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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
AndreaG
Moderator

Hi Hector,

 

Someone from our team has reached out to you via support ticket in order to assist you further.

 

hectorgomez7
Community Member
Hello. I am a mexican freelancer, and although I provided my RFC number, Upwork still took 20% of my payment for taxing purposes. I have been told by support that this is because my invoice was assesed before you got hold of my RFC number and that I cannot be refunded for it. Now that you have confirmed you have my RFC number , can you confirm you wont be taking the 20% anymore for my next payments? It is very important for me to know this so I can make the decision of using this platform.

Thanks.
colettelewis
Community Member

Hector, 

 

Once you have entered your RFC  number, you won't be charged 16% VAT on Upwork's service fee  on your next job. But you will still be paying Upwork's service fee of 20% on the amount you earn.  Have a look here: https://support.upwork.com/hc/en-us/articles/211061278--Value-Added-Tax-VAT-on-Freelancer-Fees

 

AndreaG
Moderator

Hi Hector,

 

Yes, that's correct. Now that you have your RFC on file, a 1.0% tax will be withheld from your earnings as detailed here.

 

hectorgomez7
Community Member
Thank you very much. I just wanted to make sure you could confirm the 20% for taxes won't be taken again.
cliceriomp
Community Member

Hello everyone. 

 

I see a significant confusion here among many of us, and I would love to share how I understand this matter. I hope my insight helps. 

Firstly, we must pay the 20% service fee to Upwork, based on our earnings plus all the others charges that apply. 


Yes, I remember that UpWork started a pushy strategy a few months ago to make us provide them the RFC. The bait was 1% retention with RFC vs. 20% retention with no RFC (if my memory serves correctly). This was scary, effective, and confusing because, on this document, Upwork talks about withholding a percentage on our earnings. They really need to clarify the information on this paper)


Recently, UpWork sent an email explaining very clearly that they will charge a 16% VAT on the service fee. They even provided the following example: 

"... let's say you earn $100 from a new client. You'll be charged the regular 20% freelancer service fee of $20. Under Mexican law, we will then apply the 16% VAT to that $20 fee. This means we would collect $3.20 in VAT from you."

The meaning of this is clear. Upwork gives us a service, and they collect the fee for this service. So far, they had been withholding 10% on the service fee since the third week of April. The problem is that UpWork doesn't have its RFC yet, so they can't give us an invoice on the entire charge (service fee plus what they name so far Withholding Tax MX or WHT).

 

Yes, eventually (as soon as they finish their registration process in the SAT), they will have to charge not 10% but 16%, which is the IVA that applies in Mexico usually. The invoice or factura on this charge will be an expense (a cost) in our books because we are buying a service from Upwork and paying for it.

 

Therefore, there is no reason to be concerned nor to speculate that we'll be charged a 20% fee plus another 20 or 16% for tax withholding on our earnings. Yes, the bolt from the blue is that now we'll be more forced to report the earnings from UpWork to the SAT. Then, we'll probably get our income charged with taxes (ISR at least) by the Mexican authority.

 

ponchovc
Community Member

Hello, where can i download the invoices? I need a proof/report that YOU - upwork are holding my taxes...

ponchovc
Community Member

Where can i download the invoices, so I don't have to Pay taxes in Mexico, after getting my money in my Mexican bank? Since you are already taking my taxes... I need an invoice to tell SAT that I'm getting a tax withhold with you (upwork).

 

Where can I get the invoices from my earnings, taxes, etc?

 

Thanks

BojanS
Community Manager

Hi Alfonso,

 

We will register with Servicio de Administración Tributaria (SAT) and remit the entire amount withheld to the agency. Under the rules, we will generate monthly digital invoices for you, and these will show all transactions. That information also will be reported to SAT, so they are aware of the taxes you have paid.

 

Thank you! 

a3796d64
Community Member

Hello !

 

Do we have any news about when is Upwork providing us this 

CDFI Certificado de Retencion 

and CDFI Certificado de Ingresos?

thanks!