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Mexico: New Income Tax Considerations for Amazon Sellers in 2020

Income tax collection policies in Mexico have recently changed due to new tax reform. This legislation, that took effect in early June expects Amazon to calculate and withhold income tax on the monthly total sales of its sellers.

If you’re interested in selling on Amazon Mexico, you’d want to be informed about:

  • New taxes sellers have to pay
  • Additional regulations on products
  • Tariff and duty rates
  • Destination duties
  • Customs clearance fees that sellers have to settle before Amazon fulfillment centers in Mexico can receive products.

Amazon Mexico Income Tax Requirements

The new legislation requires Amazon to charge VAT (Value Added Tax) on all the digital services that it provides to sellers. After this, the marketplace will also have to send all the taxes collected to the Mexican Tax Authority.


Importer Registration

Residents of Mexico can serve as the importer of record (IOR) on their own inbound shipments to Mexico. To do this, they must have a tax number, known as Registro Federal de Contribuyentes or “RFC” in Mexico. They must also register so that they can be recognized as importers. Then, they must ask to be listed on the Importers’ Registry (Padrón de Importadores). This department is under the Secretariat of Finance and Public Credit (Hacienda).

Note that imports might require additional registrations for certain imported products. Sellers should consult a customs broker and/or legal adviser in Mexico. This will help them sort through the regulations. This is so they can apply the correct solutions for their businesses. Sellers have to be sure that all their papers are in order.


3 Key Aspects to Keep in Mind

Non-residents have three basic options if they want to import goods into Mexico. Each option has certain considerations attached. So, sellers living outside of Mexico should consult a professional for advice before choosing one.

#1

Sellers must identify the end customer as the IOR.


#2

They can use an authorized third-party service. This service will import into Mexico on their behalf.


#3

They are allowed to incorporate and register a local Mexican business entity and then act as the importer.

If they do this, they will then have to report to Mexican tax authorities before operating. The IOR in any of these cases must have an RFC.


Note that Amazon will not serve as the IOR for any shipment. It doesn’t matter if it’s merchant fulfilled or through Fulfilment by Amazon (FBA). Sellers could lose their selling privileges if they list Amazon as the IOR.

They can also be banned from Amazon if they leave this information out on inbound FBA shipments to Mexico.

In addition, Amazon might send back shipments with wrong IOR information. Sellers should know that they will have to pay for the return shipping on these shipments.


Fees Calculated by Amazon

Sellers who do not register with the Mexican Tax Authority will pay 20% income tax on their total monthly sales. The same is true for sellers who do not have valid RFC numbers. Amazon calculates this amount and takes it out of sellers’ monthly sales on the marketplace. Amazon then and remits the collection to the Mexican Tax Authority.

Individual registered sellers are known as persona fisica in Mexico. These sellers can get a valid RFC ID and register it on their Amazon Seller Accounts. If they do this, they can expect to pay between 0.4% and 5.4% income tax. This variable rate depends on each seller’s monthly gross sales. Amazon calculates the amount and then deducts it from each seller’s monthly sales and remitted to the Mexican Tax Authority.

Registered business entities are known as persona moral in Mexico. Sellers with valid RFC IDs registered on their Amazon Seller Accounts will not pay any income tax through Amazon.

Sellers who have RFC IDs should enter their registration information on Amazon immediately. This way they can avoid being charged.

Sellers can do this through the RFC ID registration page or through Seller Central.

The RFC ID area is under the Tax Information section on the Account Info page in Seller Central Settings.


VAT on Digital Services

The Mexican government passed additional legislation that targets digital services. This refers to services that are sold to sellers who are based in Mexico.

All companies that do not register in Mexico will soon have to charge and collect VAT on these services as part of the requirements.

The definition of digital services under this legislation includes the marketplace services that Amazon provides to sellers. As above, sellers who have valid RFC IDs should enter them into Amazon. This is so that they won’t have to pay this tax.


Other Duty and Tax Requirements

Sellers who import any merchandise into Mexico have to mark them with a particular 8-digit Mexican tariff classification number. This number tells customs what the correct duty rate for the merchandise is. It also sets what non-tariff barriers apply.

Sellers should consult with an authorized customs broker, carrier, or legal adviser. They must make sure they are properly complying with this requirement.

Customs authorities in Mexico will collect VAT (called IVA) on certain merchandise upon entry into Mexico.

A special tax called IEPS (Impuesto Especial sobre Producción y Servicios) also applies to certain imports such as alcoholic beverages.

The IEPS can range from 25% to 160% of the merchandise’s value.


Customs processing fee – “DTA (Derecho de Trámite Aduanero)”

Importers must fill out a form called “pedimentos” with details of their shipments. Then they can submit imports to customs. Mexican customs charges a prescreening fee (prevalidación) to validate this information. Sometimes they do it through private companies.

Sellers must add all taxes and duties to the price stated on the customer checkout page. They cannot charge customers any additional duties or taxes at the time of order delivery or at customs clearance.


Final Thoughts

The new tax reform legislation in Mexico changes Amazon Mexico income tax collection policies. Sellers have to either register in Mexico or pay income tax and collect VAT from their customers. Amazon takes care of calculating this income tax and remitting it to the Mexican authorities. Sellers are responsible for calculating and adding the required VAT to the price of each product they sell to Mexican residents.

Julia ValdezMexico: New Income Tax Considerations for Amazon Sellers in 2020
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