The Value Added Tax in Mexico, better known as VAT, is an indirect tax that taxes the consumption of goods and services.
Natural persons (individuals) and legal entities (companies) are obliged to pay this tax when they carry out the following activities in national territory (Mexico) in accordance with article 1 of LIVE:
- dispose of assets
- provide independent services
- Grant the use or temporary enjoyment of goods
- Import goods or services
You determine the tax by multiplying the 16% to the value of the good or service. For example, if you provide a software development service with a value of $200,000 pesos, VAT will be determined as follows:
| Value of service provision for software development | 200,000 | |
| ( X ) | 16% rate | 16% |
| ( = ) | VAT caused | 32,000 |
It is important to point out that VAT will be incurred at the time of collection, that is, if we invoice the software development service in January 2022 and receive payment of said invoice in March 2023, we will owe the VAT transferred in March 2023.
In the same way, the expenses that we pay such as software licenses, internet, telephone services, etc. that include VAT, we can credit it and deliver only the difference to the Tax Administration Service (SAT).
That is, suppose that in the month of March 2022 we make the payment of different services which include VAT for an amount of 10,000 pesos, the calculation of VAT in March 2022 would be as follows:
| VAT Charged on the provision of services in March 2022 | 32,000 | |
| ( – ) | VAT paid on services received in March 2022 | 10,000 |
| ( = ) | YoVA to inform the SAT corresponding to March 2022 | 22,000 |
Said $22,000 pesos must be delivered to the SAT no later than April 17, 2022 by electronic means.
On some occasions, legal entity taxpayers (companies) must make VAT withholdings to individual taxpayers and other legal entities, such as when:
- Receive independent professional services from a natural person (individual)
- Temporarily enjoy individual assets of a natural person (individual)
- Acquire waste to be used as inputs for their industrial activity
- Receive services by commission agents natural persons (individual)
- Receive land transportation services from natural and legal persons
The payment of said withholding must be made no later than the 17th of the following month in which the payment for the service was made.
In some cases, taxes will be calculated by applying the 0% rate.
As entrepreneurs or businessmen it is important that we know the mechanics of VAT calculation to avoid possible contingencies with the SAT.
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