The Mexican Tax Administration Service (SAT) has issued a new ruling that allows for the exportation of services at a zero percent VAT rate. This ruling aims to promote the growth of the Mexican service industry and attract foreign investment. The ruling provides clarity on the requirements and procedures for companies to qualify for the zero percent VAT rate, providing a significant opportunity for businesses to expand their operations in Mexico.
Mexican courts have confirmed in multiple rulings that exported services should be enjoyed outside of Mexico for the 0% value added tax (VAT) rate to apply. Notwithstanding such precedents, in practice, it can be quite challenging to determine where exactly certain services are “enjoyed.” The latest ruling on this issue came from a federal circuit court, which provided additional guidance on how the courts analyze and apply the term “enjoyment” in certain cases.
Multinational corporations with Mexican subsidiaries engaged in service activities—including shared service centers or centralized corporate functions—need to consider the implications of this ruling to properly assess the VAT treatment of their cross-border operations.
Read a February 2024 report* [PDF 221 KB] prepared by KPMG professionals: Mexican Rulings: Exportation of Services Eligible for 0% VAT
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