Mexico: Application of VAT to exported services (court decision)
A court decision concerning the application of VAT to exported services
The Tenth Collegiate Court in Administrative Matters of the First Circuit in August 2023 held (I.10o.A.36 A (11a.) that a Mexican company providing commission services to a foreign shipping company did not sufficiently prove that the exported services were used abroad and thus that the services qualified for a 0% value added tax (VAT) rate.
The court found that it is not sufficient that the taxpayer meets the formal requirements set out in the VAT law, which provides that services are considered exported when they are contracted and paid for by a foreign resident without a permanent establishment (PE) in Mexico and the payment is made through a nominative check or bank transfer from a foreign account. Consistent with at least one prior court decision, the court held that the taxpayer must demonstrate that the services were actually provided outside of Mexico, and not just that the services were provided for the benefit of a foreign person.