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Mexico Tax - VAT Collection to Start in June

kochubei_valeria
Community Manager
Valeria K Community Manager Member Since: Mar 6, 2014
1 of 14

*Update: the collection of Mexico’s Value Added Tax (VAT) will begin this week.

 

Starting in June, we will begin collecting Mexico’s Value Added Tax (VAT) when talent and clients registered in Mexico purchase Upwork services. We are required to collect this tax under Mexican law. VAT will be charged on the following: 

 

  • The amount talent pays for Connects
  • Membership fees (for example, for a Freelancer Plus plan or Client Plus plan)         
  • Freelancer service fees
  • Client payment processing fees
  • Featured Jobs (tax will be applied to the cost of post, which is currently $29.99)      
  • Conversion fee (this is the fee you pay if you move a relationship off of Upwork)

 

Note: We will not charge VAT on the amount the client pays you for your services or on any withdrawal fees.

 

All taxes collected by Upwork will be passed on to the Mexican government, as required by Mexican law, and credited to the Registro Federal de Contribuyentes (RFC) that you have on file with Upwork. To learn more about our collection of Mexican VAT and how to add or confirm the RFC on your account, visit this help article and check the email we’ve sent you. You may also want to consult a tax professional for more information on how this new law and its exceptions may affect you and your business.

 

We’ll provide an update here and via email again in early June with the exact date when collection will begin. We will also provide our RFC once we receive it from the Mexican government.  

 

~ Valeria
Upwork
aberberana
Active Member
Ana B Member Since: May 12, 2021
2 of 14
You guys are doing everything backwards. Withhold taxes first, provide us Upwork’s RFC second. You need to understand how much this is affecting Mexican freelancers in Upwork. We are being forced to pay double taxes.

Why not wait until all your paperwork with the Mexican government is done so you can then start withholding whatever it is you need to withhold?
ana_cuervo
Active Member
Ana Paula C Member Since: Sep 9, 2018
3 of 14

Ana B, you can change your tax regime to digital platforms. That was the solution my accountant gave me to avoid paying double.

yosek
Active Member
Jose Luis C Member Since: May 13, 2021
4 of 14

I haven’t had a formal job yet, so my RFC is not registered in the SAT (in the US that would be the Internal Revenue Service, I think). I could add it on Upwork anyway, but would there be any problem with that? Also, would you still withhold 1% in that case? Thanks.

tinker_bell3
Moderator
Joanne Marie P Moderator Member Since: Nov 26, 2017
5 of 14

Hi Jose Luis,

 

Upwork is required to collect VAT from freelancers and clients who reside in, have a permanent address in, or are established in Mexico. If you are exempt from VAT in Mexico, you must claim a credit from the Mexican authorities when you file your taxes. In order to do so, you must have your Registro Federal de Contribuyentes (RFC) on file with us — any VAT collected from you during a time when your RFC was not on file with us will not be claimable. Consult with a tax expert if you are uncertain as to how the VAT in Mexico and any exemptions apply to you.

~ Joanne
Upwork
ana_cuervo
Active Member
Ana Paula C Member Since: Sep 9, 2018
6 of 14

Hello!
UpWork annonunced that starting in June, will collect 16% VAT of freelancer service fees for Mexican freelancers, and it will be taken from the 20% service fee.

 

My question is, what will happen if, because of the lifetime billings with the client, there is just a 10% or 5% service fee? Would you charge that 16% on that fee?

Thank you in advance for your help.

 

Ana

vladag
Community Manager
Vladimir G Community Manager Member Since: Oct 31, 2014
7 of 14

Hi Ana,

 

Yes, you are correct. The 16% VAT will be applied on the sliding service fee. I moved your post to the announcement thread on this topic so you can find more information and follow up in case you need further clarification.

Untitled
480fd3c7
Active Member
Abbi M Member Since: Jun 4, 2021
8 of 14

Hello, 

This is the issue I'm facing. I'm based in Mexico but work remotely for a US company. The company (based in the US) is asking me to find someone in Upwork for a job, but the platform is detecting my location and I understand mexican tax will be withheld because of my location. I won't be paying for this job posting, but the company, so how do I fix this?

I already set my company and location to the US, but I'm still getting the mexican tax banner asking me to input my RFC / VAT information.

bstojadinovic
Moderator
Bojan S Moderator Member Since: Mar 9, 2018
9 of 14

Hi Abbi,

 

A law was passed in Mexico which requires VAT to be collected from individuals and businesses operating from Mexico when they purchase electronic services from non-Mexican businesses (like Upwork). To comply with this law, we need to collect VAT on the services we provide to clients in Mexico and forward this tax to the Mexican tax authorities.

 

Please check this help article for more information.

 

Thank you! 

~ Bojan
Upwork
480fd3c7
Active Member
Abbi M Member Since: Jun 4, 2021
10 of 14
I totally understand that. But my company is not operating from Mexico.
It’s a company based in the United States. It makes no sense for them to
pay Mexican taxes.
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