How to get a Mexican tax number to sell products online (or anywhere)
About two years ago, I was invited by Amazon to speak to a handful of their executives about a problem that has plagued Amazon’s growth prospects in Mexico, the complications for foreigners to obtain a Mexican tax ID number or RFC as it is called. This is just one in a series of examples where Mexico’s tax and legal landscape have failed to live up to the realities of the 21st-century economy. In this article, we provide a real-life example of the steps involved in completing the process. Though the procedure presents certain complexities, our firm in conjunction with our affiliates located all around the world including in China, India, the United States and Europe, we can help your company register in Mexico with an RFC number or VAT registration to participate in Amazon Mexico’s marketplace, and to operate in Mexico generally. It is important to note that the procedures explained here do not only apply to companies selling on Amazon, but to any foreign company seeking to register to do business in Mexico.
Recent reforms to Mexico’s Federal Fiscal Code have obligated many foreign companies that deliver products and services by way of online digital platforms, like Amazon, Uber and Airbnb, to register in Mexico to do business. Unfortunately, the Mexican government did not make any meaningful attempts to ease this burden or bureaucracy on foreign businesses making it simpler to obtain an RFC number or VAT registration.
The truth of the matter is straightforward – getting an RFC number involves either incorporating a local legal entity in Mexico or registering what equates to a local branch office in Mexico for your company. There is no other way. This process cannot be handled online and involves sending a trove of documents to Mexico that must be registered before the proper authorities.
Let’s walk through an example, step by step, with a hypothetical situation. Our company, Bicentennial Group, is incorporated in Delaware as a limited liability company. Say for a moment that we decide to get an RFC number for our Delaware company so it can comply with local VAT rules. This is of course hypothetical, as our firm is already incorporated in Mexico as well as the United States.
First, we have to order certified copies of all corporate formation documents including our certificate of formation and a certificate of good standing from the Delaware Secretary of State. These documents represent that the company actually exists. Next, we have to execute a power of attorney from the company to our local Mexican attorney who will complete the process in Mexico. This can often be done in a dual-column English and Spanish document. The power of attorney will need to be duly signed and notarized in the United States by a manager or officer of the company. In some cases, it will also be necessary to obtain a certified copy of the company’s operating agreement or by-laws to demonstrate signing authority. This of course depends on how the company has been structured.
Once all of this is done, every single document will need to obtain an apostille. If you do not know what an apostille is, it is basically a certification issued by the Secretary of State or Ministry of Foreign Affairs of the country where the document was issued, affirming its authenticity for use in a foreign country. For more information, you can review material concerning the Hague Convention which abolishes the requirement for legalization and authentication of official documents. Some countries are not members of the Hague convention and therefore an apostille cannot be used. This is the case for many countries, including mainland China and Canada. Instead, the document must first be authenticated by the domestic authorities and taken for legalization at the local Mexican consulate or embassy. For example for a Chinese company registered in Beijing, you would have to obtain certified copies of the company’s business license and powers of attorney… etc as stated above, then have those documents authenticated by the provincial authorities and subsequently taken to the consular section at the Mexican Embassy in Beijing to be legalized for use in Mexico.
So, that was just the first step. Once all documentation is in hand, it will need to be forwarded to your attorney in Mexico for step two. All the documents will need to be translated in Mexico by a licensed translator. Using your own foreign translator is not an option according to Mexican law. The company must then seek authorization from the Mexican Secretary of the Economy to be registered and do business in Mexico. The authorization is processed online and will result in your being issued an affirmative authorization letter displaying your corporate details. This does not issue you an RFC number. There is still more work ahead.
The company’s documentation must go through a process called protocolization, which means that they are taken before a notary, transcribed and certified as part of the public record before the local Public Registry of Property and Commerce or Registro Publico de la Propiedad y del Comercio. The documents cannot be legally used in Mexico until this process before the notary is completed. Keep in mind here that one of the documents you should have obtained is a power of attorney for your local attorney or representative in Mexico to complete the registration. Only after this step can we proceed to the third and final step, obtaining the VAT registration or RFC number.
Before obtaining the RFC number, you will need to have a registered office or virtual office space secured. Your legal representative will need to make an appointment to obtain the RFC number with the local tax office and bring copies of the contract for the local registered office and notarized deed issued by the Mexican notary. At this point, the company is legally authorized to do business in Mexico with a valid RFC number and VAT registration.
Beware that this process is basically the same if you choose to incorporate a subsidiary entity in Mexico, except you will also have to appoint a second shareholder. In Mexico all legal entities must have at least two shareholders. In either case it should be obvious from this reading that the paperwork burden is almost exactly the same. From a practical perspective, it may be a wiser decision to incorporate a subsidiary rather than only registering a branch for purposes of obtaining an RFC. This is especially true where the company will have a large number of operations, contract services, own property or engage in local partnerships. There are also tax implications that vary slightly for both options. For more information, feel free to contact our company. We are able to take care of the process for you.