Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

November 18, 2019

Mexico’s tax reform: Implications for foreign digital service providers

With the imminent enactment of Mexico’s tax reform, foreign digital service providers should be aware of the new requirement to collect value-added tax (VAT) on the sale of certain goods and services in Mexico. The tax reform also would require income tax withholding on certain transactions with Mexican individuals.1

This Alert summarizes the new requirements under Mexico’s tax reform that would impact foreign digital service providers.

Digital service providers subject to the new requirements

The tax reform does not distinguish between business-to-business (B2B) and business-to-consumer (B2C) transactions. Therefore, the rule would apply to all suppliers. However, the provisions appear to focus on B2C transactions. The following providers are subject to the rules and responsible for the collection, reporting and payment of VAT:

  • Category 1: Those that provide for the download/access to images, movies, music, text, information, video, gaming, ring tones, news online, traffic, weather, online clubs, dating sites and other multimedia content, on-line learning, tests and exercises
  • Category 2: Those that perform intermediation services between potential sellers and buyers of products and services

Providers of financial services, payment services, data storage, and the use or sale of software would not be subject to the new requirements.

Services considered rendered in Mexico

Services would be considered rendered in Mexico when: (i) the recipient provides a Mexican domicile or telephone number to the digital platform; (ii) a Mexican IP-assigned address is used; or (iii) a Mexican intermediary is used by the recipient (for instance a financial institution) for payment.

Compliance and disclosure obligations for foreign digital providers

The tax reform would require foreign digital service providers to register with the Mexican tax authorities and obtain a tax identification number for VAT purposes. They also would have to: (i) appoint a tax representative in Mexico; (ii) provide a Mexican tax address; and (iii) collect the VAT on the price of the digital service. The VAT rate would be 16%. The tax representative would be responsible for the provider’s filing and reporting obligations.

The tax representative would have to disclose information related to the provider’s transactions with Mexican users/recipients of the digital services, including information related to the number of transactions and transaction amounts by type of service.

Tax representatives would not need to issue official invoices during 2020. Rather, they would only have to issue a simple payment receipt to service recipients. Beginning 2021, providers of Category 2 intermediation services would have to issue formal electronic invoices related to the VAT withholding on the sales of goods and services.

Category 2 providers would have additional reporting and registration obligations.

Entry into force

The rules would enter into force on 1 June 2020.

Next steps

Businesses should evaluate their systems to identify taxable transactions and reporting obligations. Registration with the authorities will begin 1 June 2020, and should be completed by 30 June 2020, for businesses with operations subject to the rules on 1 June 2020.


1. For more on Mexico’s tax reform, see EY Global Tax Alert, Mexican Congress passes tax reform for 2020, dated 5 November 2019.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), Indirect Tax, San Francisco
Ernst & Young LLP (United States), Latin American Business Center, Miami
Mancera, S.C., Mexico City



The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2023, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct