This content is from: Direct Tax

Mexico City’s exploitation fee raises constitutional and legal issues

Ángel Escalante and Juan Manuel Morán of Escalante & Asociados examine whether a new fee for the use of the public infrastructure in Mexico City is a gateway to double or multiple taxation.

On January 1 2022, Article 307 TER of Mexico City’s Tax Code came into force, establishing an exploitation fee for the use of the city’s urban public mobility infrastructure.

This fee must be paid by individuals and legal entities that carry out intermediation activities, promotion or digital facilitation that allow users to contact third-party suppliers of goods for the delivery or reception of food, packages, groceries or any type of merchandise in the territory of Mexico City through the operation or administration of applications and digital platforms in fixed or mobile devices.

The fee must be paid monthly, detailing the number of deliveries made in the previous month. It is calculated at the rate of 2% on the total collection of commissions or fees charged under any denomination for each intermediation, promotion or facilitation.

The calculation of the fee is made before taxes and the text of the law indicates that such charge is non-transferable and will not be subjected to transfer. It will not be included in the total cost charged to users, and will not be charged to third-party suppliers or any other third party that delivers packages, food, groceries or any type of merchandise.

Individuals and legal entities that only deliver products, parcels and/or courier services are not subject to this fee, nor are individuals and legal entities that directly manage the supply and delivery of the goods being marketed.

In simple terms, the exploitation fee is set to charge intermediaries of third-party goods such as Amazon, Rappi, DiDi Foods, Uber and Mercado Libre for the use of Mexico City’s urban infrastructure, including the streets and public internet networks.

This measure has been confirmed by legislators. During the approval of the article in question, they pointed out that the purpose of the fee is to charge international companies for the use and wear and tear of Mexico City’s infrastructure, given that such companies in most cases take their profits out of the country.

Constitutional and legal issues

Considering these points, the exploitation fee is likely to be challenged by the affected parties through an amparo lawsuit. This must be filed soon, based on the first payment made by the companies on February 15 2022.

For the first time in a while, we consider there are solid grounds to obtain the amparo protection against Article 307 TER, since it presents multiple constitutional and legal issues:

1. Nature: even though it disguises itself as an ‘exploitation fee’, it is clear that in reality we are facing a new contribution or tax, since the text of the law establishes all the corresponding elements e.g., subject, object, rate or fee and time of payment.

2. Link between subject and object: another inconsistency is that according to the legislators the exploitation fee seeks to charge the platforms for the use of Mexico City’s infrastructure, specifically for the wear and tear of the streets and the use of public internet networks. 

However, it excludes delivery companies from payment and they are the ones that actually use and transit through the streets of the city for their activities and affects the intermediaries that only charge a fee for the use of their digital platforms.

3. Unfairness: additionally, the fee is considered unfair since it only affects taxpayers that carry out intermediation activities, promotion or digital facilitation through the operation or administration of applications and digital platforms, and excludes those who use digital platforms to sell their own goods, and those who render the same services without the use of the internet.

The possibility of double or multiple taxation

The importance of challenging unconstitutional and illegal contributions such as this exploitation fee is that, if it is left unchallenged, it is likely that similar measures would be imposed in other states in the country. As a result, it could cause a double or even multiple taxation effect for operations that require the goods to transit between these states.

Finally, it is clear that the imposition of the exploitation fee was merely for tax collection purposes that undermine the economic reactivation of the country, considering the global pandemic caused by COVID-19.

Although it is expressly established that it cannot be transferred, the truth is that the obligated parties will be forced to restructure their business models and the end consumer will be the only one affected.

Ángel Escalante Carpio
Founding partner, Escalante & Asociados

Juan Manuel Morán 
Senior associate, Escalante & Asociados

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