Digital VAT Scheme Disrupts Mexican iGaming Market

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

Mexico’s Finance Ministry launched its new SAT Tax scheme last week to enforce the nation’s standard 16 percent value-added tax charge on all digital transactions and services, effective July 1st, 2020.

The VAT extension is part of the ‘2020 Economic Package’ of the MORENA government, wherein President Andres Lopez Obrador aims to align trade tax codes between foreign and domestic companies, creating a level playing field for market competition.

Mexico’s SAT scheme, drafted by the MORENA party in 2019, will apply to digital transactions related to vertical retail, goods , services, content, and entertainment.

The Mexican government has clarified that its new tax scheme will apply to the online gambling services that non-resident firms undertake.

It is confirmed that US Tech giants, Amazon, Google and Airbnb have advised the Mexican government to delay the launch of its new VAT scheme by a further five months to handle ongoing market disruption.

Despite the MORENA party highlighting its SAT scheme as a headline initiative, questions remain as to how government agencies will enforce the incumbent tax on foreign gaming as Mexico has yet to define its online gambling laws on individual vertical igaming.