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Digital services tax

On September 6th, 2018, an initiative bill regarding the Digital Services Tax Law was filed to its approval.  This initiative bill is based on the experience of the European Union (“EU”).  Countries such as Norway, Spain, Chile and Argentina have taken similar measures.

The purpose of this bill is to tax individuals and legal entities residents for tax purposes in Mexico and those who are non-residents but have a permanent establishment on it, with a 3%  tax rate on profits derived from the following activities:

1.- The inclusion on a digital interface of publicity directed to users of that digital interface (Google, Facebook, Twitter, Instagram, Spotify, etc.).

2.- The availability of a multifaceted digital interface that allows users to locate other users and interact with them, and that eases the deliverance of goods or services between them (Mercado Libre, Rappi, Uber, Airbnb, etc.).

3.- The transfer of the collected data regarding users that were generated as the result of the activities developed by said users on the digital interfaces (a major part of the entities that are part of digital economy).

If the bill is approved, it would have to be analyzed the interaction with the current income tax and with the current text of the USMCA.  Also it has to be defined if the collected tax will be aimed for “public school in Mexico to have computers and internet service”, besides of valuing the economic impact for final users.

Recently United States of America criticized the intention of the EU to establish a digital services tax, qualifying the measurement as “discriminatory”.  They argue the levy us discriminatory and a violation of current international tax rules.

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