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Mexican Withholding Tax on Upwork Earnings

escobar_irene
Active Member
Irene E Member Since: Dec 16, 2019
51 of 98

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.

lucioric
Community Guru
Lucio Ricardo M Member Since: May 16, 2018
52 of 98

Yes, Upwork needs a RFC id so that we can get tax refunds. Please, Upwork staff, get advice about that.

kochubei_valeria
Community Manager
Valeria K Community Manager Member Since: Mar 6, 2014
53 of 98

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.

~ Valeria
Untitled
lopezdp
Active Member
David L Member Since: Jan 22, 2019
54 of 98

Ahhhh. The idea of the distributed application; maybe one day...

 

A boy can dream.

 

rayfreelance
Active Member
Raymundo L Member Since: Apr 18, 2019
55 of 98

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

rosiehallin
Active Member
Angela Rosie H Member Since: Feb 25, 2021
56 of 98

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
Active Member
Raymundo L Member Since: Apr 18, 2019
57 of 98

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!

ms62979
Active Member
Mirka S Member Since: Feb 25, 2021
58 of 98

About the IVA part:

 

I have been in direct communication with SAT and PRODECO,

 

and answer about IVA is very clear: if I work via upwork (when UPWORK has RFC in Mexico) platform and the services I provide (for example translation) are needed (aprovechado) out side of Mexico (for example in United Stated or Europe), the IVA is 0%, NOT 8%. In my case the work I do via UPWORK is clearly used/ utilized outside of Mexico, it doesnt have any use inside Mexico. 

 

HERE BELOW THE ANSWER OF PRODECO AND LAWS IT IS BASED ON (SAT says the same): 

 

  • en su caso si seria a tasa de 0%, de conformidad con el artículo 29 de la LIVA (el servicio realizado se aprovecha en el extranjero)

ARTÍCULO 29: OPERACIONES QUE SE CONSIDERAN EXPORTACIÓN DE BIENES O SERVICIOS

Las empresas residentes en el país calcularán el impuesto aplicando la tasa del 0% al valor de la enajenación de bienes o prestación de servicios, cuando unos u otros se exporten.

 

I strongly recommend UPWORK will check this law carefully. 8% IVA should be applied to work which results are used IN Mexico, if service is EXPORTED, IVA is 0%. UPWORK is just a platform, I´m NOT providing service TO UPWORK MEXICO, BUT for the various clients OUTSIDE of Mexico. 

 

BR,

Mirka

 

ms62979
Active Member
Mirka S Member Since: Feb 25, 2021
59 of 98

so in the light of this, the announcement I got  from UPWORK today is a bit strange:

 

We also want to let you know 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.

webforefront
Active Member
Daniel R Member Since: Jul 29, 2017
60 of 98

Mirka, 

        I just got the same emai and at this point it's just pointless to argue with Upwork, they don't care. They're moving forward and being advised as if they were a platform like Uber, AirBnb and others that broker services between two Mexican parties. 

        I also consulted with a tax specialist and they told me the same thing about VAT/IVA, that it doesn't apply because the end customer is not in Mexico. However, this same accountant was pretty clear on one thing, that if Upwork starts withholding you income tax (ISR) it automatically means it's a Mexican company and by implication VAT/IVA will apply.  

        This whole change is flawed from the outset, this law doesn't apply to Upwork and Mexican freelancers, unless Upwork brokers services between a Mexican company/person and a Mexican freelancer (like Uber, Airbnb), but again, they don't care and whoever is advising them will reap the benefits in consulting fees and extra paperwork. 

       The details on the VAT/IVA are still scant, but I'll tell you what my local accounant said -- which has been prescient about how all this would pan out if Upwork went the way of Uber, AirBnb and the rest of 'tech platforms'.  They will start to withold 8% VAT/IVA and you'll need to pay the remaining 8% on your monthly statements.

         Who will crate the invoice (factura) to do this is still unclear, but it will be the same treatment as Uber drivers and AirBnb hosts, your whole income will be subject to 16% VAT/IVA + the whole Income tax(ISR) depending on your bracket, Upwork will just do deed of witholding you 8% VAT/IVA and 1% ISR for the gov and let you deal with the rest of the fallout locally  (good look arguing with SAT your services are an export not liable to VAT/IVA when Upwork has an RFC)