In the last few years, there has been an exponential increase in the number of digital goods produced and in circulation in the world. This expansion provides easy access to information and services without much limitation or restriction.
Digital goods are electronic or digital intangible products. These products are created, traded, and issued online. They are inexhaustible online products, which include movies or videos, PDF documents, software applications, electronic music, and other documents.
Any customer with an electronic device (computer or portable smart device) and access to these electronic media or the internet can easily stream, download, or receive an email with such products in any desired form. Also, different types of digital goods come in different formats. Below are some popular types.
- Music – MP3 (MPEG Audio Layer-3), WAV (waveform audio), WMA (windows media audio),
- Document – PDF document, word document, spreadsheet, e-books,
- Video – MP4 (MPEG-4 video file), AVI (audio-video interleaved), MKV (Matroska format)
All these different types of files offer a variety of options and quality to the users. However, not all digital products are free to use or share. Access is usually granted to certain types of products when paid for or when a subscription is purchased. The ease in the transaction of digital goods begs the question, are digital media or documents taxable? What is the tax rate on purchased digital media or documents in Mexico?
Digital Goods Taxation
Although millions of Mexicans purchase and use different types of digital products and media, Mexico has no tax law or act, which is specific to digital or electronic goods, at least not until 2020. On the 31st of October, the country’s congress approved certain amendments that allow for the taxation of commercial digital goods and services, which begins next year. This law is going to require a 3% tax from resident and nonresident sellers or suppliers of digital products as long as revenue does not exceed a particular threshold.
This new law is going to require all foreign or nonresident digital services and goods providers to register and submit reports to the Mexican tax authority. This law is going to require third party providers of digital services or products to pay taxes and provide a withholding tax amount of 50%.
The law, when it comes into force, is going to aim to tax digital products and services, which include the following.
- Online gaming and associated resources,
- Images and e-books purchased on different online sites,
- Videos or movies from streaming content providers such as Netflix, Apple TV plus and Disney Plus,
- Streaming or downloadable songs and general music files from service providers such as Amazon Music and SoundCloud,
- Software application provided for different functions such as typing, editing, programming, and engineering design,
- Internet site access and hosting services.
Although this law is yet to kick-off, in June 2019, the Mexican authorities made agreements with a handful of delivery and car-sharing businesses, which include Bolt, Uber Eat, Uber, and Cornershop, to remit to the Mexican tax authority VAT and income tax from their revenues.
In Mexico, several people stream and download digital products for different types of needs. These types of products range from movies, music to documents. In 2020, digital product taxation is going to commence at a 3% rate.