While Upwork is your home for work, we know that your physical home could be anywhere in the 180+ countries where we operate. Because each country has its own rules and regulations, some users have taxes that are specific to their location. 

In Mexico, this includes an income tax on digital services that we are required by Mexican law to withhold from the earnings of freelancers and agencies. We plan to begin withholding this tax, at the earliest, on April 1, 2021.  

This means you’ll see the tax withheld on any payments made to you once we start collection.  

The great news is that you have total control over whether we withhold 1% or 20% of your earnings on Upwork. Because we hope to withhold as little as possible, we urge you to add your RFC (Clave en el Registro Federal de Contribuyentes) number. If you add your RFC, we will only be required to withhold 1% of your earnings instead of 20%. To enter your RFC number, click here.

Mexican income tax

In Mexico, income tax withholding is a means of collecting a portion of the income tax owed by Mexican taxpayers on identified transactions.

Legislation that became effective as of June 1, 2020, and was modified effective January 1, 2021 (the Resolución Miscelánea Fiscal), requires businesses like us to collect income tax on the earnings of service providers who are based in Mexico, such as freelancers and agencies who use Upwork. 

This means that if you are based in Mexico, we will be required to withhold this tax from your earnings. We will then remit what we collect to the Mexican government.

The amount to be collected from your earnings is determined by whether you provide a Clave en el Registro Federal de Contribuyentes (RFC) number to Upwork.

How Mexican income tax withholding works

  • A 1.0% tax will be withheld from your earnings if you have provided an RFC number to Upwork.
  • A 20.0% tax will be withheld from your earnings if you have not.

NOTE

You will be able to claim a tax credit or refund from the Mexican government should you pay more taxes than required.(Since we’re not tax experts and want you to receive the most accurate information, please contact a trusted tax expert or advisor for specific advice. We can’t provide tax help.)

 

When will Upwork collect Mexican income tax?

We expect to begin collecting this tax on April 1, 2021, but it may be a bit later.

Do you withhold the tax before or after freelancer service fees are charged?

The withholding tax is calculated based on the gross amount that you invoice your client, so it is calculated prior to freelancer service fees or any other fees that may reduce the amount credited to your account.

I am a freelancer in Mexico but I don’t think I have to pay any Mexican income tax. What should I do?

Unfortunately, we cannot provide specific tax advice. Since we want to make sure you receive the specific information you need, we suggest you contact a trusted tax advisor.

I am a freelancer in Mexico and I think I’m being charged the wrong withholding tax. What should I do?

We are required to withhold a specific percentage of your earnings, as defined by Mexican law. Since we want to make sure you receive the specific information you need, we suggest you contact a trusted tax advisor. We cannot provide tax advice.

What if I end up paying more in taxes than required?

You will be able to claim a tax credit or refund from the Mexican government should you pay more taxes than required. (Unfortunately, we cannot provide specific tax advice. Since we want to make sure you receive the specific information you need, we suggest you contact a trusted tax advisor.)

What does Upwork do with the money that it withholds? Is this just a way for Upwork to make more money?

No, Upwork does not keep the funds withheld under this tax law. We are required to forward any tax we collect from our users to the Mexican government.

Does Upwork also need to collect VAT (Value Added Tax) on transactions in Mexico?

The same legislation that requires Upwork to collect income tax also imposes VAT collection on certain digital services transactions. We are currently working to determine which transactions are subject to VAT collection. Once Upwork has determined when VAT collection will be required, we will reach out to our users in Mexico with more information.

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