Mexican Tax Law: Value Added Tax

A company doing business in Mexico will be obligated to pay Value Added Tax (VAT) when it carries out any of the following activities:

1. alienates or leases goods;
2. renders independent services; or
3. imports goods and/or services.

This tax shall be calculated by applying the general rate of 15% to the price of the goods or services. If residents in defined border areas of Mexico (North America and Central America) perform the foregoing activities, the applicable rate will be 10%. The VAT is charged to the taxpayer who acquires the goods or receives the services from the company. Therefore, the VAT must be stated separately on the invoice of the goods or services. Basically, the company shall pay to the tax authorities the difference between the VAT it has transferred to its clients or paid on the importation of goods and services from the VAT the company had paid to third parties during the course of business.

However, if the Mexican company with an Export Incentive Program authorized by the Ministry of Economy, definitively exports such goods or services from Mexico, and such goods or services are utilized entirely outside of Mexico, the VAT shall be 0%.

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