You have freedom and opportunities when you freelance in Mexico, but you also have to follow the law and pay taxes. If you work with local clients or on international sites like Fiverr, it's important to know what your responsibilities are under Mexican law. This guide will show you how to deal with your freelance income and taxes in Mexico without having to worry about breaking the law or guessing.

1. Getting a job as a freelancer with SAT

If you work as a freelancer in Mexico, you need to register with the Servicio de Administración Tributaria (SAT), which is Mexico's tax authority. For this, you need to get an RFC (Registro Federal de Contribuyentes) and an e.firma (electronic signature).

The registration process usually includes:

• Making an appointment with SAT as an individual taxpayer.

• Showing a valid government ID and proof of your address.

• Picking a tax system based on your income and job.

• Obtaining your e.firma so you can file your taxes and access them online.

You can sign up online, but it's usually better to make an appointment in person so you don't make a mistake and get help.

2. Choosing the Right Tax System

There are different ways to pay taxes in Mexico for people who work for themselves. How much tax you pay, how often you file, and how you handle deductions all depend on which one you choose.

Régimen Simplificado de Confianza (RESICO):

• Ideal for freelancers earning up to MXN 3.5 million annually. 

• Makes it easy to file and has low ISR rates of 1% to 2.5%. 

• It is common for VAT (IVA) to be taken out automatically.

• You don't need to do much bookkeeping.

Business and Professional Activity Regime:

For freelancers who make more than MXN 3.5 million a year.

• Needs a lot of accounting

• The ISR for income tax is between 1.92% and 35%.

• You have to file monthly reports for both IVA and ISR.

Rules for Digital Platforms:

• This includes money made on sites like Airbnb, Uber, and Fiverr.

• For freelancers who earn less than MXN 300,000 annually on digital platforms

• Platforms may not pay taxes directly.

• Choosing the right regime helps you find a middle ground between your taxes and your paperwork.

3. Knowing Your Tax Responsibilities: ISR and IVA

Freelancers in Mexico usually have to pay two kinds of taxes:

• The ISR (Impuesto Sobre la Renta) is a tax on income. The rates for RESICO are low (1%–2.5%) and are based on gross income.
  
• Some systems use net income to figure ISR, and the rates range from 1.92% to 35%.

• IVA (Impuesto al Valour Agregado) is a tax on added value.
  
• Most services in Mexico have a 16% value-added tax (VAT), but services in border areas have an 8% VAT.
  
• Clients have to pay IVA and file it every month.

• If you don't file or pay your taxes on time, you could get fines, interest, or even have your bank account frozen.

4. Sending out bills (Facturación)

To stay in line with the SAT, freelancers must send Electronic Tax Invoices (CFDI) for each transaction. You will have to make your Mexican invoices using SAT or another service, since Fiverr doesn't offer them.

An accurate invoice must include:

• Your RFC and, if you know it, the RFC of the client

• Details about the service, the price, and taxes (ISR, IVA)

• When and how to pay

• Correctly billing your clients helps you prove your income and lets you take tax deductions for business expenses.

5. Getting tax breaks

Freelancers can lower their taxable income by writing off work-related costs like:

• Tech, computers, and office supplies

• Rent and utilities (for home offices, the amount depends on how big the office is)

• Subscriptions to software and office supplies

• Travelling and getting to work

• Classes online or for career growth

To qualify, make sure that all of your deductible expenses have invoices that are correct with your RFC.

6. Sending in tax forms

Freelancers need to send in:

• The 17th of each month is the deadline for ISR and IVA monthly declarations.

• The last fiscal year's annual declaration is due by April 30.

• You can file your taxes online through your e.firma and SAT. This will be easier if you keep records regularly.

7. Showing that you earn money as a freelancer

• Freelancers must provide evidence of income to obtain loans, mortgages, or other financial services.

• Every year, ISR declarations

• Invoices sent to customers by CFDI

• Bank statements that show related deposits

• If you need them, notarised income statements

It's very important to send out the right invoices because banks and other financial institutions like to see regular, well-documented income.

8. How to Start a Freelance Business That Is Legal

You can begin as a persona física and transition to a sole proprietorship (actividad empresarial) as your enterprise expands.

The steps are as follows:

• Getting your RFC and e-firma. 

• You can register a business name if you want to.

• Opening a business bank account. 

• If you hire people, you need to sign up for either IMSS or INFONAVIT.

• A formal setup can help you get credit, build trust, and keep your money in order.

9. The best ways for freelancers to manage their money

• Keep track of your money with accounting software.

• Put aside some of your monthly pay for taxes.

• Stay up to date on changes to tax laws. 

• Use digital platforms with good exchange rates for payments from other countries.

• Talk to a certified accountant who knows about the SAT and working for yourself.

TransFi's Bizpay makes it easy and cheap for businesses to pay freelancers and remote teams around the world. There are no hidden fees, and making international payments is easy.

Conclusion 

Managing taxes as a freelancer in Mexico may seem like a lot of work at first, but if you follow the right steps, like registering with the SAT, sending invoices, and claiming tax deductions, it's not too hard and can be very rewarding. With the right tax system, accurate records, and professional advice, you can stay in compliance, pay less in taxes, and have a successful freelance career in Mexico.

If you're just starting out, make sure to register with the government and keep good records. Experienced freelancers will have long-term financial health if they plan ahead and file on time.

FAQs 

Q1: Do freelancers in Mexico need to register with SAT?

Yes. If you work as a freelancer in Mexico and make money, you need to sign up for SAT and get an RFC.

Q2: What will happen if I don't send in my monthly reports?

If you don't file or pay your taxes on time, you could get fines, penalties, interest, and even have your account frozen.

Q3: Can I write off my phone and internet bills if I work for myself?

Yes, as long as the costs are work-related and you have RFC invoices that are valid.

Q4: Do I have to send out invoices if I work through sites like Fiverr?

Yes. Fiverr doesn't give you official CFDI invoices, so you have to make them yourself.

Q5: What types of taxes are best for people who are just starting out?

If you make less than MXN 3.5 million a year, RESICO is usually the best choice because it has low tax rates and is easy to understand.