Economic Nexus in Mexico: Do You Have a VAT Obligation?
Understanding VAT obligations under economic nexus in Mexico.Updated 3 months ago
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Mexico does not use a sales or transaction dollar threshold the way some other countries do. Whether you have nexus in Mexico depends on the nature of your business activities and whether your sales qualify as taxable supplies. This article explains how economic nexus works in Mexico and what it means for your business.
Mexico vs. Non-Mexico-Based Businesses
How nexus is determined depends on whether your business is considered a Mexico-based or non-Mexico-based entity.
A Mexico-based business is one that is incorporated in Mexico or has significant physical presence there.
A non-Mexico-based business is one that has no physical presence in Mexico.
Economic Nexus Thresholds at a Glance
Business Type | Nexus Threshold | Are Exempt Sales Included? | Are Marketplace Sales Included? | Are B2B Sales Included? | Are Zero-Rated Sales Included? |
|---|---|---|---|---|---|
Mexico-based | No threshold | Yes (even if only exempt sales are made, registration and filing are required) | Yes | Yes | Yes |
Non-Mexico-based | No threshold | No (if only exempt sales are made, registration is not required) | No, if all sales are made through a marketplace; otherwise yes | Yes | Yes |
A note on zero-rated supplies: Even though these are taxed at 0%, they are still considered taxable supplies and count toward nexus evaluation.
How Nexus Is Monitored
Nexus exposure should be monitored on a continuous basis. Because Mexico has no fixed dollar threshold, the question is not whether you cross a number, but whether you are making taxable supplies into Mexico at all.
For monitoring purposes, a quarterly review cycle is recommended. This approach surfaces exposure quickly and allows you to initiate registration and filing as soon as possible. Ideally, a notification is triggered as soon as the first qualifying transaction occurs, since even a quarterly cycle could result in a return or two being filed late. While penalties in that scenario are unlikely, the best practice is to register within 30 days of establishing nexus.
Marketplace Sales
If your business sells exclusively through a marketplace that acts as a VAT-withholding agent, your nexus treatment differs slightly. For non-Mexico-based businesses where all sales flow through such a marketplace, marketplace transactions are generally not included in the nexus calculation. However, if you have any direct sales alongside your marketplace activity, those direct sales do count.
Even if all your sales are through a marketplace, you may still have filing obligations. See the deregistration section below for more detail.
Deregistration and Zero-Return Filing
If your business is based outside of Mexico and sells exclusively through a marketplace, you may still be required to register and file VAT returns showing zero dollars owed. There is an exception available for businesses with annual Mexico sales below MXN $300,000 (approximately $16,000 USD). Qualifying businesses may complete a form to skip the zero-dollar monthly returns, but the initial registration and the associated paperwork are still required.
Summary: What Triggers Mexico Economic Nexus
For Mexico-based businesses:
Making any taxable supplies in Mexico
Expecting to make taxable supplies within the next 30 days
Making taxable supplies in the ordinary course of business
For non-Mexico-based businesses:
Making any taxable supplies in Mexico (other than through a qualifying marketplace)
Expecting to make taxable supplies within the next 30 days
Having no Mexico establishment but still making supplies in the course of business
Need Help?
Kintsugi monitors your Mexico exposure automatically and alerts you when a registration obligation arises. If you have questions about how your specific sales activity is classified or want to understand your current nexus status, reach out to our support team.
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