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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