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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
samantharop
Community Member

It does!! thank you so much,

**Edited for community guidelines**

rayfreelance
Community Member
Hi Vladimir
This is the worst decision that Up can make against mexican freelancers. Why is Up taking responsibilities that doesn't apply to this platform?

Let me tell you what will happen.
I currently pay around 15% of taxes (ISR)
If Up register with SAT I'll be force to generate an invoice (currently I don't need to generate an invoice because my clients are from all over the word and they're not mexican companies registered with SAT)

So, if I'll be force to generate an invoice my fees/taxes will be like this.
20% Up fee + 15% ISR + 16% VAT for creating an invoice + 10% exchange rate that we loose everytime that we transfer to our bank because in Mexico we can't have bank accounts in USD

Hahahaha we all know what this means, right? And what will be the future for Up related to mexican freelancers.

Second time that I suggest this. Up legal team must get a better advise on the new law and don't take a responsibility that doesn't apply to this platform.
Thanks
VladimirG
Community Manager

Hi Raymundo,

 

Thanks for your question. We can confirm that we are now required by Mexican law to collect this tax and send it to tax authorities there. To read more about Mexican income tax withholding, please click here

rayfreelance
Community Member

Hi Up team!
I requested an email for the proper person to forward my comments regarding the new Mexican law and Up policy but I have no response. I kindly ask any Guru, moderator, or Up employee with empowerment to forward my comments to the correct person.

It's frustrating to see that Up doesn't take consideration for Mexican freelancers (you can read my previous post), so this time I'm going to give you free advice with an Up business perspective.

 

If Up register with SAT and retains a single penny from us:

  • For Mexican law, this means that Mexican freelancers are being hired by Up
  • Mexican laws will apply to Up platform (a company registered with SAT in México)
  • Mexican freelancers will have the right to sue a company registered in SAT México
  • Benefits by Mexican laws will apply to Mexican freelancers (if a company retains employee taxes the company must provide the benefits by law 

What Up legal team has to do, is to cooperate with SAT and don't allow creating an account without providing a valid RFC, Up should deactivate any account without an RFC and Up should share the list of RFC's with the Mexican government so the SAT can make his job without Up in the middle.

https://www.sat.gob.mx/consulta/64576/conoce-las-obligaciones 

https://www.sat.gob.mx/consulta/21519/conoce-tus-obligaciones-fiscales-como-patron 

Thanks

rayfreelance
Community Member

Hi Vladimir,
Thanks for the quick reply.

Please advise what should I do? Should I just stop declaring my income to SAT on monthly basis and stop paying ISR because Up will retain it?

Thanks

kochubei_valeria
Community Member

Raymundo, unfortunately, we cannot provide specific tax advice. Since we want to make sure you receive the specific information you need, we suggest you contact a trusted tax advisor.

kochubei_valeria
Community Member

Irene E wrote:

I want to know which is Upwork's RFC. I spoke with a tax advisor in my country and he asks me about that. I need that in order to be able to claim a tax refund from the Mexican government.


 

Hi Irene, Lucio and others,

 

Upwork is in the process of getting registered in Mexico with SAT. We'll share an update and provide Upwork's RFC number as soon as it becomes available.

rosiehallin
Community Member

Hola Raymundo!

I talked with SAT on the phone to try and figure out how to pay my taxes etc. They say I have to pay IVA on my income from Upwork. What's your input on this?

rayfreelance
Community Member

Hi Angela,
Currently, we don't need to pay VAT (IVA) because we are providing a service as an independent contractor to a company outside México (to whom will you generate the invoice if you don't work for a Mexican company with an RFC on SAT?). The Mexican law encourages this and you need to explain to SAT that your work is needed by non-Mexican companies, we only need to declare income and pay ISR tax.

My tax advisor told me that Up must provide us at least a "fiscal identity registration number" (número de registro de dentidad fiscal) and that Up can't retain us 20% nor 1% if they don't have an RFC with SAT (we won't be able to claim back that 1% or 20% without an RFC from Up)

He also told me that if Up retains 1% or 20% we will be forced by law to generate an invoice of our total income which means 16% VAT-IVA in addition to ISR tax that we currently pay (or we should pay).

He also told me that probably Up plans to register our RFC as a 100% commissionable contractors, which means they won't have any "legal responsibility" against us but in exchange, we will be forced to generate the invoice for those "commissions that we own" (Up contracts with clients) 

 

So yes, if they retain they must have an RFC and we must generate an invoice with VAT tax in addition to ISR tax

Thanks Upwork you're AWESOME!

foxbeam
Community Member

Hi Raymundo,

I am in a similar situation as you are, freelancer in Mexico already paying taxes.

I think what is happening with Upwork is that since they are registering something like Upwork Mexico in SAT, they will make that all freelancers based in Mexico work for that company, as any other mexican company, no matter you have clients in other countries.

 

This "Upwork Mexico" company will sell your services across the world (as they do now), dealing with any kind of international service fees and taxes (I guess), and then they will treat us like local workers working for a mexican company.

 

This will reduce our earnings if we keep the same price or will make us (freelancers in Mexico) more expensive if we transfer those costs to the final customer.