In response to a bill submitted by senior Mexican legislators regarding the imposition of a value-added tax (VAT) of 16% on Internet companies such as Amazon, Uber, AirBnB, and other platforms whose business is booming, and the official implementation of the new policy from June 1, 2020, which will be targeted at overseas e-commerce merchants, the Mexican government has proposed a new tax of 16% on Internet companies.
Screenshot of an Amazon seller receiving an email notification from the platform
From the Amazon email, it appears that the seller did not provide a valid RFC ID, and the platform is withholding 16% of VAT and 20% of income tax to the Mexican government, which is non-refundable.
In response to the new Mexican tax law, the Green Circle participated in two official Amazon tax training conference, on the issue of concern, the first focus.
1. Who needs to register?
Sellers with FBA or local overseas warehouses in Mexico are required to register, similar to the requirements in Europe. Customers whose inventory is sold remotely from North American warehouses to Mexican buyers are not affected by the new policy.
2. The name of the Mexican tax code:
RFC, Spanish: Registro federal de contribuyentes (RFC) English: Federal Taxpayer Registry.
3、What happens if a Chinese seller does not have a Mexican tax ID number?
If the Chinese seller does not have the Mexican RFC tax number, Amazon will not shut down the Mexican site, but will withhold and pay on behalf of the value-added tax and income tax two types of taxes, these two types of taxes Amazon will be based on the seller's monthly sales, a total of 36%.
4、If I upload the RFC tax code?
If there is a Chinese seller with RFC, if it is an enterprise registered RFC, the VAT rate is still 16% but can be refunded 100%, if it is a natural person registered RFC, the VAT rate is 16% and can be refunded 50%.
Chinese sellers who have uploaded RFCs will be subject to an income tax rate of 0% if the RFC is registered as an enterprise and 0.4-5.4% if the RFC is registered as a natural person.
5. Will sales before registration be taxed?
No income tax will be levied on sales made before June 1; the first levy will be on June 25, and the levy period will be June 1-June 25th.
6、Do I need to register for direct mail?
If it is MSN parcel direct mail, no matter shipping from China or the United States do not need to register RFC, also does not belong to the requirements of this Mexican tax reform.
7、What are the requirements for RFC tax code?
Each seller account requires an RFC, the registered company/legal entity information is identical to the company/legal entity information on the backend of the Amazon account, you cannot use the same tax ID for more than one account, this requirement is the same as any other website on Amazon.
Mexican sellers will have 16% automatically deducted from their orders on June 1st.
Under the new e-commerce law, it is necessary to register the company's VAT number with the Federal Register of Taxpayers in order to conduct business in Mexico, as described below:
If you are a legal entity, the documents required to apply for a Mexican tax ID are:
1. Your company's business license with Hague certification and notarization. Upon receipt of the documents, we will deliver them to a notary public in Mexico who will protocolize and translate them in order for the SAT (Mexican Tax Service) to accept them and allow them to be registered in the RFC. It must be notarized again and protocolized before the Mexican notary.
2. Power of Attorney, your company must authorize us to perform this procedure before the SAT, in which case we suggest that this can be done through our Mexican legal representative. Once we receive the power of attorney, we will deliver it to a notary public who will agree and translate it so that the SAT will allow the program to be carried out in your name.
Power of Attorney
The Hague Certification Template
Second, regarding the manner in which monthly sales and tax revenues are calculated, we contacted the Revenue Management Services Department to ensure that all information was available:
1) The Dirección General de la Nación informs us that we must pay VAT and ISR (Corporate Income Tax) every month, since there is no exemption treaty between the two countries that provides for the non-submission of ISR to Mexico, which is a new activity that has not been taken into account.
2) To file these taxes, the Internal Revenue Service requires us to comply with electronic accounting under Section 33 of the Federal Tax Code and mentions that we must comply with the following:
The Supplemental Accounting Records or Entries, including the chart of accounts used for this purpose, and the policies for such records and entries;
Bank statements and reconciliation of deposits and withdrawals related to accounting records, including investment and credit, debit or service card statements.
Tax types and rates
1, VAT is still 16%, but after registering the RFC tax code, you will have the right to declare and deduct your input tax normally, provided that you need to provide the invoice recognized by the tax office, we will give specific guidance later.
2. Requirements regarding income tax, as interpreted in accordance with Mexican tax law
Natural and moral persons are obliged to pay income tax in the following cases:
1) Residents of Mexico, regardless of their source of income, shall be considered to have all of their income.
2) Income attributable to the permanent establishment of a foreign resident who has a permanent establishment in that country.
3) Income derived by a foreign resident from a source of wealth located in the territory of this State shall not belong to this State if the foreign resident does not have a permanent establishment or presence in this State.
We had a discussion with the Mexican tax authorities and they mentioned to us that Chinese cross-border sellers are under the Section III assumption and therefore the seller must pay income tax in Mexico as there is no exemption treaty for trading activities.
However, when you get your RFC tax number, you can submit your relevant cost bills to us as one of the ways to reduce your profit in order to minimize your taxable amount.
In short, Chinese sellers with overseas warehouses in Mexico are advised to register for a local tax ID, RFC, so that you can minimize the amount of tax that will be deducted at a later date. Both natural persons and legal entities can use our local Mexican legal representatives to help you complete the process of registering your local tax ID. Sellers registered RFC, you can normally and legally claim credit for your input VAT amount, and the EIT portion of the EIT is only for Mexican business income, after deducting all the fees and costs that can be provided to meet the requirements of the Inland Revenue Department of the invoice and the rest of the profits subject to EIT, so your tax rate will be far less than the 36% that was directly withheld by Amazon because of the lack of an RFC tax ID number.
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