Mexico VAT Compliance: An Overview for Businesses

VAT compliance in Mexico requires in-depth knowledge of the country’s rules and future plans. It can take a lot of work to stay on top of your obligations should you do business there.

This page is your ideal overview of your VAT requirements. Be sure to bookmark the page to stay on what’s to come, too.

General VAT information for Peru

Periodic VAT return17th day of the month following the end of the tax period
VAT rates16
8%
0% and Exempt

VAT rules in Mexico

For many taxpayers in Mexico, meeting their tax obligations often takes more than keeping up with VAT. Here are several mandates you may need to pay attention to.

Mexico e-invoicing

Mexico was quite an early adopter of e-invoicing, replacing its CFD with an electronic invoice scheme in 2011. E-invoices are required for both B2B and B2G transactions.

There are processes taxpayers must follow when electronically issuing invoices. The country’s tax authorities require e-invoices to meet specifications in the Miscellaneous Tax Resolution, and both the content and format must be validated.

Learn more about e-invoicing in Mexico.

Requirements to register for VAT in Mexico

There is no VAT threshold in Mexico, meaning any business that plans to perform taxable activities in the country must register for VAT with the national tax authorities.

Foreign entities without residence in Mexico must also register in the RFC for VAT purposes. Domestic entities must apply for a VAT number in Mexico’s Federal Taxpayers Registry of the Tax Administration Service.

Once registered, taxpayers must file and pay VAT returns electronically by the 17th of the month following the tax period. Failure to do so may result in penalties.

Invoicing requirements in Mexico

Taxpayers must follow a stringent set of rules to meet Mexico’s e-invoicing regime, such as:

  • The generated XML file must comply with Miscellaneous Tax Resolution specifications in both format and syntax
  • E-invoices must be validated by the PCCFDI
  • E-invoices must be securely stored for five years
  • They must be issued for both B2B and B2G transactions
  • They must include specific information for the buyer, seller and goods/services traded

Penalties for non-compliance with VAT in Mexico

Failure to comply with Mexico’s tax rules may result in penalties. For example, if an organisation does not register for VAT or is late doing so, it may be fined up to $500 USD.

For non-compliance regarding payments, including late VAT return filings or payments, taxpayers may receive a fine of $650-$1,400 USD. As well as the fines for the above examples, the taxpayer could be sanctioned with a fine for failure to pay the tax of 20-75% of the omitted tax.

FAQ

The standard VAT rate in Mexico is 16%, though there is also a reduced rate of 8% and a 0% rate. Some goods and services are also exempt.

There are plenty of items and services that are exempt from VAT in Mexico, including:

  • Lottery and gambling tickets
  • Books, newspapers and magazines
  • Goods produced by charitable organisations
  • Personal property used and not sold by businesses
  • Gold ingots with a purity of at least 99% which are sold retail to the public
  • Fees derived from mortgage loans
  • Educational services
  • Public land transport of people
  • Medical services
  • Hospital services

In Mexico, legal entities or companies withhold a percentage of VAT when they make payments for concepts such as professional services, leasing or operations with taxpayers who are not registered in the Federal Taxpayers Registry (RFC).

Digital platforms that operate as intermediaries, even if they are residents abroad, also withhold VAT from the user who sells products or services through such platforms.

Yes, non-residents with tourist status in Mexico may be able to recover VAT. This is dependent on them having the relevant tax receipts and proof that the relevant goods actually left Mexico.

Mexico requires foreign organisations that wish to do business in the country to register with its tax authorities. This registration must be done through a legal representative, who must provide a domicile in the country for the purposes of notification and monitoring of compliance with tax obligations.

There is no VAT threshold in Mexico, meaning any business that is looking to perform taxable actions in the country must register for VAT in the country.

VAT is payable, generally at a standard rate of 16%, when products and services are sold – though it also applies to lease payments and product and service imports.

VAT returns must be submitted on a monthly basis, namely by the 17th day of the month following the period end. Any tax that is due must be paid by that date, too.

Solutions for VAT compliance in Mexico

Meeting your tax obligations in Mexico may seem complicated. Multiple mandates are in play for many taxpayers, and rules change over time. It can all be simple when you choose Sovos as your compliance partner.

Combining leading solutions with unparalleled regulatory expertise, Sovos’ software and team act as extensions of your own organisation to ensure you are compliant – both in the present and the future. Speak with us today to get started.

Speak to our experts today to start a new chapter in your compliance journey.