Indirect tax - Mexico

Value Added Tax (VAT) is the main type of indirect taxation in Mexico.

VAT applies to most transactions involving goods or services taking place within the Mexican territory. Such transactions include the importation of goods and services from abroad. VAT consists in a 16% tax rate applied to each transaction.

The VAT mechanism involves VAT collected, which is charged to  the buyer when a sale is made; and VAT outlay, which is paid to the seller when a purchase is made. When the difference is positive (VAT collected is greater than VAT outlays), it’s forwarded to the tax authorities with the monthly VAT return. When the difference is negative (VAT outlays are greater than     VAT collected), a refund or tax offset claim may be filed on a monthly basis.

VAT may be an easy tax to work with, but on certain circumstances it may create substantial cash flow consequences. Additionally, proper precautions need to be taken since VAT refunds may not be granted to foreign corporations. A proper VAT plan may be required to avoid a negative impact on VAT.

The following acts or activities are subject to VAT, within Mexican territory:

• supplies of goods
• services provided
• leasing of goods
• importation of goods or services. 

No, all the taxpayers that carry on the activities mentioned before should register; however, in case of foreign residents only in some cases may be necessary to be registered.

Not applicable in Mexico.

Depending on the service provided it could be classified as a  digital service or a importation of services (including technology transference)  which must include VAT in the consideration paid for such services.

The Mexican Federal Tax Code establishes the obligation to register in the ‘Federal Taxpayer Registry’ for all legal entities and for individuals who must file tax returns or issue electronic tax invoices, for the acts or activities they carry out, for the income they obtain, or in case they opened a financial account.

A non-established corporation with no permanent establishment in Mexico needs a fiscal representative in order to register.

Most businesses are required to submit VAT on a monthly basis,  no later than the 17th day of the month following the month to which the payment corresponds.

A default surcharge penalty may be imposed by the tax authority if VAT returns are not submitted on time, or the related tax is not paid by the due date.

For non-compliance, a fine which ranges from 55% to 75% of the tax omitted.

From $1,400.00 to $17,370.00 Mexican pesos, in the case of returns, for each obligation not declared.

Additionally, taxpayers must submit on a monthly basis, an informative tax return of transactions with third parties, also known as ‘DIOT’.

Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.

For mathematical mistake, a fine which ranges from 20% to 25% of the tax omitted.

In case of failure to submit the DIOT, a fine which ranges from $10,370 to $20,740 Mexican pesos.

No, because transactions that do not take place in Mexican territory are not subject to the VAT in Mexico.

A VAT invoice must show:

• an invoice number which is unique and sequential
• the seller’s registration number and tax regimen
• the invoice date
• the invoice place of expedition
• the customer registration number
• a description (including quantity/measure unit) sufficient to identify the goods or services supplied to the customer
• total amount of the good or the service
• total amount of VAT charged expressed
• if total payment is completed in one or more payments.

No, due that the filing of the monthly VAT returns, as well as the invoices (CFDI) must be made through electronic means. Nevertheless, the only additional requirement is the electronic filing of the informative tax return of transactions with third parties, also known as (DIOT).