Tax Advisers Fret Over Mexico’s Withholding Rules on Outsourcing

Corporate tax advisers are urging Mexico to clarify a new law that requires companies to withhold a portion of value-added taxes on the outsourcing services their clients use.

The provision, included in the country’s 2020 budget adopted at the end of last year, requires companies to withhold 6% of value-added tax on payments they make to service providers. The move is part of the government’s broader effort to crack down on corporate tax avoidance and collect more revenue.

But tax practitioners are running into problems. The provision doesn’t clearly define what types of services are subject to withholding. Terms like ...