Mexican Withholding Tax on Upwork Earnings

[Lena E]

Starting April 1st, 2021, Upwork will begin withholding income tax from payments to freelancers and agencies based in Mexico as part of the tax law enforced by the Mexican government which became effective June 1, 2020 and was modified effective January 1, 2021 (the Resolución Miscelánea Fiscal). This law requires businesses like us to collect income tax on the earnings of service providers who are based in Mexico, such as freelancers and agencies who use Upwork.

As part of our continued efforts to remain compliant with tax laws in Mexico, we are asking that freelancers and agencies based in Mexico provide their Clave en el Registro Federal de Contribuyentes, Income Tax Identification number (RFC) in their “Tax Info” section under “Settings”. 

By providing a valid RFC number you are subject to significantly lower tax withholding.

• If you provide a valid RFC number we will withhold 1% of all your Upwork earnings, starting with all payments made on or after April 1, 2021. 

• If you don’t provide a valid RFC number we will withhold 20% of all your Upwork earnings, starting with all payments made on or after April 1, 2021. 

You will be able to claim a tax credit or refund from the Mexican government should you pay more taxes than required.  

We also want to give you a heads up that the same legislation included adding a Valued Added Tax (VAT) on digital services. Right now we are working to understand if we are required to collect VAT and remit it to Mexican tax officials. We will keep you posted on that. 

For additional information see our Help center article and for questions about withholdings and how this applies to you, we suggest you contact a trusted tax advisor. We cannot provide tax advice.

[Oliver B]

Hello everyone 

I just have received a notification regarding RFC. I landed to work on upwork home from Mexico. 

Notification is saying like following:

"In compliance with Tax Law in Mexico, Upwork withholds a 1% Income Tax from your payments. The tax withheld is increased to 20% if you haven't already provided your RFC (Registro Federal de Contribuyentes)"

I'd appreciate for that if anyone can kinda help .

[Vladimir G]

Hi Oliver,

Thanks for your question. We expect to begin collecting this tax on April 1, 2021, but it may be a bit later. Please review the information included in the email you received, review the information shared here and feel free to follow up afterwards with us here in the Community if you have any questions. Thank you.

[Raymundo L]

Hey Up Team!
I have been happy freelancing on Up for the last 4 years, I have paid my taxes and also Up fees.

Yes, we have a new law for "Digital Platforms" in the "Resolución Miscelánea Fiscal" available to download here 
Netflix increased the prices in Mexico during quarantine because of this new law https://www.world-today-news.com/netflix-raised-its-prices-in-full-quarantine-in-mexico/ 

Due to the lack of information on how Up changed or added this new Up policy, I have some comments.

• I pay my taxes I have no issues adding my RFC to my profile. I don't allow Up to make my RFC visible on my profile or share it with my Up clients nor potential clients that I could have in the future.
• I'm not a digital platform providing a digital service,  if the Mexican laws enforce new taxes to digital platforms, the new taxes should be paid by Up or the one who hires and not the freelancer.
• I don't authorize Up to withhold 20% nor 1% of all my Upwork earnings, if the Mexican government request me more details about my income I can share it with them, I am willing to share my annual tax return with Up in exchange for no additional withholding.

Come on guys! a lot of Mexicans are freelancing in Up, the new law should not apply to Up because Mexicans are being hired by Up clients! these new taxes on Digital Platforms providing Digital services are supposed to apply to those companies that don't fulfill a basic need e.g education or working! (this new tax applies to platforms that are considered a "luxury" and not a basic need, like Netflix)

Please ask your legal team to find out more about the new law, the Mexican government will not charge additional or new taxes to platforms such as Up that puts us in contact with potential clients and helps us meet a basic need, which cannot be covered by the Mexican government.

Thanks

[Miguel G]

Hello! I'm currently new to Up, I already have my first earnings on the platform. Today I came up with the notifcation of updating my RFC wich if its not concieved it will witheld the 20% of my earnings, My question is: Does this mean that this 20% is an extra from the default 20% that Up withelds? giving a total of 40% less of my total earnings? 

Also, if I have my earnings still on Upwork and I update my RFC. could I recieved them with just the 1% of witheld, whitout the 20%? 

Hope this make sense since I'm a little bit confused here 

[Valeria K]

Hi Miguel,

Thank you for your question. The withholding tax is calculated based on the gross amount that you invoice your client, so it is calculated prior to freelancer service fees or any other fees that may reduce the amount credited to your account. Also, please note that we won't start collecting this tax before April 1, 2021. So it will not apply to your earnings before then. 

[Miguel G]

Got it, so this means that I would only get the 20% fee for the Up freelancer services right? 

[Lucio Ricardo M]

Hi, every dollar that is retained from Upwork as ISR or IVA, should not be paid by you again, but you need to inform Hacianda that Upwork already retained you that tax.

[Gaby O]

There is no way, no way I'll provide my RFC to you, gosh I miss Elance...

[Rodolfo E. S]

Exactly. We are not providing digital services.