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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
lucioric
Community Member

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.

JoanneP
Moderator

Hi Lucio Ricardo,

 

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.

esamuel08
Community Member
Exactly. We are not providing digital services.
9769adcc
Community Member

As Raymundo says, the new tax reform does not contemplate this type of platform because it is not a luxury. Upwork is an intermediary platform that connects potential customers with people who provide a service. Also they should not withhold VAT because at the time of one as a Mexican resident providing a service abroad is taxed at 0% rate according to current tax laws (which dictate this reduction of VAT to avoid losing competitiveness in an international market).

 

I share the same experience as Raymundo, I have been working in Upwork for almost a year and all my tax obligations as a taxpayer have been presented accurately before the competent authority. And within my fiscal situation there is something called RIF regime, which gives me reductions on the ISR and VAT, which would be diminished because you would be withholding VAT without any reason.

 

Your legal team needs to get advice and investigate more about this new tax reform, because you are attributing to yourselves obligations that do not correspond to you.

 

alexletayf
Community Member

I read the latest announcement regarding Mexican law requiring the retention of 1% or 20% of earnings from the invoice amount. What I would like to know is how are we going to prove to the Mexican Government that you are retaining that percentage of our income?

 

I am sure the mexican community has many questions too.

gabyo21
Community Member
It seems here Upwork is just going with the easiest solución for them and doesn't really care about it's Freelancers, at least not enough to figure this new tax requirente that applies to digital plataforms, not Freelancers using them, hey, no ofende yo Uber drivers but I'm not an Uber driver. This is very disappointing!
s_martinez
Community Member

I landed here in 2009, oDesk/UpWork became profitable to me really fast and I've been paying my taxes religiously since then. Not ecstatic for paying taxes, just an obligation.

 

For more than a year I've been wondering how you guys will going to handle this matter. Now I know, and I foresee more changes to come in ref to VAT (or IVA) to be retained to us, hopefully in the far far future. So far no questions, likely I'll have some in the next weeks.

 

I'm not thrilled about these changes, but can I predict I'll be extremely annoyed for having to deal with Tax Authorities (SAT) in my country. I also predict too many hours of my free time spent studying the law referenced here, just to be sure my accountant doesn't mess up my taxes.  Kidding, I know he wouldn't dare Smiley Tongue and besides, he's a bestie 😉

 

Fortunately, we still have some overhead expenses that are tax-deductible.

 

Meh! 

a8047314
Community Member
The deduction should be based on gross amount or net of upwork fee.
VladimirG
Community Manager

Hi Alejandro,

 

That's a great question! Upwork is in the process of getting registered in Mexico with SAT, so that we will be able to pay over and report to SAT all amounts withheld from freelancers in Mexico.

Under the rules we will be generating monthly digital invoices to our freelancers which show the transactions completed, and the withholding taken on those transactions. That information will be reported to SAT (the regulations are not yet in place, but we assume this is a quarterly report from Upwork to SAT). Since SAT will be receiving record of the withholding done, the freelancer will be able to claim that withheld tax when they do their income tax filings with SAT. (Unfortunately, we cannot provide specific tax advice. Since we want to make sure you receive the most accurate information, we suggest you contact a trusted tax advisor.)

1899a972
Community Member

Hello everyone, right now I'm living in Mexico but I'm here on a student visa that does not allow me to work I do have an RFC from a scholarship I used to have until August 2020, I am still here waiting on my master's degree expedition and then I have to apostille it. The main reason I'm in Upwork is that I can't work here so I'm not sure if I should pay Mexican taxes less if I should use that RFC now that I no longer have a scholarship. I am Venezuelan Should I try to change my Upwork account?