Do these requirements apply to foreign digital service providers already registered for VAT in Mexico?

No, providers already registered for VAT on digital services in Mexico are not required to amend their bylaws. However, those registering for the first time must comply with these new stipulations, which may necessitate modifications to their legal documents, even if the companies were incorporated years ago or in different jurisdictions.

What challenges might foreign digital service providers face due to these new requirements?

The new requirements add complexity to the registration process, potentially making compliance more challenging. Specifically, updating corporate bylaws to reflect the mandated business purpose can be cumbersome, especially for companies established long ago or in jurisdictions with different legal frameworks. Additionally, preparing the detailed affidavit demands thorough internal documentation and coordination.

How can foreign digital service providers ensure compliance with these new requirements?

Providers can ensure compliance by reviewing and updating their incorporation documents to ensure the corporate purpose aligns with SAT's specifications. They should also prepare the affidavit with detailed information about their services, transaction platforms, and main business address. Consulting with legal professionals familiar with Mexican tax law is advisable to navigate the registration process and ensure all requirements are met. Proactively addressing these steps can facilitate smoother compliance with SAT's regulations.

What are the consequences of non-compliance with these new requirements?

Non-compliance can lead to delays or denials in VAT registration, hindering a company's ability to operate legally in Mexico. Moreover, failure to meet SAT's requirements may result in penalties or other enforcement actions, impacting the company's reputation and financial standing.

Are there any exemptions or special considerations for certain foreign digital service providers?

Currently, the new requirements apply uniformly to all foreign digital service providers seeking VAT registration in Mexico, and there are no specified exemptions. Companies should, however, stay informed about any future regulatory changes that might introduce exceptions or additional obligations.

Mexico: New Requirements For Foreign Digital Service Providers

Q: What are the new requirements introduced by Mexico's Tax Administration (SAT) for foreign digital service providers?

As of July 2024, the SAT requires foreign digital service providers to include a corporate purpose in their bylaws that explicitly states their business purpose involves providing technological platform services for the sale or lease of goods or the provision of services. Additionally, providers must submit an affidavit signed by their legal representative, detailing the goods or services offered through the platform, the website where transactions occur, and the full address of the company's main business administration. These measures aim to enhance transparency and ensure proper identification of foreign digital service providers operating in Mexico.

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