The digital economy remained unregulated in LatAm far longer than its international counterparts. For example, previously, digital services provided by nonresident entities were not subject to the tax bracket. However, this has soon begun to change, as the region is quickly implementing tax laws for these services, as well as B2C transactions, amongst others.
Across Latin America, fiscal reforms are becoming a priority for governments, particularly as a digital economy is no longer the future, but the present. At the top of the list is digital services taxation, which most countries are unilaterally adopting.
The digital economy remained unregulated in LatAm far longer than its international counterparts. For example, previously, digital services provided by nonresident entities were not subject to the tax bracket. However, this has soon begun to change, as the region is quickly implementing tax laws for these services, as well as B2C transactions, amongst others.
As of 2025, countries like Mexico, Argentina and Peru had already implemented indirect taxation, while Brazil was still working towards the introduction of similar rules. In Mexico, non-resident platforms are required to pay a 16% VAT; Argentina levies a 21% VAT on digital services used for economic or commercial purposes; and finally, in Chile, foreign providers must register and pay the 19% VAT and other taxes.
Mexico’s digital economy is rapidly advancing, and in 2023 represented approximately MXN 2 trillion. The country has therefore taken several steps to collect money from the digital economy, including the imposition of VAT on all domestic digital services. Digital platforms which operate in the collective economy of Mexico must withhold income and VAT on operations carried out by their users.
Similarly, Brazil, on the other hand, which is home to 18,000 start-up companies, accounts for 77% of startups in LatAm and attracts over 70% of start-up investment in the region, indicating the country’s growth potential in the medium term and long term, opening opportunities for digital services taxation.
E-commerce is thriving in the region and is projected to reach $232 billion by 2026 from $159 billion in 2022, propelled by rapid digital transformation and particular, thanks to a young, tech-savvy population that is increasingly engaging in online shopping. This growth outpaces the global e-commerce growth, which stands at 7-8%. There have also been some exceptional cases in which Latin American markets reported annual growth rates over 30%.
Brazil occupies the primary position with an e-commerce market which was worth $216 billion in 2022. Nearly 70% of the online purchases were made on mobile phones, highlighting the increasing preference for mobile commerce. Mexico’s e-commerce sector is projected to grow by over 30% from 2023 to 2026, keeping in line with the regional growth. E-commerce sales in Mexico were MXN 758.7 billion ($42.8 billion) in 2020, and climbed to an anticipated MXN 1.3 trillion ($70.9 billion) in 2024.
Regulations are also being put into place to support e-commerce expansion and fintech innovation in the region. In Brazil, to ensure that financial tools are accessible to all, the Central Bank’s open banking regulations dictate that standardised APIs for banks are necessary, as it facilitates increased data-sharing and integration of financial services across platforms. Mexico’s 2018 Fintech Law has been framed to ensure transparency and accountability in the sector. Along with supporting a budding e-commerce market, the law also targets the pressing issue of financial exclusion, which is quite rampant across LatAm.
Most countries in the region are recognising that to develop infrastructure and institutions which help e-commerce and fintech companies, they must first ensure that the large underbanked or unbanked population gains access to traditional as well as modern financial services platforms. It is only then that the e-commerce market can truly penetrate even the remote and underrepresented portions of LatAm’s economy.
The high levels of unequal income distribution in the region are caused by a number of reasons. One of the main reasons for this, however, is the low redistributive impact of cash transfers and direct taxes. Research has also shown that disposable income in Latin America is higher than in other regions because government interventions in cash transfers and direct taxes only reduce income inequality 5%, as opposed to the 38% reduction rate elsewhere.
Fiscal reforms are enacted in any country only after carefully observing and analysing their impact on business enterprises, particularly multinational corporations. In 2026, the OECD/G20 nations agreed to introduce the ‘Global Minimum Tax.’ Under this new tax, a 15% levy will be imposed on multinational enterprises which record a revenue of over EUR 750 million.
The Inclusive Framework is necessary for Latin American and Caribbean countries, as they are active participants in regional and international discussions. Most of these countries have already implemented the Base Erosion and Profit Shifting (BEPS) 1.0 reforms, and many are moving towards implementing the BEPS 2.0 reforms, which include the Global Minimum Tax.
The region has also adopted the Qualified Domestic Minimum Top-up Taxes (QDMTTs) within the Inclusive Framework, which not only protects tax bases but also competes for high-quality FDIs. The adoption of the Substance-Based Tax Incentive (SBTI) Safe Harbour also allows for Latin American countries to adopt policies which attract more investments, which will enable the creation of a stable and competitive environment while maintaining public finance stability.
LatAm countries are also offering several tax incentives to investments, such as Bolivia announcing a reduction in Corporate Income Tax on Foreign Beneficiaries for foreign companies willing to reinvest their profits in the country. Under Uruguay’s General Investment Promotion Regime, numerous benefits can be availed under the Corporate Income Tax, the Net Worth Tax, VAT, and import duties and fees on goods.
A change in approach toward capitalising on the potential of a rapidly expanding digital economy is reflected in the fiscal landscape of Latin America. The area is striking a balance between tax collection and investment appeal by moving from unregulated markets to complex VAT regimes and OECD-compliant minimum levies. These changes, together with fintech rules, aim to close the financial inclusion gap, which is essential for long-term growth, particularly in the digital economy.
In conclusion, Latin American countries are setting themselves up to lessen income inequality while creating a stable, competitive climate for long-term digital innovation by fusing internationally proposed norms with domestic incentives.
