Mexico’s igaming market blurred by new digital VAT scheme

The Mexican igaming market has been disrupted by the introduction of a new ‘16% digital services tax’ for all foreign-based companies.

Last week, Mexico’s Finance Ministry launched its new ‘SAT Tax’ scheme enforcing the nation’s standard 16% value-added tax charge to be sanctioned on all digital transactions and services, effective from 1 July 2020.

The VAT extension forms part of the MORENA government’s ‘2020 Economic Package’, in which President Andres Lopez Obrador seeks to align commercial tax codes between foreign and domestic enterprises, creating a level-playing field for market competition.

Drafted by the MORENA party in 2019, Mexico’s SAT scheme will be applied on digital transactions related to retail, goods, services, content and entertainment verticals.

The Mexican government has clarified that its new tax scheme will be applied to online gambling services undertaken by non-resident firms.

US Tech giants, Amazon, Google, and Airbnb are reported to have urged the Mexican government to delay the introduction of its new VAT scheme by a further five-months to accommodate for ongoing market disruptions.

Despite the MORENA party underlining its SAT scheme as headline initiative, questions remain as to how government agencies will enforce the tax on foreign gaming incumbents as Mexico has yet to define its online gambling laws with regards to individual igaming verticals.

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