Business

Mexico could introduce a new tax on foreign digital business, such as Netflix and Spotify

The expectation is that the new tax could generate a revenue of $ 185 million a year

Spotify could be affected by new Mexican tax
  • The new tax would be similar to other taxes that exist in other Latin American countries, such as Argentina and Colombia 
  • The Mexican tax is not approved yet and will only affect foreign digital businesses that provide audiovisual services, mainly streaming companies
  • The government expects to reach a revenue of 3.6 billion pesos a year, around $ 180 million dollars, with the new regulation

A new tax could change the game for digital business in Mexico in the next  few months, but this isn’t completely surprising. In the last few years, Latin American countries went through several tax regulation changes to embrace new digital business models that had started booming in the region and each one is dealing with it in their own way. 

In Argentina, the Federal Public Revenue Administration (AFIP) released a list with 180 foreign digital businesses that have been paying the VAT (Value-Added Tax) tax since 2018. On the other hand, Colombia established rules for decided what kind of companies should pay for offering digital solutions on the country, including the provision of audiovisual services, mobile application digital distribution platform services, the provision of online advertising services, and the provision of distance education or training. However, Colombia has great news for clouding services, since they will be free from the VAT

Now, it’s Mexico’s turn. The Finance Minister revealed on Monday (Sep 9th) that the government intends to approve a new tax over foreign digital businesses that provide audiovisual services, a tax that will have a direct impact on the streaming industry in the country.

READ MORE: Amazon Prime and Apple TV + open new front in Latin America’s streaming clash

The tax will let off the hook other big companies, such as Uber and Airbnb, according to what the Senate leader of MORENA, Ricardo Monreal, reiterated in a news conference. 

I’m not talking about Uber, I’m not talking about Airbnb, I’m only talking about the audiovisuals [companies]. Essentially, Netflix, Apple, Spotify, Amazon Prime and anothers, there are four or five.

Ricardo Monreal, Senate leader of MORENA

Being one of the most important markets for streaming services, following Spotify’s statements saying that Mexico City has more users than any other city in the world, the government plans to use the new tax to fill up economic gaps. If approved, it is expected that the government could reach revenue of 3.6 billion pesos a year, around $ 180 million dollars,  according to Reuters.