To understand E-Commerce in Mexico, it’s necessary to consider current trends such as the worldwide adoption of mobile phones, increase in the influx of social networks, and a surge in digital consumption. People from Mexico are currently more interested in buying clothes on Amazon or a digital platform than going to a clothing store at a shopping center.
E-Commerce in Mexico is starting to be incorporated into more web platforms, for the purpose of managing payment or making an automatic payment through the use of credit cards in a secure and efficient manner. E-Commerce is also being used to guide the use of a virtual money system as is the case of those companies that pay for the use of web advertising, the best known being Paypal.
Sales though electronic commerce in Mexico grew 32.3% at the end of 2018 which represented a turnover of 399.8 billion pesos.The data measured at the end of 2018 compared to 2017 represented an increase in e commerce. The form of purchase that prevailed among Mexicans was through mobiles, which grew 11% over the previous year. In addition, they specified transactions in foreign sites, especially those in the United States.
In foreign electronic commerce shopping, the United States ranked first with 75% interest, followed by Asia with 49%. Regarding the profile of the Mexican online buyer the study revealed that the average age is 36 years old and spends an average of 6,920 pesos per quarter on online merchandise.
The practice of buying online in Mexico is increasingly frequent and continues to grow, but the Mexican tax system does not yet specifically regulate purchases made over the Internet and there are no judicial precedents that indicate how these transactions should be taxed.
About 40.5 percent of virtual stores did not comply with the basic guidelines established by the Federal Consumer Protection Law (LFPC) for e-commerce sites in Mexico. Based on Article 76 Bis of the LFPC, the Monitoring of Virtual Stores of 2018 showed that they lack policies or privacy notice, security in personal and financial data, physical address and fixed telephone number and detailed description of goods or services .
Despite this, the vast majority of companies that do electronic commerce do not have their servers in Mexican territory. They do not have their own equipment, they rent it, everything goes up in the cloud and not even the vendor knows where the transaction data is stored. Which would make it even more difficult to determine if it is subject to the tax.
Since the Value Added Tax (IVA) is absorbed by the final consumer, if the electronic transaction is structured correctly for the purchaser of the good it will not imply an additional charge. But if it were a foreign company without a server located in Mexico, the IVA would be applied if the goods that are commercialized are in Mexico when they are sent to the purchaser or when there is no shipment, if material delivery is made in Mexico by the seller.
However if the goods are outside national territory at the moment in which the seller and buyer specify the price, the act itself is not subject to IVA; however, the operation could be taxed when it is imported depending on the product. The import tax applies for a tangible good at the moment in which the buyer imports it into the national territory. But if it is intangible (software, music, movies or information, such as books) a tax exemption applies.
Regarding the Flat Rate Business Tax (IETU), residents abroad with a Permanent Establishment in Mexico would be required to pay it for the income obtained regardless of the place where they are generated by the alienation of goods, provision of independent services and the granting of the use or temporary enjoyment of goods.
But if the seller is a person residing abroad without a fixed place of business located in Mexico, has no server and does not have employees in the country, a Permanent Establishment is not created, so the tax does not apply.
Companies involved in electronic commerce must not make any statement, omission, or engage in any practice that is false, misleading, fraudulent or disloyal. Although in the international arena there is still no consensus on how to operate e-commerce, SAT is working on a foreign trade rule to regulate the scheme to facilities for e-commerce. Since in recent years, a large part of incidents and abuses involving e-commerce have been detected.
Users should be sure about the information offered by the virtual stores based on those established by the Law. E- commerce in Mexico has a massive potential for growth and if people are given enough confidence to continue purchasing online this will only help to stimulate the economy for the good of everyone.
As a result of these tax laws, many sellers are setting up offshore corporations to sell into Mexico. They’re incorporating in zero tax countries like Belize and Nevis (those close to Mexico), and low tax Puerto Rico, and shipping into Mexico. They are then using offshore merchant processors that can transact in dollars and pesos.
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