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Mexican Withholding Tax on Upwork Earnings

hectorgomez7
Active Member
Hector G Member Since: May 16, 2021
131 of 145

Hello. I am a mexican feelancer and I have provided my RFC number to the platform. Still, Upwork is  taking 20% of my payment for taxing purposes. I read that providing my RFC would reduce this number to 1%. Why is this happening?

andregutierrez22
Moderator
Andrea G Moderator Member Since: Jul 7, 2020
132 of 145

Hi Hector,

 

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

 

~Andrea
Upwork
cliceriomp
Active Member
Clicerio M Member Since: Oct 23, 2017
133 of 145

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
Active Member
Alfonso V Member Since: Mar 10, 2015
134 of 145

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

bstojadinovic
Moderator
Bojan S Moderator Member Since: Mar 9, 2018
135 of 145

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! 

~ Bojan
Upwork
212f528d
Active Member
Martha H Member Since: Sep 18, 2020
136 of 145
From what date we will be able to access to the invoices?
chelsea1026
Active Member
Chelsea B Member Since: Oct 19, 2018
137 of 145

I am a US Citizen living abroad in Mexico. 

I uploaded my USA tax information in the tax area. The system is alerting me that it will keep 20% of my income for Mexican taxes. 

 

What do I need to do to avoid that? 

luiggi_rosado
Moderator
Luiggi R Moderator Member Since: Jul 3, 2020
138 of 145

Hi Chelsea,

 

We are required to withhold a specific percentage of your earnings, as defined by Mexican law. Since we want to make sure you receive the specific information you need, we suggest you contact a trusted tax advisor.

 

Thank you.

~ Luiggi
Upwork
alexletayf
Active Member
Alejandro M Member Since: Jan 7, 2019
139 of 145

Do we have an update yet?

 

When is Upworks RFC going to be available? And when are we going to start getting RFCs? And if we hire someone in México, are you going to send a CFDi on their behalf or do they still have to that themselves?

 

It's been several months, is any progress being made? 

edzuko
Active Member
Edgar M Member Since: Jun 3, 2019
140 of 145

We're half way through the year and all we've heard so far are boilerplate answers, when can we expect Upwork's RFC to be available as well as start receiving CFDIs??