Mexico VAT (IVA) - Rates, Registration, and Filing Guide

Mexico VAT (IVA) System

Mexico, one of Latin America’s largest economies, implements a consumption-based tax system known as IVA (Impuesto al Valor Agregado). Understanding how IVA works is crucial for businesses, freelancers, and foreign companies operating or selling to Mexican consumers.

📌 What is IVA in Mexico?

IVA is Mexico’s Value Added Tax, applied to most goods and services sold within the country. Like other VAT systems worldwide, IVA is charged at every stage of the supply chain, with businesses passing the tax to the end consumer.

The IVA system in Mexico is governed by the Servicio de Administración Tributaria (SAT) - the official Mexican tax authority.

📊 Mexico VAT (IVA) Rates

Mexico applies the following IVA rates:

16% - Standard Rate

Applies to most goods and services nationwide.

0% - Zero Rate

Applied to certain essential goods and exports.

Exemptions - No IVA charged

On some services and sectors, but without input tax credit.

🛍️ Goods and Services Subject to 16% IVA

Most goods and services are taxed at the standard 16% rate, including:

• Electronics and appliances
• Automobiles and auto parts
• Furniture and clothing
• Restaurant and hotel services
• Professional services (legal, IT, marketing, etc.)

🧺 Goods at 0% IVA Rate

Certain items are taxed at 0%, meaning they are technically taxable but the seller can claim input tax credit:

• Basic food items (tortillas, milk, eggs, vegetables)
• Prescription medicines
• Books and newspapers
• Exported goods and services

🚫 IVA-Exempt Categories

Some goods and services are exempt from IVA completely. However, businesses cannot claim input tax credit for these:

• Residential rent
• Public transportation
• Educational services
• Cultural and sporting events
• Insurance and financial services

🧾 Who Needs to Register for IVA in Mexico?

You must register for IVA with SAT if:

• You operate a business in Mexico
• You import goods into Mexico
• You sell digital services to consumers in Mexico (even if you’re a foreign company)
• You provide services that are subject to IVA

Foreign businesses offering digital services (like Netflix, Spotify, SaaS, e-books, etc.) are also required to register and charge Mexican IVA since June 2020, under the Digital Services Tax Law.

📝 How to Register for IVA with SAT

To comply with Mexican tax law, you must obtain a Registro Federal de Contribuyentes (RFC):

1. Visit the SAT portal: https://www.sat.gob.mx
2. Submit documentation (ID, proof of address, business details)
3. Register online or in person
4. Receive your RFC number and digital tax certificates (CFDI)

🧮 IVA Calculation Example

Suppose you sell handmade bags in Mexico for MXN 1,000:

• Output IVA = 16% of 1,000 = MXN 160
• Total Price to Customer = MXN 1,160
• If you bought materials worth MXN 500 + 16% IVA (MXN 80), your input tax is MXN 80
• Net IVA Payable = 160 - 80 = MXN 80

🗓️ IVA Return Filing in Mexico

VAT returns in Mexico are usually filed on a monthly basis, and must include:

• Total IVA collected on sales
• Total IVA paid on purchases
• Net IVA owed to SAT or eligible for refund

Deadline: Returns must be filed by the 17th of the following month.

Returns must be submitted electronically via SAT’s online portal using your digital certificate (FIEL).

🧾 Electronic Invoicing (CFDI)

Mexico mandates the use of CFDI (Comprobante Fiscal Digital por Internet) — an official digital tax receipt.

Businesses must:

• Generate and send CFDI for all transactions
• Include client RFC, tax breakdown, and item details
• Use SAT-approved electronic signature and stamping

CFDI helps SAT track all transactions in real-time.

🌍 VAT on Cross-Border and Digital Services

Digital services sold by foreign companies to Mexican users are taxed at 16% IVA. This includes:

• Video/music streaming
• Online education
• E-books and software
• Cloud and SaaS platforms

Foreign providers must:

• Register with SAT
• Charge IVA to Mexican users
• File simplified VAT returns quarterly
• Appoint a Mexican tax representative (in some cases)

🛃 Importing Goods into Mexico

Imports are subject to 16% IVA at customs. Importers must:

• Declare the value of goods
• Pay IVA and applicable customs duties
• Submit import documentation to SAT

Input IVA paid on imports is creditable if used for taxable business activities.

🧠 Key Points to Remember

✅ Mexico uses a Value Added Tax system called IVA

✅ Standard IVA rate = 16%

✅ Some essential goods and exports are 0% rated

✅ Digital services from foreign companies are taxed

✅ Monthly filings and CFDI e-invoicing are mandatory