The Mexican government recently made some changes to the Mexican Federal Fiscal Code to designate non-resident companies, such as Amazon, giving digital services, to begin charging Mexican VAT on the services they provide to Mexican resident sellers.
The main purpose of this new Mexican tax law reform is to require e-commerce platforms and sellers to share the tax responsibility for sales. As a result, individuals selling through Amazon in Mexico will have to register for an RFC number.
This registration RFC tax number is mandatory for Amazon customers in Mexico, because if the RFC is not uploaded, Amazon will automatically withhold 16 %增值税和20% income tax for sellers selling on the platform. And after the RFC ID is uploaded and verified, no corporate income tax or value-added tax will be charged.
Broadly speaking, Mexican RFC numbers are not mandated to be used in Mexico only for digital services. If you pay taxes in Mexico, or if you generally do business in Mexico, you will need a Mexico RFC.
What is a Mexico RFC number?
RFC is an acronym for “Registro Federal de Contribuyentes”. It is an alphanumeric tax identifier in Mexico, comparable to a Social Security Number in the US, and similar to VAT in Europe. It is a special ID for individuals and businesses used to identify taxpayers for various uses before the SAT (Servicio de Administración Tributaria) .
Format of Mexican RFC tax number
There are two types of RFCs.
– Corporate RFC Tax Number: This is a 12-digit alphanumeric number for any legal person.
– Individual RFC Tax Number: This is a 13-digit alphanumeric number for any natural person in Mexico.
The RFC is made up of letters and numbers. The first 4 digits for an individual or 3 digits for a corporation are taken from the name of the individual or corporation, then there are 6 digits that indicate the date of birth or when the business was founded, and the number at the end is the check digit.
Who Needs a Mexican Tax ID Number (RFC)
Who must obtain an RFC in Mexico
– Workers in companies.
– Business owners, and
– Self-employed people.
If you pay taxes in Mexico, you need an RFC.Generally speaking, you need to pay taxes in the following cases.
– Your company is legally registered in Mexico.
– Your business operations take place in Mexico.
– You are a local resident of Mexico.
– If you make payments through a digital platform located in Mexico.
– If you are a foreigner with legal residency in Mexico. or
– If your business operations use a phone number with a Mexican code.
In conclusion, if you are new to Mexico and want to start a business and make payments effortlessly, it is important to get an RFC number.
Advantages of registering a Mexican RFC tax number
Employers can utilize RFC to report income tax deductions from employee wages effortlessly.
It is used by Mexican businesses to report their income and tax-deductible expenses.
In Mexico, you can use the RFC number for other conveniences such as opening a bank account, receiving social programs or scholarships, selling real estate, etc.
Additionally, RFCs are used to track business and business transactions, payments and expenses for tax reporting purposes.
Registering for a Mexican RFC tax number can also help avoid the situation where the platform deducts more VAT and pays more taxes.
What’s more, in order to limit the fraud and abuse of RFCs in Mexico, the local tax authorities are introducing a new and stricter method of RFC validation, where each RFC needs to match taxpayers against SAT tax profiles name and its registered address.
If you want to start a business in Mexico, you need to apply for a Mexican RFC tax ID number. However, under normal circumstances, individual sellers outside of China or Mexico are generally not allowed to apply for a Mexican RFC tax ID number.
It is recommended to leave this process to the professionals. In other words, let’s get it together and contact your Moxigerfc expert now to register your RFC.