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Mexico’s Tax Authority Issues Guidelines for Virtual Asset Transactions
Mexico City, Mexico - On November 4, 2021, the Taxpayers’ Defense Office (TDO) issued guidelines to clarify the tax obligations of individuals who sell Virtual Assets in Mexico. The guidelines aim to provide certainty and clarity for taxpayers who engage in these transactions.
Income Tax on Virtual Assets
The TDO established that profits obtained from the sale of Virtual Assets are subject to income tax, which is calculated by applying a rate of up to 35% (for individuals) or 30% (for legal entities) on the taxable income. Withholdings and provisional income tax payments must be made to the Tax Administration Service (TAS) in operations carried out for more than approximately US$13,324.
Value-Added Tax on Virtual Asset Transactions
Value-added tax (VAT) is levied on the consumption of Virtual Assets at a general rate of 16%. The VAT is owed to the person who performs the activity and must be transferred and collected by the buyer. This new guideline aims to clarify the application of VAT on Virtual Asset transactions.
Money Laundering and Financial Terrorism Prevention
In addition, the guidelines highlight the importance of preventing money laundering and financial terrorism in the Virtual Asset sector. Financial entities that engage in these activities must comply with specific regulations, including:
- Identifying customers and controlling beneficiaries
- Maintaining records
- Reporting suspicious transactions
Regulatory Sandbox for FinTech Activities
The FinTech Law has created a new figure, known as the Regulatory Sandbox, which allows for innovation and experimentation in financial services. To operate a Regulatory Sandbox, prior authorization is required from the Financial Authorities or Banxico, depending on the type of activity.
These guidelines aim to provide clarity and certainty for taxpayers who engage in Virtual Asset transactions and to promote compliance with tax laws and regulations. They also highlight the importance of preventing money laundering and financial terrorism in this sector.