MEXICO Law and Practice Contributed by: Ricardo García Giorgana, Carlos Chavez Alanis and Xavier Careaga Franco, Galicia Abogados
( Comisión Federal de Competencia Económica; COFECE), has launched investigations into vari - ous aspects of the digital economy, including the markets for digital payment processing, servic - es, advertising and e-commerce. However, these investigations remain inconclusive. The creation of a new competition agency under constitution - al amendments could further delay their resolu - tion. This agency will absorb COFECE and the Federal Telecommunications Institute ( Instituto Federal de Telecomunicaciones ; IFT), consoli - dating competition law enforcement across all sectors and implementing asymmetric regula - tions in telecommunications and broadcasting. This new entity, with its own legal standing and assets, will likely operate under the Ministry of Economy. Under President Claudia Sheinbaum, significant structural changes are underway. The autono - mous privacy regulator – ie, the National Trans - parency Institute ( Instituto Nacional de Transpar- encia ; INAI), will merge with the Public Service and Transparency Secretary, and a new Science and Technology Secretary will be established to oversee digital innovation. A Digital Transforma - tion Office will also be created, which could have a substantial impact on the industry. The govern - ment has expressed plans to enact new laws, including a Cybersecurity Law, a Nearshoring Law, and a Digital Simplification Law, as well as initiatives to attract investment in AI, semicon - Tax regulations for the digital economy include a corporate income tax (CIT) of 30% for Mexican residents on income from goods and services, alongside a value added tax (VAT) of 16% under the Mexican Value Added Tax Law (MVATL). Non-resident digital service providers must reg - ister with the Mexican Tax Authority ( Servicio de ductors, robotics and data centres. 1.2 Digital Economy Taxation
Administración Tributaria ; SAT) under a simpli - fied regime, collect VAT from Mexican users and remit it monthly. These measures aim to ensure equitable taxation in the evolving digital econ - omy. Companies providing digital services in Mexico, both domestic and foreign, encounter several challenges. • VAT credit: The MVATL is silent with respect to the possibility of crediting any VAT input for non-resident companies, which are required to register before the MTA for VAT purposes. • Registration and reporting requirements: Non-resident companies must register before the MTA, a process that may be unfamiliar to businesses outside Mexico. The simplified regime for digital services reduces some of the administrative burden but still requires monthly reporting and payment compliance. • Electronic invoicing: Mexican legislation man - dates the issuance of digital invoices ( com- probantes fiscal digital por internet CDFIs) for transactions. Understanding technical speci - fications and ensuring accurate issuance is a significant challenge for new entrants. • Ambiguities in cross-border taxation: Deter - mining the source of income for CIT purposes under the Mexican Income Tax Law (MITL) can be complex, especially when distinguish - ing between digital and traditional business models as well as in relation to the applica - tion of tax treaties, including multilateral instruments. Penalties for Non-Compliance Non-compliance can lead to penalties, including fines and restrictions on the provision of services to Mexican customers.
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