iGaming transactions face new Mexican tax reform

The new tax will distinguish between land-based betting venues and online gaming companies, whilst also drawing a line between foreign and local businesses

Approved by the government in December 2019,  Mexico's 2020 Economic Package comes into effect in two weeks, including a newly introduced VAT charge for foreign iGaming companies, as well as non-gambling entertainment businesses operating outside of the country.

The package contains a series of new tax regulations which will become effective on July 1st, 2020. One of the new regulations is the so-called SAT tax, or the 16% digital services tax, targeting platforms giving access to online services, such as multimedia and audio-visual entertainment, information, and transport services. In light of the economic difficulties brought about by the current pandemic, household names hit by the tax, such as Netflix, Amazon, PlayStation, and Airbnb, have reportedly asked the Mexican government to postpone the launch for another 5 months - the government has not yet indicated whether it would acquiesce to their request. 

All foreign companies that provide digital services - including iGaming websites and betting operators - in Mexico are included in the new VAT charge, even if they do not have residence there.

New regulations aside, the gaming industry is already required to pay taxes in Mexico. 30% of gambling revenue must be given to the Mexican government (Tax Special on Production and Services). Since the existing tax does not distinguish between land-based and online gambling, nor between national and non-Mexican companies, competition within the sector has become stagnate.

Through this new tax the government hopes to achieve two main goals; to increase competition between local and foreign businesses, and to further highlight the distinction between the two.  

For the gambling industry it is one more step towards including online gaming into existing Mexican gambling laws, despite questions about the sustainability of an 16% tax amid an economic crisis.

 

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