Financial Crime World

Deduction Assumptions Crucial in Calculating Tax on Virtual Assets

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New Tax Regime for Virtual Asset Transactions in Mexico

Mexico City, Mexico - In a move aimed at clarifying tax obligations for individuals who buy or sell virtual assets, the Taxpayers’ Defense Office has issued a crucial criterion defining the regime under which such transactions must be taxed. Effective November 4, 2021, profits obtained from the sale of virtual assets cannot be attributed to an exchange gain, as is the case with foreign currencies. Instead, the tax treatment applied will be that of a goods sale.

Tax Obligations for Virtual Asset Sellers

Under this new regime, taxpayers who sell virtual assets must comply with various obligations:

  • Withholdings and Provisional Income Tax Payments: Withholdings and provisional income tax payments must be made to the Tax Administration Service (TAS) in operations exceeding approximately US$13,324.
  • Provisional Payment Rate: The provisional payment to TAS shall correspond to 20% of the total disposal transaction amount.
  • Electronic Invoices: The electronic invoice must be issued by the seller and in favor of the buyer.

Digital Platforms’ Responsibilities

Digital platforms that facilitate transactions with virtual assets are required to make income tax withholding payments, applying rates outlined in Section III, Chapter II, Title IV of the Income Tax Law (ITL). These platforms will also pay withholdings directly to TAS.

Money Transmission Laws and Anti-Money Laundering Requirements


To prevent money laundering and financing of terrorism, banks and financial institutions (FTIs) are required to apply measures for the prevention of such activities related to transactions with virtual assets. Non-financial entities that offer or facilitate transactions with virtual assets must also comply with anti-money laundering requirements.

These requirements include:

  • Registration: Registration with the Tax Administration Service
  • Enrollment in Money Laundering Prevention Portal: Enrollment in the Money Laundering Prevention Portal
  • Compliance Officer Designation: Designation of a Compliance Officer
  • Customer and Controlling Beneficiary Identification Policies: Customer and controlling beneficiary identification policies
  • Information and Documentation Retention: Keeping information and documentation for at least five years

Regulatory Sandbox

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The FinTech Law has also introduced a new figure, known as the Regulatory Sandbox, aimed at encouraging innovation and investment in the financial sector. This figure allows companies to operate with temporary authorization, requesting exceptions to applicable legal provisions.

  • Authorization Period: The authorisation for operation of a Regulatory Sandbox is limited to three years, allowing companies to test their business models without having to comply with all regulatory requirements.
  • Innovation and Investment: This move has attracted new competitors to the market, as companies seek to leverage technology to speed up their operations and improve efficiency.

Conclusion

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With this ruling, Mexico takes another step towards clarifying tax obligations for virtual assets and promoting innovation in the financial sector.