Mexico: New Requirements For Foreign Digital Service Providers

Mexico has introduced new requirements for foreign digital service providers to further regulate the rapidly expanding digital economy. 

The Mexican Tax Administration, Servicio de Administración Tributaria (SAT), added two new requirements for foreign digital service providers that want to register for the first time. This list was already complex enough, and foreign digital service providers faced many difficulties registering for VAT purposes in Mexico.

 Two new requirements included in the list are:

• Corporate purpose in bylaws and

• Affidavit.

Impact on Foreign Digital Service Providers

Under the new requirements, foreign digital service providers must ensure their deeds of incorporation, such as Articles of Incorporation or Certificates of Incorporation, or other bylaws, explicitly state that their business purpose is to provide technological platform services. This includes the sale or lease of goods or the provision of services. The SAT requires this business purpose to be detailed, specifying that the service is delivered through a "technological platform."

Additionally, foreign digital service providers must submit an affidavit signed by their legal representative. This affidavit should include:

• A detailed description of the goods or services sold through the technological platform,

• The website where these transactions occur,

• The full address of the core business administration of the foreign digital service provider.

While foreign digital service providers already registered for VAT on digital services in Mexico do not need to amend their bylaws, those registering for the first time might have to amend or modify their legal acts, even if these companies were incorporated many years ago or in different jurisdictions.

Conclusion

The addition of two new requirements for VAT registration significantly increases the administrative burden on foreign digital service providers registering for the first time. These changes could have significant impacts. All those who want to register for VAT purposes must thoroughly review all formalities, including deeds of incorporation, and explore all compliance options to meet Mexico's registration requirements.

Source: KPMG