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Mexican Withholding Tax on Upwork Earnings

lenaellis
Community Member

[Updated March 2023] We would like to update you that we are working with our vendor to have the CFDIs sent out automatically. We hope that this will be functional within the next 2 months and will allow us to provide CFDIs to our Mexican freelancers on a monthly basis. We are continuing to send out any remaining CFDIs that have not been sent out for the last quarter of 2022 as we are aware of the income tax return due date of April 30. We appreciate your continued patience.

 

 

[Updated June 2022] We apologize for the current situation in which CFDIs have not been able to be fully provided  under your name. We are in the process of digitally stamping the CFDIs and we have increased our efforts during the month of June 2022 in order to be able to finalize additional processes and send you the pending documentation as soon as possible.

It is important to mention that any sanction that the tax authority could impose for the non-issuance of a receipt for withholding and payment will not fall on the recipients (i.e. users of the Upwork platform). We understand that at this time you have not been able to prove the calculation of withholdings on your taxes, however, we will notify you as soon as the receipts are issued so that the withholdings may be used by you.

 

[Updated April 2022] We thank you for your patience. As of today, we are able to issue CFDIs for most of the transactions in Mexico and have begun processing all calendar year 2021 transactions. We will email your CFDIs in the coming weeks, but if you need to request that we expedite the process, please submit your request to support@upwork.com and we will send you your CFDIs as soon as we can. 

 

The email with your CFDIs will come from Reachcore (servicioalcliente@reachcore.com). Please add this email to your safe sender list to avoid this email being filtered as spam. The  subject of the email will be “Envío de comprobante fiscal”. In some cases, the email will come from tax@upwork.com.

 

We thank you again for your patience and please do not hesitate to reach out to us if you have any questions.

 

[Updated February 2022] We would like to take this opportunity to update you on the latest status of issuing CFDIs in Mexico. As you are aware, Upwork began income withholding in 2021. However, there was a delay in our registration process due to the complexities of a non-resident entity obtaining tax registration in Mexico. That being said, we successfully registered for tax registration in Mexico at the end of 2021. 

 

Now that we’re registered, we've worked tirelessly to issue CFDIs for income withholding that we have made. We were in discussion with one "Proveedores Autorizados de Certificación" (PAC) vendor, but due to the vendor's inability to meet our high data protection requirements, we made a difficult decision to move in a different direction. As much as we want to issue CFDIs ASAP, our user's data privacy is our primary priority and therefore we want to work with the right vendor who maintains high standards of securing our users’ data. A few weeks ago, we entered into a contract with a different PAC vendor and we are currently working through testing of our integrations. Once completed, we hope to issue the CFDIs shortly thereafter.

 

We are aware of the income tax return due date of April 30th, and we will provide an additional update as soon as we have a clear timeline of delivering CFDIs to you. We are working tirelessly to get this done within a reasonable timeframe, and appreciate your continued patience. 



 

[Original Product Release] Upwork has begun 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 Infosection 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 6, 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 6, 2021. 

 

This withholding is required by Mexican law and all funds withheld will be passed to the Mexican government. 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. Upwork is required to collect VAT on its fees charged to users in Mexico. We have begun configuring our system to be able to collect VAT, and we will let you know when we have a target date to start collection. 

 

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.

307 Comments
1f32be23
Community Member

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 .

VladimirG
Community Manager

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.

 

rayfreelance
Community Member

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

 

 

50e6f33d
Community Member

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 

kochubei_valeria
Community Member

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. 

cliceriomp
Community Member

Hello.

I am working from Mexico.

Seems to be that registering my RFC is convenient and I did it already; however, I wonder if besides this I must upload the W-8BEN form?

In case I must do so, where is the link to upload the form to Upwork? I don't see any repository in my profile's settings.

I would appreciate any orientation.

Thank you so much in advance.

Clicerio


50e6f33d
Community Member

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

JoanneP
Moderator

Hi Clicerio,

 

The Form W-8BEN is a form used to confirm you’re not a U.S. taxpayer and that Upwork is not required to withhold taxes from your earnings. To provide Upwork with your Form W-8BEN information, please go to Settings  Tax Information and provide us with your legal name and address.

 

 

lucioric
Community Member

I am grateful that Upwork is complying Mexican laws, so that the Mexico-based freelancers don't have any problem later. But, shouldn't the Earnings tax (Impuesto sobre la Renta) be applied after deducting the Upwork fee, and not before (or how can we deduct the Upwork fee, as the money for this fees never comes to our hands?). And, for the effect of that deductions, do you have a RFC (Registro Federal de Contributyentes) registry.

lucioric
Community Member

Mexican goverment have looked to the platforms contractors, for surveilling our tax obilgation. But social security has not looked to us. They should do also, don't you think, Mexico-fased freelancers?.