Step-by-Step Guide to Deduct Your Fitune Subscription Payments in Mexico

1. Verify that the invoice meets Mexican tax requirements

According to Rule 2.7.1.14 of the Miscellaneous Tax Resolution and Articles 29 and 29-A of the Federal Fiscal Code (CFF), invoices issued by foreign entities can be used for tax deductions if they include:

• Name, company name, address, and tax identification number (or equivalent) of the issuer (Fitune).
• Place and date of issuance.
• RFC (Mexican Tax ID) of your business and your company name.
• Unit price in numbers and total amount in numbers and words.
• If applicable, the withheld taxes broken down, or a CFDI issued by your business to document the withholdings.

Since Fitune cannot issue a CFDI, you will need to issue a CFDI for the withholdings you make to meet this requirement.

2. Determine the payment type: monthly or annual

• Monthly subscriptions: declare withholdings and VAT for each monthly payment.
• Annual subscriptions: process withholdings and VAT in the month the single annual payment is made. Even though the service spans a year, the tax obligations apply in the payment month.

3. Calculate and withhold Income Tax (ISR)

You must calculate and withhold ISR, typically 25% of the payment amount, as per the Income Tax Law (LISR):

• Monthly payments: calculate 25% of the monthly payment.
  • Example: if you pay $1,000 USD per month, withhold $250 USD each month.
• Annual payments: calculate 25% of the total annual payment.
  • Example: if you pay $12,000 USD as a single annual payment, withhold $3,000 USD at the time of payment.

This withholding must be remitted to SAT the month following the payment.

4. Calculate and pay VAT

In addition to ISR, you must self-assess VAT at the standard rate of 16%, as Fitune is not registered for VAT in Mexico:

• Monthly payments: calculate VAT for each monthly payment (16% of the monthly amount).
  • Example: if you pay $1,000 USD monthly, VAT is $160 USD.
• Annual payments: calculate VAT on the total annual payment in the payment month.
  • Example: if you pay $12,000 USD annually, VAT is $1,920 USD.

The self-assessed VAT must be declared and paid to SAT in the month following the payment.

5. File your tax returns with SAT

Whether you pay monthly or annually, you must file the following:

• Monthly ISR and VAT return:
  • Monthly payments: file ISR and VAT every month.
  • Annual payments: file ISR and VAT in the month following the single payment.
• Informative Return for Transactions with Third Parties (DIOT):
  • Report payments to Fitune in the month they are made, regardless of whether they are monthly or annual.

Keep your payment receipts for tax compliance.

6. Retain all supporting documentation

To support your tax deduction, ensure you retain:

• The invoice issued by Fitune, meeting the requirements of Rule 2.7.1.14.
• The CFDI issued by your business for ISR withholdings.
• Proof of payments made to SAT for ISR and VAT.
• DIOT reports and, for annual payments, evidence of the single payment.

Summary

Monthly subscriptions:

1. Calculate and withhold ISR and determine VAT for each monthly payment.
2. File and pay ISR and VAT every month.
3. Report payments in the monthly DIOT.

Annual subscriptions:

1. Calculate and withhold ISR and determine VAT in the month of the payment.
2. File and pay ISR and VAT in the month following the single payment.
3. Report the payment in the DIOT for the payment month.