Starting October 2020, digital short-term rental platform AirBnB in Mexico will begin collecting taxes from its users. A tax regime for transactions involving the sale or provision of services through digital e-commerce platforms was introduced in Mexico on July 1, 2020. However, Mexico's Ministry of Finance and Public Credit allowed some digital platforms to delay its implementation for several months to give their customers time to get their act together.
New «Tax regime for intermediary services through digital platforms» suggests that anyone who rents out property located in Mexico through such platforms must pay income tax (ISR) and VAT (IVA). Payment of taxes is not tied to the country in which the supplier or consumer account is registered and from which country the money goes to. It is based on the fact that the service is provided on Mexican territory.
Intermediaries, in other words e-commerce platforms, are responsible for managing (collecting) taxes. Platforms are required to deduct taxes from the balance sent to the owner of the rental property after each transaction, accumulate them and then transfer them to the budget.
The income tax rate depends on the gross cost of services provided for the month:
| Monthly sales volume, MXN | Income tax rate (ISR), % |
| Providing accommodation services | |
| Up to 5000 MXN | 2% |
| Up to 15,000 MXN | 3% |
| Up to 35,000 MXN | 5% |
| More than 35,000 MXN | 10% |
VAT in Mexico is 16% and the same amount should be charged on each service. Half is retained by the digital platform, the client declares the other half to the tax authorities independently. At the same time, he has the opportunity to use a tax credit, for example, to include as expenses the price of intermediary services provided to him by a digital platform, advertising on AirBnB, participation in a business travel program, etc.
These tax rates apply to tax residents of Mexico, more precisely, to holders of RFC — numbers in the Federal Register of Taxpayers. If the homeowner does not have such a number, they are subject to a much higher income tax rate — 20%, and VAT is charged in full at 16% after each transaction.
VAT reporting is sent by the client to the tax office monthly, for income tax (ISR) — both monthly and annually. Annual income tax returns (ISRs) for individuals are usually filed in April.
The responsibilities of digital platforms include:
- request an RFC from the client and check that it is valid,
- include VAT in the amount of 16% in the price of your intermediary services, and in addition to this the basic and additional services offered by the owner of the property, for example, the rental price and payment for cleaning the premises,
- withhold ISR and VAT amounts from all transactions made by the client, issuing a monthly withholding certificate,
- monthly transfer data on client transactions to the tax bank.
To sum up, the main requirement of digital platforms — upload the RFC (and the so-called key or password) to your account data. The key replaces the digital signature, so the homeowner has a legal obligation to the digital platform, and vice versa.
The homeowner can request from the digital platform all invoices for services provided by the platform and details of accrued and withheld taxes.
It is important to note that if a transaction on a digital platform is carried out by a company (not an individual), the platform will not withhold taxes, but will report the transactions to the tax authorities.
So the key is whether you have an RFC. Only citizens and permanent or temporary residents of Mexico can have a tax number, the latter — only with a work permit. A non-resident without a residence is not entitled to engage in gainful activity in Mexico and is not able to have an RFC.
Totalfrom October 1, 2020All homeowners who rent out an AirBnB in Mexico and are registered with the Tax Administration (SAT) will see their costs increase by 18-28%, some of which can be returned as a credit. For foreigners, the cost of renting out an AirBnB in Mexico will increase by as much as 36%. Plus — an additional 16% to the cost of services provided to the client by AirBnB itself. Since all payments at AirBnB are made non-cash through their system, it is unlikely that taxes will be avoided.
We add that in addition to paying taxes, additional licenses and permits may be required at the local level. AirBnB will tell the tax authorities that you are running a rental business. Accordingly, SAT gets the chance to transfer this material to municipalities that require licensing of such activities (or all of them at once: commercial activity + housing rental + resort fee, etc.).
If you are a non-resident and think carefully, you can get around the situation with high taxes. Specifically, as a first step, register an AirBnB account for someone you know in Mexico who has an RFC.