Legislative Alert, Outsourcing Reform Invoice Defined – Taxes

Mexico:

Legislative Alert, Outsourcing Reform Bill Explained

December 08, 2020

Díaz Mirón Y Asociados, S.C.

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  1. On November 12th was the President of the Mexican Republic

    submitted a bill to amend the Federal Labor Act (LFT)

    Security Law (LSS), the law of the National Institute for the

    Workers Housing Fund (INFONAVIT), federal tax legislation, income

    Tax law (LISR) and VAT law (LIVA) with the purpose

    the organization of subcontracting.
  2. The bill was motivated by the ideas of order, transparency in

    Employment relationships, avoidance of abusive or fraudulent practices,

    Strengthening employment and eliminating whatever is possible

    harm the rights of workers and, from a tax point of view, restrict all employers

    Obligations to recognize their claims.
  3. And to comply with international recommendations and

    International Labor Organization best practices for

    the implementation of effective policies for the benefit of workers.
  4. This bill aims to comply with the principle of labor law. to

    Avoid inappropriate and fraudulent practices like indiscriminate

    Transfer of workers; the register of workers with a lower salary

    than those they actually receive, which affects their rights

    social security and housing.
  5. At the heart of the bill is the prohibition of subcontracting

    Staff and the provision of specialized services or the

    Execution of projects that are not part of the company

    Purpose nor the financial activities of the beneficiary and as

    as long as the contractor has a special permit from the Ministry

    of work and social welfare is allowed.
  1. In connection with the social security law is a reform

    suggested when relating to the provision of specialized services

    Is work that is based on actual activities of the contractor and the beneficiary

    regulated.

The aim is also to prevent sub-registers of salaries in

Order that payment of employee-employer fees be made directly

and geared towards actual and real salary. Obviously the whole thing

special system relating to registers and special types of fees

for subcontractors would go away.

  1. Regarding the law of the National Institute for Workers

    Housing Fund, the bill aims to fix the impact on the right to

    Live and dictate, as mentioned above, that it is the real thing

    Salary of the worker with the same impact before the Mexican

    Social Security Institute, the National Institute for the

    Workers Housing Fund and the tax authorities.
  2. Of course in tax matters is the provision of services and the

    Subcontracting arrangements are not deductible for either income

    Taxes and VAT as well as the tax administration service

    considers the VAT as paid for any impact

    of intercompany agreements related to the transfer of

    the cost of subcontracting.
  3. In relation to federal tax legislation, through the prohibition of the institution,

    The initiative aims to clean up and enforce tax transparency

    Resources as currently assumed

    unfortunately a bias that creates illegal systems that have

    led to a manipulation and decrease in tax payments with which

    Consequential damage for the tax authorities.

It is proposed to issue the receipts to the employee

Joint and several subcontracting, fines, penalties and a

qualified tax fraud would have no tax implications.

  1. Implementation of these reforms included in the bill, in

    in accordance with the preliminary articles of which would begin on

    January 1, 2021.
  1. In terms of implementation, is expected for the new

    Companies that provide specialized services or a modified one

    Company purpose to apply for a permit from the Ministry of

    Labor and Social Affairs for a period of six months from

    Date the Department publishes the general requirements or regulations

    said companies must comply. The bill provides that the

    Ministry of Labor and Social Affairs should have a deadline of 4 moths

    first issue these general provisions or criteria.
  2. And last but not least, the Mexican

    The Social Security Institute can terminate the contract within 120 days (6 months).

    all employers from the entry into force of the reforms

    Registrations that are incorrect.
  3. Because of the dialogue between employers and government

    according to today's news arising from the meeting that was held

    yesterday at the Palacio Nacional the basic points in this process

    are the following:

one. The reform and the recruitment bill

Delivery systems will be successful.

b. The date of entry into force is requested

except January 1, 2021 for businesses to be ready.

c. Employee profit sharing was discussed as an important matter

that can help during the implementation process if the National

Commission for employee profit sharing manages a

Recommendation to limit the payment of such

Profit sharing for employees up to a maximum salary of three months. This

is not discussed in Congress and could be accepted

from this National Commission for Employee Profit Sharing. It is

expects to raise this matter with the Commission where required by law

intervene

d. main national trade unions and employers' associations to

Suggest the sectors or high intensity capital industries in which

Such thresholds for employee profit sharing can be proposed.

The foregoing does not imply any consultation or recommendation.

It's a simple opinion of this law firm on the subject

the reform of outsourcing and employee profit sharing.

The content of this article is intended to provide a general overview

Guide to the subject. Expert advice should be obtained

about your particular circumstances.

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