In Mexico, online gambling operators must obtain a legal license issued by the General Directorate of Gaming and Sweepstakes (Dirección General de Juegos y Sorteos, DGJS) of the Ministry of the Interior (Secretaría de Gobernación, SEGOB) in order to operate.
License Type
SEGOB issues different types of licenses through the DGJS, which are divided into several categories according to the specific gambling activities:
Online Casino License: Applicable to operators that provide games of chance such as slot machines, roulette, card games, etc.
Sports Betting License: Applicable to operators that provide betting services such as sports events and horse racing.
Bingo and Lotteries License: For operators offering online bingo or lotteries.
Betting Exchange License: Applicable to player-to-player betting platforms, such as Texas Hold'em poker platforms.
Interpretation: If it is a gaming company with multiple business types, it needs to hold multiple licenses at the same time.
Licensing requirements
Operators legally licensed by SEGOB must meet a series of strict conditions, including:
Financial stability:Demonstrate sufficient funds to support operations.
Safety measures:Ensure the security of the gaming platform, prevent manipulation, and protect the personal information of customers.
Operational History:Demonstrate a record of integrity and responsible operations.
Key points: Special access terms for foreign operators:
Validity period of the license
Licenses issued by SEGOB are valid for up to 25 years, and some early licenses are valid for up to 40 years.
Tax System:
Federal Taxes
Mexico imposes a federal tax on the gaming industry at 1% which applies to all gaming winnings, meaning all gaming operators must pay 1% of their gross revenue to the federal government.
State Taxes
Additionally, states impose tax rates on the gaming industry ranging from 4% to 6%. These taxes are also based on gaming profits and are levied separately from federal taxes. For example, if a state’s tax rate is 5%, the operator will pay 5% of gross revenue to the state after paying federal taxes.
Overall tax burden
Combining federal and state taxes, the overall tax burden for gaming operators is typically between 5% and 7%, depending on the tax rate of the state they operate in. For example, if an operator operates in a state with a 5% tax rate, their total tax burden would be 1% federal tax plus 5% state tax, or 6% of gross revenue.
Specific taxes on online gambling
For online gambling, in addition to the federal and state taxes mentioned above, operators are also required to pay a value-added tax (IVA) of 16%. This means that online gambling operators will have to pay 16% of their revenue as VAT after paying federal and state taxes.
example
Assume that an online gaming operator has a total revenue of 10 million pesos in a state in Mexico, where the state tax rate is 5%. The operator needs to pay the following taxes:
Federal Taxes:10 million pesos × 1% = 100,000 pesos
State Taxes:10 million pesos × 5% = 500,000 pesos
VAT:10 million pesos × 16% = 1.6 million pesos
Therefore, the total tax burden is: 100,000 pesos (federal tax) + 500,000 pesos (state tax) + 1.6 million pesos (VAT) = 2.2 million pesos, with a total tax burden of 22%.
Additionally, Mexico has a tax abatement program where gaming operators can take advantage of a number of tax relief programs that allow businesses to offset local taxes by up to 20% of federal gaming taxes.
