Exporting services from Mexico: 0% VAT rate and how to invoice foreign clients

Two regimes that get confused constantly: 0% rate vs "not subject to VAT"

Article 1 of the VAT Law (LIVA) establishes that the tax applies to acts or activities carried out within Mexican territory: sale of goods, independent services, temporary use of goods, and imports. If a service is rendered and consumed entirely outside Mexico, it may not fit any of those categories at all — in which case the transaction is simply not subject to the LIVA. No VAT is charged, but technically it is not "0% rated" either.

Article 29 of the LIVA is different: it applies to services that are rendered by a Mexican resident, but whose benefit is received abroad. For a closed list of activities, the law mandates a 0% rate. The transaction remains subject to the tax — just at a zero rate.

The difference looks subtle, but it has a very concrete economic effect: under article 5 of the LIVA, the VAT you pay on your own expenses (office rent, software, subcontractor invoices, services you hire) is creditable when your income comes from taxed activities, including 0%-rated ones. If your income is instead treated as "not subject", that credit becomes much harder to sustain or is lost proportionally. For most businesses billing abroad, it is worth actively framing the transaction under article 29 — not avoiding it.

Which activities qualify as service exports (Article 29, section IV)

Section IV of article 29 lists the services rendered by Mexican residents, used abroad, that carry a 0% rate:

Notice what is not on this list: general "consulting", general "professional services", "software development" as a broad category, plain graphic design, plain content writing. This does not mean these activities can never be billed at 0% — it means they must be precisely framed under one of the items above (for example, software development under a technical assistance contract, or content writing as part of an advertising service), and that framing must be backed by the contract, not improvised when the invoice is stamped.

The requirement almost nobody documents: use abroad

Having a client based outside Mexico is necessary but not sufficient. SAT can review whether the actual outcome of the service is used abroad. Evidence used to support this includes:

• The contract specifies where the service or its deliverables will be used (the foreign client's offices, operations, or market).
• The client has no permanent establishment, branch or representative office in Mexico that receives or uses the service.
• Payments come from the client's bank account abroad — worth cross-checking against our guide on receiving international payments in Mexico.
• Business correspondence (emails, work orders, deliverables) confirms where the service is destined.

If the foreign client has a subsidiary or branch in Mexico and the service is actually used there — even if the invoice is paid by the foreign parent company — the transaction no longer qualifies as a 0%-rated export, because the use occurred within national territory.

How to invoice a service export under CFDI 4.0

Stamping an export-of-services invoice has specifics that many issuers overlook:

• Recipient's RFC: if the foreign client has no Mexican RFC, use the generic RFC XEXX010101000, together with the client's real name or legal entity name.
• "Exportación" attribute: in CFDI 4.0 it must be set to 02 — Definitiva when the transaction is an export under article 29 of the LIVA.
• Recipient's country: entered using SAT's three-letter country code catalog (e.g., USA, ESP, DEU).
• VAT rate: declared as TipoFactor = Tasa with value 0.000000 — it must not be left as "Exempt", because exempt and 0%-rated have different consequences for crediting input VAT.
• Currency and exchange rate: if the invoice is issued in dollars, euros or another currency, the currency and the day's exchange rate published by Banco de México must be recorded for bookkeeping and the monthly return.

The foreign trade complement of the CFDI is mandatory for the export of goods crossing customs, not for services. Confusing the two regimes is a common mistake that delays invoicing unnecessarily.

The numbers: why the 0% rate matters more than it seems

Take the case of a web design and development agency in Guadalajara, registered as an individual with business activity, billing exclusively two clients in Spain and Germany under technical assistance contracts for interface development.

That monthly $9,920 MXN negative balance is a VAT balance in the agency's favor that can be requested as a refund month after month — following the same logic described in our guide on SAT balance in your favor. Over a year, that is close to $119,000 MXN recovered from VAT the agency already paid to its suppliers.

Had the same agency treated its income as "not subject to VAT" instead of a 0%-rated export — a common mistake when the accountant does not distinguish between the two regimes — crediting that $9,920 monthly would be far harder to sustain under review, because the taxed activity that justifies the credit (article 5-I of the LIVA) would not be correctly reported.

Real case: when "service export" was not properly supported

In a review we carried out for a design studio in Guadalajara, we found they had been billing at 0% to clients in Spain and Germany for two years under the generic claim of "service export", but none of their contracts mentioned where the service was used or framed the activity under any item of article 29-IV. If SAT had reviewed those invoices, the export argument would have been hard to sustain based solely on the client's address being abroad.

The fix did not require changing how invoices were issued, but updating the contracts: the scope of services was redefined as "technical assistance for the development and maintenance of software interfaces", with an explicit clause stating that deliverables would be integrated into products operated and marketed outside Mexico. With that contractual basis, the 0% rate applied over the previous two years became defensible — and future invoices followed the same format from the start of the contract.

RESICO and service exports: what changes and what does not

If you bill under the Simplified Trust Regime (RESICO), the VAT rules do not change because of RESICO — article 29 of the LIVA applies the same as for any other individual with business activity. What does change is income tax: under RESICO you do not deduct expenses for ISR purposes, but crediting the VAT paid on those same expenses still follows the general LIVA rules, which is a separate tax from ISR. This is a recurring point of confusion: "not deductible for ISR" does not mean "not creditable for VAT".

The most common mistakes in service export invoicing

Marking the invoice as "Exempt" instead of "0% rate" — these are two different fields in the CFDI with opposite crediting consequences. Applying 0% to activities that are not, and cannot reasonably be framed under, article 29-IV, without contractual support. Not keeping evidence of where the service is used — emails, contracts, work orders — which is the first thing requested in a review. And, the opposite mistake: failing to charge 16% VAT on transactions that, even though the client is abroad, are actually used in Mexico because the real recipient of the service operates locally.