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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
rayfreelance
Community Member

Hi Mirka

 

All my clients have been from the US and a couple from Europe, I have been paying my taxes as (persona física con actividad empreseral) because I have been providing technical services export. In this case, the article 29 applies by law and I have never been required to generate an invoice with vat retention.

 

The new law required Up to register with SAT, despite it is a tech platform where only 1 party is resident in México (the once who provides the service) and the one who hires the service is in another country, this means we must start generating invoices, not for Up fees, but for total income even before deducting Up fees.

For SAT, we stop being "persona física con actividad empresarial/profesial" to become a person who provides services via a tech platform for a company registered in SAT, from now on we must generate an invoice which means 16% VAT + ISR 
From my understanding Up can retain 8% or 16% VAT, but in the end, we will be forced with 16% VAT depending on provisional or definitive monthly declarations.

maytemontano
Community Member

Hi Lena:

 

For the ISR, Upwork needs to issue a "CFDi Certificado de Retencion" (Electronic document for withold certificate) with the amount withhold so we can claim the ISR tax credit for the amount withold.

 

As for the IVA (VAT), Upwork needs to issue a "CFDi Ingreso" (Electronic Sale Invoice) for the comission and the VAT amounts so we can credit the VAT amount and the comission as expenses in our tax declaration.

Both of those documents need to be issue at least monthly each.

 

Regards,

 

Mayté M.

kochubei_valeria
Community Member

Hi Mirka and others,

 

Thanks for reaching out. Please note that when Upwork implements VAT (IVA in Mexico), it will be  assessed on the digital services provided by Upwork (i.e. service fees, membership fees, and Connects purchases), not on earnings. 

ms62979
Community Member

Thank you Valeri, That makes more sence, it will be relatively small amount then, just like ppl working via Upwork do in some another countries (Y)

gabyo21
Community Member

This pretty much seems like the end of rhe road for Mexican freelancers on Upwork...

maytemontano
Community Member

I urge Upwork to do a throughfull study of this new Mexican law; I checked with a tax firm and, as some other freelancers already stated, this law applies for services such as AirB&B, Uber, etc, where both entities, the one providing the service and the one receiving the service, are located in Mexico.

 

For Upwork pourpuses this is what applies for freelancers based in Mexico:

  1. Upwork must generate a CFDi Ingreso (Invoice) for the comissions the freelancer pays to Upwork and include 16% VAT over those comissions.
  2. When the client is located inside Mexico, Upwork must retain 1% or 20% as ISR tax withhold over the amount paid to the freelancer and generate a CFDi Retencion for the amount withheld.
  3. When the client is located outside Mexico no ISR withold applies.

So basically this only applies when the client is also in Mexico.

 

Please Upwork!, do not over retain to freelancers.

 

Regards,

 

Mayté

9769adcc
Community Member

I share your concern Mayte, it seems that Upwork received bad guidance on the subject of the new tax reform, from a bad accountant or from the same SAT offices to collect more money from us as freelancers. As it has been said several times in the forum, Upwork should provide us with your RFC as a company as well as all the details that concerns, as well as the CFDI to make our tax deduction. It is also very sad to know that we lose competitiveness as Mexicans on the platform, as it would now be (20% commission from Upwork, 16% VAT plus 1% tax withholding giving a total of 37% of money in taxes) As service providers to a foreign company that 16% would be converted to 0% to be competitive in the international market. So now it only remains to think that every time you take a job on the platform you take that 37% of the total unfortunately because Upwork was not well informed on the subject that their plattform does not enter in this new tax reform.

 

rayfreelance
Community Member

Hi Arturo,

1% ISR? Upwork retaining 1% doesn't mean we will pay 1% ISR we have to pay ISR  based on income 😂 see the attached image

9769adcc
Community Member

1% tax witholding, my bad. Thanks for the observation.

alonsogyg222
Community Member

Hello and thanks for your response Valeria. 

 

Are there any news on this information ?

 

Thanks