Good morning internet, today lets discuss how VAT or IVA works in mexico

Reference https://start-ops.com.mx/mexico-vat-tax/#:~:text=Mexico%20VAT%20tax%20is%20a,%25%2C%20or%20even%20be%20exempt.

Let’s start with what are the taxes applicable in Mexico market

VAT – primarily is 16% which is the most common slab and applicable on almost all goods and services. There is also 8%, 0% and exemptions applicable on certain goods and regions IEPS – Sugar Tax, – Applicable for products containing sugar

What is VAT Retention VAT is collected by the consumer and transferred to the tax authority by the seller. However, many sellers were not transferring that tax amount and instead keeping it and it was tough for the government to track and recover that tax. So the government decided to delegate some of its responsibility to companies and have them retain the VAT.

Hence, now it is easier to monitor, and there is a better chance that they will transfer the tax to the government. So government has made it mandatory to retain 1/3rd of the taxes, so out of 16% tax the company can retain 10.66 % tax and pay this 2/3rd directly to the government

VAT in Mexican Border Regions 8% As discussed earlier the IVA is 16% across Mexico, however as a stimulus to Border regions there are certain exemptions and the obligation is to pay only 8% VAT by companies and individuals operating in Border Regions The idea is to increase competitiveness, foster investments and create prosperous economic growth conditions in the Border Regions. Some of the states in border who enjoy this benefit are

Baja California Sonora Chihuahua Coahuila Tamaulipas

All companies and individuals have to apply for this tax stimulus, a few things need to happen.

Felix Garcia