Netflix registered as a "Mexican" company; now pays taxes to SAT

Netflix, the most important streaming platform in the world, has opted to establish itself as a company in Mexico, so it will be taxed as any other taxpayer residing in the country. According to a press release published on Wednesday by the Ministry of Finance and Public Credit (SHCP), Netflix International B.V. (Netflix) will no longer appear in the list of digital service providers, with residence abroad, registered in the Federal Taxpayers Registry (RFC).

In other words, it will declare its income and will continue to pay Value Added Tax (VAT) and Income Tax (ISR). The digital platforms regime is a mechanism that facilitates and simplifies the VAT payment compliance of users located in the country that contract digital services from platforms that do not have permanent residence in Mexico.

In Mexico, the contracting of a digital service is subject to VAT, which is collected by the platform and delivered to the Tax Administration System (SAT), otherwise, the consumer should pay this VAT directly to the SAT. At the beginning of the year, Netflix informed Forbes Mexico that it will invest USD 300 million in the country, to make at least 50 original productions, either local or global, filmed in national territory, to be released in 2021.

Mexico has been the protagonist of a boom of great relevance for the industry, with contributions that have been enjoyed in different markets. Mexico is a creative capital of great importance for Latin America and the world. It is exciting to see how Mexican productions are enjoyed by millions of our members in countries such as the United States, France, and Brazil. That is why continued investment in the Mexican audiovisual industry will continue.

According to information from El Universal, the new list also does not include the job offer company Dgnet LTD from the United Kingdom, which had registered in December 2020, and highlighted the entry of 16 new digital service providers, among them Blizzard Entertainment, the creator of video games such as Diablo, Warcraft and Overwatch.

Also noteworthy among the novelties are Starzplay, a streaming company that offers series and movie content through Apple TV Plus, and Fitch Solutions, which is part of Fitch Ratings and registered to offer country risk and financial intelligence services. Meanwhile, there are 86 foreign-based companies, including Alexa Internet, Airbnb, Amazon, Adobe, Adobe, Apple, Bloomberg, Expedia, Facebook, Google, HBO, Linkedin, Microsoft, Nintendo, Roku, Spotify, Samsung, Sony, Uber, and Zoom.

According to the Federal Tax Code and the Value Added Tax Law, "it is the obligation of foreign residents without a permanent establishment in Mexico who provide digital services to recipients located in Mexican territory to register in the Federal Taxpayers Registry".

Likewise, the SAT should disclose both on its website and in the Official Gazette of the Federation the list of residents abroad that are registered in the Federal Taxpayers Registry. Companies that do not comply with all their tax obligations in Mexico will have their internet signal blocked in Mexican territory, following the law.