Friday, July 31, 2020

Should Netflix and other digital platforms issue an invoice? This says the SAT

The streaming platform must issue a tax receipt that does have tax effects. The SAT explains why. After Netflix announced last week that from June 1 it will increase its prices in Mexico to incorporate VAT into digital services, users on social networks questioned whether the video streaming platform should issue an invoice. In response to those concerns, the Tax Administration Service (SAT) clarified on Tuesday that Netflix must issue a tax receipt that is not the same as a Digital Internet Tax Receipt (CFDI), that is, an “invoice”; however, the tax receipt issued by that and other platforms can have tax effects. The SAT recalled that it will comply with the provisions of the Value Added Tax Law (LIVA) regarding the withholding of the tax generated by the provision of digital services by residents abroad without establishment in Mexico. These provisions will come into effect from June 1, 2020. These adjustments to the LIVA that the Congress of the Union determined in the reform published in the Official Gazette of the Federation (DOF) on December 9, 2019, seek to establish the obligatory digital platforms to withhold and pay the VAT caused by the importation of digital services used in Mexico. This tax was already incurred and, therefore, its payment obligation already existed in the VAT Law (Article 24, section V). It is important to mention that the possibility of digital services increasing in price is not related to a new tribute. In said reform, the aforementioned digital platforms were granted a transition period that allows them to prepare to begin complying with the aforementioned legal provisions from the first day of next month. In this regard, on December 28, 2019, the Miscellaneous Tax Resolution for fiscal year 2020 (RMF 2020) was published, which includes a new Title 12, called “On the provision of digital services” where it is established the detailed regulation of the retention that must be carried out for these services provided in the LIVA. It is highlighted that among the obligations that residents abroad must fulfill digital service providers in the country, is to issue vouchers of the withholdings made that, although they are not CDFI, may be used for tax purposes in cases that proceed. In such a way that, in accordance with the provisions of RMF 2020, digital platforms residing abroad without fiscal domicile in national territory that provide digital services in Mexico must electronically issue and send the receipt (PDF format file), from In accordance with the regulations applicable in the territory where they reside, by means of which the payment of the consideration is covered with the transfer of VAT expressly and separately. Therefore, the SAT urged digital platforms resident abroad without establishment in national territory to timely comply with the obligations indicated in the LIVA, and invited taxpayers to inform themselves through official channels regarding the tax implications of the provisions that will come into effect from June.

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