Income Tax Policies for Amazon in Mexico

Amazon in Mexico boasts over 90 million unique visitors per month. It is not hard to understand why sellers want to expand their business south of the border.

However, If you’re considering how to sell on Amazon Mexico, you can’t get started just like that. One of the key aspects you must understand are Mexico’s income tax collection policies.

In this article, we will help you navigate the process and make informed decisions, whether you’re a new seller or looking to grow your existing Amazon business.

Is Amazon Business Available in Mexico?

The first question to answer is, can you even use Amazon business in México? And the answer is yes. Amazon Business is available in Mexico, and there are almost 18 thousand local sellers already. However, selling locally is not the only option: If you are a seller looking to expand your current client base, you will have access to a broader customer base that includes businesses looking for bulk purchases.

For example, if you sell office supplies, signing up for Amazon Business can allow you to offer bulk pricing or volume discounts specifically tailored for companies. By listing your items on Amazon Business in Mexico, you can attract large companies like factories or office buildings that regularly purchase these supplies in bulk. This opens up opportunities for higher sales volumes and repeat customers, especially if you offer competitive pricing and reliable fulfillment.

How to Sell on Amazon in Mexico

If you’re already selling on Amazon and want to expand to Amazon in Mexico, there are a few sticks you will need to follow.

Set up your Seller Central account in Mexico. You can use your existing Amazon account to register. Simply update your business details and payment information to cater to the Mexican market. Once you’ve provided the necessary information and completed the verification process, your account will be ready to use.
Decide how you want to handle fulfillment. With FBA, Amazon takes care of storing, packing, and shipping. Alternatively, FBM allows you to handle storage and shipping yourself. You’ll keep control at the cost of effort.
Familiarize yourself with the FBA Calculator in Mexico. This tool can help you estimate costs for fulfillment, storage, and shipping. This will help you decide if using Amazon FBA is a good fit for your products. You can also calculate your potential revenue, which is crucial for setting competitive prices and managing profit margins.
Adapt your listings for the Mexican market. Update your product titles and descriptions to include relevant keywords and cater to local preferences. Also, revise your product images to ensure they meet local expectations and show your products clearly.
keep an eye on your performance once your products are live. Keep track of sales, revenue and customer feedback on a constant basis. Then, adjust your listings, pricing, and fulfillment methods as needed to improve your results.

Tax Policies for Amazon Sellers in Mexico

Mexico’s tax reform has introduced new rules that directly impact how you do business on Amazon.

One of the most critical changes is that Amazon is now required to calculate and withhold income tax on your total monthly sales. If you don’t have a valid tax ID (known as RFC,) Amazon will deduct a 20% income tax from your earnings.

However, if you do register your RFC, the tax rate can be significantly lower, ranging from 0.4% to 5.4%―depending on your sales volume.

Imagine you’re a new seller on Amazon Mexico. In your first month, you generate sales totaling 50,000 MXN. Without an RFC, Amazon would automatically deduct 20% in income tax. On the other hand, if you had registered your RFC, the deduction could be as low as 200 MXN (0.4%.)

What About VAT on Digital Services?

Mexico also implemented new rules requiring that VAT (Value Added Tax) be charged on digital services provided by Amazon, such as advertising or subscription fees for premium services.

If you’re a seller based in Mexico, Amazon will add this VAT to your bill, unless you have a valid RFC registered with Amazon.

Selling on Amazon Mexico from the US vs as a Resident

When selling on Amazon Mexico, your approach will differ depending on whether you’re based in the US or if you are a resident of Mexico. Each option has its own set of steps, challenges, and benefits.

Selling from the U.S.

Dealing with the Import Process

You’ll need to go through Mexico’s import process. This means registering as an importer with Mexican authorities, paying import duties, and following customs regulations.

Your products must meet Mexican safety standards, and you may need to add labels or documents in Spanish.

You may also need to hire a customs broker to help you navigate the process and avoid delays.

Managing Shipping and Logistics

Shipping your products from the US to Mexico can be both expensive and time-consuming. You’ll have to decide whether to store your items in Amazon’s US warehouses and ship them as orders come in, or send inventory to Amazon’s warehouses in Mexico.

For example, shipping from the U.S. will probably lead to longer delivery times and higher costs, which might impact how happy your customers are. Handling returns can also be tricky since shipping items back to the U.S. is costly.

Handling Currency and Payments

When selling in Mexico from the US, you’ll need to consider currency exchange rates and how you’ll process payments. The value of the Mexican peso compared to the US dollar can change, which might affect how much profit you make.

You might need to open a local bank account or use a payment service that can handle different currencies to make things easier.

Following Mexican Laws

As a US-based seller, you must follow Mexican consumer protection laws. The problem is that you will need to get some professional help or do a lot of research to stay on top of all the different regulations, as these are different from what you’re used to in the US.

You’ll have to learn everything from rules about product returns and warranties to customer rights.

Selling as a Resident

Simplifying the Import Process

México residents have it way simpler when it comes to dealing with the import process.

You can register as an importer locally, which reduces the paperwork and costs that foreign sellers face. Being in Mexico also makes it easier to handle any issues that come up, which ultimately will help you save time and money.

Improving Logistics and Delivery

As a resident, you can store your products in Amazon’s warehouses in Mexico. This makes shipping faster and less expensive, which can improve your customer service.

Understanding the Local Market

Living in Mexico gives you a better understanding of what local customers want. You’ll know about trends, popular products, and regional differences. This can help you choose the right products to sell and how to market them effectively.

Building Relationships with Local Partners

As a resident, you can form relationships with local suppliers, manufacturers, and service providers. These partnerships can help you get better prices, improve the quality of your products, and make your logistics more reliable.

Working with local businesses also makes it easier to adapt quickly to market changes.

Taking Advantage of Local Tax Benefits

Mexican residents might qualify for tax benefits or incentives that are designed to support local businesses. These benefits can include lower tax rates or financial support, which can help reduce your costs and increase your profits.

Should You Sell on Amazon in Mexico?

Selling on Amazon Mexico can be a smart move, but this doesn’t mean it is the right path for you.

If you are thinking about approaching this strategy, you need to know everything about the benefits and challenges and see if it will work for you long-term.

Benefits

Growing market. Mexico’s ecommerce sector is expanding, driven by increasing internet penetration and a growing middle class. For sellers, this means a broader audience and more sales opportunities.
Less competition. Amazon Mexico typically has fewer sellers than markets like the US or Canada, which can make it easier for new sellers to stand out. For example, if you’re selling niche products like eco-friendly household items, you might face less competition and be able to capture a significant market share more quickly.
Local fulfillment centers. Amazon’s established several warehouses in Mexico, which can reduce your shipping costs and improve delivery times. This is especially beneficial if you use Amazon FBA.

Challenges

Tax and regulatory hurdles. Navigating Mexico’s tax system can be complex. You’ll need to ensure you’re compliant with all regulations to avoid penalties.
Customs and import duties. If you’re importing products into Mexico, you’ll need to manage customs duties and paperwork, which can be time-consuming and costly.

By weighing these factors, you can make an informed decision about whether to enter the Mexican market.

Importing Goods and Customs in Mexico

When selling on Amazon in Mexico, it’s crucial to understand the import process.

You need to register as an importer and obtain an RFC to legally bring goods into Mexico.
Additionally, you’ll need to classify your products correctly to determine the appropriate duty rates.

Let’s say you’re importing electronic gadgets into Mexico. You’ll need to classify these products using the correct tariff codes and calculate the duties owed. If the duty rate is 10% and you’re importing 100,000 MXN worth of goods, you’ll need to pay 10,000 MXN in duties.

Working with a customs broker can help ensure you’ve done everything correctly, avoiding potential fines or delays at customs.

Remember, Amazon won’t act as the importer for your shipments. So, it’s up to you to make sure all paperwork is accurate. Incorrect documentation could lead to your shipments being returned, and you’d be responsible for the return shipping costs.

Shipping to Amazon in Mexico

Amazon has several warehouses across Mexico, which can be a significant advantage for sellers. These warehouses allow you to store your products closer to your customers, reducing shipping times and costs.

Now, you might wonder, “how much does Amazon charge to ship to Mexico?” The answer varies depending on factors like the size and weight of your products, but using Amazon’s FBA service can help you lower these costs.

If you’re selling fitness equipment, which is typically heavy, storing your products in an Amazon warehouse in Mexico can drastically reduce your shipping costs.

Instead of shipping each item individually from your home country, you send a bulk shipment to the Mexican warehouse. From there, Amazon can handle the distribution, delivering products to customers in just a few days and at a lower cost.

Key Points to Remember

Register your tax ID. Register your RFC to avoid higher tax rates and unnecessary VAT charges.
Understand import regulations. Ensure you’re correctly listed as an importer and that you have all necessary registrations and documentation in place.
Use the FBA calculators. The Amazon FBA Calculator is essential for estimating costs and pricing your products competitively.
Leverage Amazon’s infrastructure: Use Amazon’s warehouses in Mexico to reduce shipping costs and improve delivery times, enhancing your customers’ experience.

Final Thoughts

Expanding your business to Amazon in Mexico can open up tons of new opportunities for your business, but it requires careful planning and a solid understanding of the local market.

Do your research to understand everything about tax regulations, shipping, import requirements, and Amazon’s tools and infrastructure in Mexico. Also, it can be a good idea to join some specific forums to talk with people who have done this before.

Whether you’re a small seller just starting or an established business looking to expand, Amazon Mexico offers a promising ecommerce platform for reaching new customers. Just remember to approach it mindfully with all the right resources in hand.

Author

Antonella Fleitas is highly adept at creating fact-based, evergreen content about science, language learning, and culture. Her main goal is to build a strong content foundation for her clients, based on meaningful stories that people can learn from.

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