made tax provisions for e-commerce operations, processed through intermediation services governed by the digital platform operator.

The digital platform regime is designed to regulate the provision of services and sale of goods through technological platforms such as Uber, Airbnb, Amazon, Mercado Libre, and others.

The newly established rules acclaimed by domestic competitors and public institutions mandated that foreign providers of cross-border digital services register and collect VAT when they provide digital services to recipients located in the country.

When the digital platform, being domestic or foreign, alongside the provision of digital services, facilitates the supply of services(between third-party suppliers and recipients), it will be obliged to withhold income tax and VAT from service providers. 

To underscore this initial point, withholding income tax and VAT for platform intermediation services doesn’t just cover third-party providers of digital services and the obligation to withhold income tax and VAT from supplier goods (when the goods are sold via digital platforms). 

Adopting the digital platform regime resulted in great success for Mexican tax authorities. This system introduced a new tax collection system, which was a necessary move, considering the growth levels of the country’s e-commerce market.

Taxability Frameworks

Taxpayers in scope

Direct providers

Resident and foreign providers of digital services or goods to recipients based in Mexico through the Internet, technological platforms, and other applications. The providers of digital services or goods offered through the digital platform (via the usage of the intermediation service of the platform) can transfer the VAT and ISR collection liability to the platform operator when the conditions are met. However, they should register for RFC (tax number), following the specifically designed online procedure. 

Third-party resident suppliers that offer their goods or digital services through digital platforms can remain outside the VAT and ISR reporting obligations when revenue in the fiscal year is below MXN 300,000. In this case, and if the terms and conditions of the digital marketplace permit, the platform operator will make VAT and ISR withholdings of an underlying supplier and make the filing and payment of taxes directly to the tax authority. 

Foreign providers of digital services should register for RFC through the taxpayers’ registry portal. There isn’t any threshold for their direct supplies.

When they offer their digital services to Mexican customers through the digital platform, reporting obligations for their supplies made through the platform may be transferred to the platform operator. 

Online seller VAT registration Mexico rules and regulations determine the difference between VAT registration procedure between the platform operator and foreign providers that provide their services directly. 

Digital platforms 

VAT obligations for marketplaces in Mexico have been part of the Mexican tax system since June 2020. The driving force for introducing the system is based on taxing foreign digital platforms that facilitate the supply of goods and services no matter the residency of the underlying supplier. 

Mexico e-commerce VAT requirements stipulate that when the domestic or non-resident platform operator provides intermediary services for the underlying supply carried on by third parties, the obligation to withhold Income tax and VAT rises. 

Foreign digital business VAT Mexico rules state that non-resident platform operators, acting as intermediaries, should charge VAT of 16% to the underlying supply of goods and services. 

The rules established around digital platforms tax compliance Mexico are very complex because there aren’t uniform rules or some standards which are the same for all taxable persons that are part of this business model. The first differentiation can be seen in the responsibility of VAT collection of the digital platform operators, which depends on who is responsible for the collection of the consideration and VAT. 

Withholding regime 

VAT withholding regime 

Non-resident VAT obligations Mexico for digital platforms, in cases when the platform intermediaries in the underlying supply of goods or services need to follow different requirements regarding the VAT withholding regime. 

These rules are designed following the residency of the underlying supplier and data that the provider has submitted to the platform operator. 

Foreign digital platform operators that intermediates in the provision of digital services should withhold VAT following the following rules:

• In the cases when the supplier is a natural person with validated RFC and is residing in Mexico, the platform should withhold 50% of the VAT amount;
• When the supplier is a natural person without validated RFC and resides in Mexico, the platform should withhold 100% of the VAT amount;
• In cases where the supplier is a foreign resident, the platform should withhold 100% of the VAT amount.

The intermediary is obliged to register following the prescribed form and to submit the VAT return by the 17th day following the end of the reporting period. The rules governing the foreign business VAT compliance Mexico requirements, as we see, are very complex, and demand a significant amount of effort to be adequately understood.

Income Withholding Regime 

Foreign e-commerce platforms that intermediate in providing goods or services offered by domestic underlying suppliers have the obligation, following income tax provisions, to withhold income tax when they process payments on behalf of the underlying supplier. 

There are differences in the income tax percentage that these intermediaries need to withhold from the underlying suppliers. The differences between the current rules are the following: 

In the cases when the domestic supplier is an individual who provides a validated RFC: 

• 4.0% for accommodation services;
• 2.1% for land passenger transport services and land freight transport services;
• 1.0% for the sale of goods and services in general.

In the cases when a domestic supplier doesn’t provide a valid RFC:

• The withholding should be 20% regardless of the type of the transaction.

New Taxability Rules 2025

In the last quarter of 2024, new rules governing the withholding regime for digital platform operators have been adopted. The new rules established the obligation for digital platforms that intermediate between underlying suppliers and recipients based in Mexico to withhold 100% net VAT when the consideration for the underlying supply is deposited in the account abroad. 

The approved amendments to the Miscellaneous Tax Resolution for 2025 concerning the digital platform regime show the continuous work of the Ministry of Finance to improve the tax collection process within the e-commerce ecosystem. These new rules that will come into effect in 2025 will undoubtedly raise awareness of foreign intermediaries to establish if they haven’t done so previously, a more accurate tracking system for VAT(RFC) validation of the third-party suppliers that offer goods to customers residing in Mexico. 

The e-commerce rules and regulations that govern VAT requirements for foreign providers of goods or services direct suppliers of scenarios when the platform facilitates the underlying supply are complex and are undergoing significant changes in 2025. 

Foreign suppliers that have customers in Mexico should be aware of the New Year’s novelties because it could impact their previously set VAT collection model.