What is VAT?

VAT is often regarded as being similar to sales tax, although it is instead imposed on the price of goods/services at each stage of production, distribution and sale to end-consumers. 

Mexican VAT is known locally as Impuesto al Valor Agregado (IVA).

There is a standard VAT rate of 16%, and some goods/services/transactions are zero-rated or exempt.  This includes products such as foodstuffs, water and books/magazines.  

Do I need to register for VAT?

Under the Régimen residentes en el Extranjero sin Establecimiento Permanente en México (Regime for Residents Abroad Without Permanent Establishment in Mexico) rules, all overseas businesses must register for VAT if they intend to use any warehousing arrangements in Mexico (e.g. Amazon FBA). 

All applications are made to the Mexican Tax Authority Servicio de Administración Tributaria (SAT). 

Overseas businesses must also appoint a local representative to act on their behalf – it is not possible to independently apply for VAT as an overseas business.

Once you’ve successfully applied for VAT, you’ll be issued with an Registro Federal de Contribuyentes (RFC) number. The RFC number is directly linked to your VAT registration and liabilities – it effectively acts as a VAT number.

Marketplace Requirements

Ecommerce platforms such as Amazon are required to check whether businesses are operating with a valid VAT registration. 

As of the 1^st June 2022, all businesses selling on Amazon.com.mx will not be able to use the platform without providing a valid RFC number (obtainable upon successful VAT registration).

Basic Requirements

Some basic information is required to start a Mexican VAT application for your business:

• Company/business certificate
• Articles of association
• Director’s proof of identity (e.g. passport or national ID card, ID cards require English translation)
• Amazon/website store links – to indicate proof of trading

US businesses must also provide their EIN certificate. 

What happens next?

The registration process is usually expected to take around 3-4 months. 

TBA will act as your local representative, schedule a mandatory appointment with the SAT and act on your behalf. 

Once approved, you’ll be issued with an RFC number consisting of 12 or 13 characters, depending on your business type. This number is also present on the corresponding RFC certificate.

From the point that your RFC number is issued, you will be expected to begin filing VAT returns.

The filing frequency is always monthly, with both VAT return and payment being due on the same day – the 17^th of the month following the reporting period (e.g. reporting and payment for October must be completed by the 17^th November). 

Payments can be made directly to the SAT (via authorised banks/platforms only), or via TBA as your appointed local representative.  

Failure to comply with filing/payment requirements can lead to further financial penalties and/or suspension of trading.

Importing Requirements

Your RFC number will only be valid for inventory storage in Mexico. 

To import any inventory into Mexico for storage, you will also need to appoint an Importer of Record to handle the customs clearance process.

Your shipment provider may be able to provide further information on this process.

Why apply with TBA?

All overseas businesses are required to appoint a local representative to apply for and manage their Mexican VAT. 

With an established presence in Mexico, TBA Global can act as your representative for both the application process and ongoing compliance requirements such as filing timely VAT returns.

Once you have received your Mexican VAT number, you will need to comply with ongoing obligations such as filing and payments.    Non-compliance can lead to financial penalties, and the possible suspension of your trading activities. 

TBA Global can help your business stay compliant with both current and any upcoming compliance requirements.  If you have any questions, please check out our FAQ, or contact us at info@tbaglobal.com for a free one-to-one consultation.