Newsflash - June 1, 2020 – VAT rules on digital services come into force
May 18, 2020
Newsflash Ritch Mueller
On June 1, 2020 new value-added tax (“VAT”) regulations for digital services provided by non-Mexican residents will come into effect.
New Chapter III BIS of the VAT Law establishes a new tax regime applicable to the following digital services when rendered by non-Mexican tax residents: (i) download of information (images, movies, text, music, games, among others); (ii) intermediation between third parties that supply and demand goods and services; (iii) online clubs and dating websites, and (iv) remote teaching, including exercise lessons.
Digital services will be deemed rendered in Mexican territory whenever: (i) the recipient of the digital services provides a Mexican address; (ii) the payment in respect of the digital services is carried out through an intermediary in Mexico; (iii) the IP address of the recipient of the digital services is in Mexico, or (iv) the recipient of the digital services provides a Mexican telephone number.
The non-Mexican tax resident digital service providers rendering digital services in Mexico must comply with new obligations, including, among others, obligations requiring them to: (i) register in the Federal Taxpayers’ Registry (Registro Federal de Contribuyentes); (ii) obtain an electronic signature (e.firma); (iii) designate a legal representative and a domicile in Mexico; (iv) compute and pay VAT, monthly; (v) issue tax invoices, and (vi) provide quarterly information to the Mexican tax authorities regarding the digital services rendered.