If you are a Virtual Assistant (VA) collaborating through the VPM Solutions platform as an external service provider and you were born in Mexico or are resident therein, you are bound to determine and pay your taxes in Mexico.
We have prepared the following guide for you to take as a reference in your tax compliance, gathering the main doubts that may arise in the process:
We will cover the following
- How can I duly pay my taxes in Mexico ?
- What do I need to know to pay such taxes?
- What do I need to do to sign up in the Federal Taxpayers Registry (RFC)?
- What is the Electronic Signature (FIEL) and am I bound to have it?
- How do I know if I have been assigned to the correct tax regime?
- How do I know if I am bound to pay ISR and IVA?
- Why am I not due to pay VAT?
- How often should I be determining and paying my taxes?
- How do I determine how much ISR I have to pay?
- What are the authorized deductions?
- As a VA, will I be subject to tax withholdings?
- What does it mean to have a tax credit or balance in my favor?
- What can I do when having an ISR tax credit?
- Besides my tax filings, which other tax obligations am I bound to comply?
- Is the contracting business responsible for any of my tax filings?
- What can I do if I have further questions?
- How can I duly pay my taxes in Mexico ?
In general, in order to pay taxes in Mexico you must first obtain your registration in the Federal Taxpayers Registry (RFC, per its acronym in Spanish). After obtaining your RFC number, you will need to file monthly and annual tax returns on the Tax Administration Service (SAT) website, previously performing a calculation to determine the tax to be paid, in accordance with the corresponding laws and rules.
Once you file each of your returns, you will receive a receipt in PDF format that will specify the amount to be paid (if any) or the balance in your favor. In case of generating a balance to pay, the same receipt will include a code that you can use as a reference key to pay the balance via Internet or at the teller window of your bank of preference.
2. What do I need to know to pay such taxes?
Two major taxes exist in Mexico:
- Income Tax (“ISR”), calculated based on profits obtained.
- Value Added Tax (“IVA”), caused by the use or consumption of certain goods and services.
ISR in Mexico is paid from your income obtained, regardless of its origin (even from abroad), but the way in which it is obtained will be important to know how much you will have to pay. Therefore, prior to the RFC registration appointment, it is recommended to know the type of tax regime to which you belong, as well as to define the type of economic activity that you are going to carry out to obtain your income.
It should be noted that the election of your economic activity may define your tax regime, so it is important to identify your specific economic activity in advance, which can be done through the following website: bit.ly/3kWy2Zq. With this you will also be able to know your tax obligations, for example, which tax returns to file.
It is important to mention that both ISR and IVA could be determined and paid by you, however, in some cases they will be determined and paid by a third party (for example, Mexican companies that hire you for your services), who would be obliged to calculate the tax for you and subtract it from your final payment. This concept is known as "withholding tax".
NOTE: A "tax regime" is the fiscal status to which you are entitled for carrying out an economic activity. An "economic activity" is everything that seeks to cover a need, either because you carry it out, you are an intermediary or you sell a good or a service.
3. What do I need to do to sign up in the Federal Taxpayers Registry (RFC)?
Once you are clear about your tax regime and economic activity, you must register in the RFC. To do so, you must schedule an appointment in person at a SAT office of your choice via the website https://citas.sat.gob.mx/ through the access "Inscripción al padrón de contribuyentes Personas Físicas". Once you have an appointment date, you must present yourself with the documentation that proves your residence in Mexico (Government ID number known as CURP, valid official identification and proof of address).
Once at the appointment, the process will be quite simple and you will have to choose a password to access the SAT online portal. Subsequently, you will obtain a receipt in PDF format accrediting your registration to the RFC.
NOTE: Due to contingency measures taken in recent years by SAT in relation to public health, the number of available appointments has been considerably reduced. Therefore, it is normal to find long waiting periods from the appointment request to the date granted, so it is recommended to schedule it as soon as possible.
4. What is the Electronic Signature (FIEL) and am I bound to have it?
The FIEL is the set of electronic files that work as an access key to the SAT online portal (in a more secure way than with the basic password), to sign tax returns and also to issue invoices or Digital Tax Receipts via Internet (CFDI), previously generating your Digital Stamp Certificate (CSD) via the site: bit.ly/3J03zBW
It should not be forgotten that the FIEL has an expiration date of 4 years from the date of its generation, which can be renewed through the SAT web portal.
It is recommended that you acquire your FIEL at the same time as your registration in the RFC, carrying out both procedures together (with their respective appointments) and presenting the documentation indicated in the appointment confirmation, highlighting that you must bring a USB drive to obtain the files that make up the FIEL.
NOTE: The CSD serves to be able to have access to generate your invoices (CFDI) for income obtained. It is recommended to approach a tax advisor for invoicing processes, mainly to verify that these are being issued correctly.
5. How do I know if I have been assigned to the correct tax regime?
As a Virtual Assistant, you are an individual who independently performs economic activities related to the provision of professional and/or business services* abroad. According to Mexican law, the authorities must assign you to the tax regime for “Individuals with Business and Professional Activities".
It is important to mention that since 2022, the Régimen Simplificado de Confianza (RESICO) was created, a new tax regime focused on making it easier for individuals to calculate their ISR and thus be in due compliance. As a Virtual Assistant, you could choose to join this regime instead of the one mentioned in the previous paragraph.
NOTE: It is important to point out that you can only join one of the tax regimes mentioned above. It is recommended to approach a tax advisor to define which one best suits your needs and tax situation.
*The services provided abroad focused on real estate companies or for property management are the following: Maintenance, Inside Sales Assistant, Social Media Specialist, Administrative Assistant, Bookkeeping, Customer Service and Listing Administrator.
6. How do I know if I am bound to pay ISR and IVA?
As a Virtual Assistant, for purposes of Mexican law you are an individual taxpayer (persona física). Regardless of whether you are paying taxes under the Individuals with Business and Professional Activities tax regime or have opted for RESICO, in the event that you provide your services to a foreigner, particularly in the United States, you would only be due to determine payable ISR on a monthly and annual basis.
However, even if you do not have to pay any other tax, for example, VAT, you may still be subject to meeting certain obligations and tax filings.
7. Why am I not due to pay VAT?
As a Virtual Assistant providing your personal services to a foreigner, you will not have to pay VAT, but you may still have to file monthly VAT returns.
In the understanding that your economic activities are exploited in the United States, in terms of VAT Law, your services are subject to a 0% rate because they are being rendered abroad.
VAT returns are filed every month, no later than the 17th day of the month for the operations of the immediately previous month, including a breakdown of your income and corresponding expenses incurred in the period.
NOTE: It is recommended to keep the independent service agreements executed with the recipient of the services abroad as documentary support to prove that the services are being rendered outside Mexican territory.
8. How often should I be determining and paying my taxes?
You must be determining taxes on a monthly and annual basis, both for VAT and ISR.
For the monthly payments, you will have as deadline the 17th day of each month after the period to be reported, for example:
- If you are filing for the month of January, you would have until February 17 to submit such return, and so on consecutively.
In the case of submitting your annual tax return, you will have as deadline the period from April 1 to April 30 of the fiscal year following the year to be filed, for example:
- If you are filing the annual return for the Fiscal Year 2022, you would have from April 1 to April 30, 2023 to file such return.
9. How do I determine how much ISR I have to pay?
Taxes in Mexico for individuals with business and/or professional activities are calculated based on the income actually collected and expenses actually paid by the taxpayer (strictly related to the activity that generated the income) for each month and/or year, i.e., in very simplified terms:
Each month you must make this comparison and thus file your monthly income tax returns, which are provisional in nature since they must be seen as "advances" of said tax to the total amount that you will determine at the end of each year in your annual income tax return.
In the event that your authorized deductions are greater than your income, as well as in other cases, you will be generating a tax credit, also known as a balance in your favor.
10. What are the authorized deductions?
Authorized deductions are the expenses that as a taxpayer you are entitled to deduct from your income for the period in order to determine your taxable income and therefore the ISR determined. However, the ISR Law specifies that only those expenses that are strictly indispensable for the rendering of your economic activity and that are supported by an invoice (CFDI) correctly issued during the corresponding year will be considered.
In addition to the aforementioned expenses, for the annual tax return you will also be able to consider the personal deductions you have made during the year, as long as they are supported by invoices under the applicable concept, such as:
- Medical and dental fees and hospital expenses.
- Nutritionist and psychologist consultations.
- Donations made to authorized institutions and foundations.
- Medical expenses due to disability or incapacity.
- Interest in mortgage loans.
- Medical insurance premiums.
- Tuition and mandatory school transportation.
- Optical lenses and prosthesis.
- Funeral expenses.
- Deposits in special savings accounts (AFORE).
NOTE: It should be clarified that there are strict requirements to be able to make effective the authorized and personal deductions, in case of any doubt, it is recommended to contact a tax advisor for a better understanding of the corresponding tax treatment.
11. As a VA, will I be subject to tax withholdings?
Following the scenario that the services are rendered to companies and/or individuals resident abroad, you will not be subject to any Mexican withholding tax. However, this does not exempt you from any withholding tax in the U.S or from the country where your employer is tax resident.
Also, as mentioned before, although you may not be subject to a withholding tax it does not mean that no tax will be due, so you will still have to determine the amount to be contributed.
12. What does it mean to have a tax credit or balance in my favor?
In summary, when you file your annual tax return, you may find that the result of the tax calculation determines that you paid more in monthly payments than you were obligated to pay.
Regularly, this can also happen when subtracting the personal and authorized deductions of the year in your annual tax return, as mentioned in Question 10.
13. What can I do when having an ISR tax credit?
If you have a balance in favor of ISR, you may choose to request the refund automatically at the time of filing the annual tax return, which would be made directly to your bank account within a maximum period of 40 business days.
In case your refund request is rejected (mainly due to inconsistencies in the filed deductions), you could request a refund manually, which you could file via the website: bit.ly/3JjhpRg, however, the authorities may require additional documentation and evidence of the declared expenses.
On the other hand, in the event that you do not opt for the refund, you may also save the balance in your favor to compensate in future monthly or annual returns of the same tax where you are initially deemed a payable balance.
14. Besides my tax filings, which other tax obligations am I bound to comply?
Within the normal obligations of taxpayers, in addition to filing monthly and annual returns, as a Virtual Assistant you will also be obliged to:
- Issue CFDI invoices for income collected.
- Request CFDI invoices for expenses paid (authorized deductions).
- File annual informative declarations, if applicable.
- Keep accounting records.
- Upon exceeding 2 million pesos in income per year.
- Not applicable for taxpayers in RESICO.
- Renewal of FIEL and CSD (every 4 years).
15. Is the contracting business responsible for any of my tax filings?
No, As an independent service provider, all Mexican VAs need to take care of their own taxes, invoices, and filings. However, these obligations can also be outsourced to a Mexican accountant or firm, which can either guide you along the way or take care of these filings in their entirety. For more on this, please refer to the last question in this document.
16. What can I do if I have further questions?
For particular inquiries, tax returns reviews, general support in compliance with obligations and other tax advice, the main recommendation is to approach experts in the field, so from VPM Solutions we suggest reaching out to JA Del Rio (jadelrio.com), a Mexican firm of accounting and tax consultants, which already has an understanding of your role as Virtual Assistants and the operation that is performed through our platform.
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Tania Salinas, Manager J.A. Del Rio, S.C.
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Rafael Moriyama, Manager J.A. Del Rio, S.C.
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Document issued in March 2023 subject to annual reforms or criteria modifications by Mexican Tax Authorities without prior notice.