Do you know the new Federal law reforms in relation to SUBCONTRACTING in México?
On Friday night April 23rd, 2021 the Mexican President (AMLO) published in the Official Gazette of the Federation a Decree (attached to this email you will find the Official Decree that is valid as of Saturday April 24th, 2021 in the whole country) which reforms and modifies the Federal Labor Law; the Social Security Law; the INFONAVIT Law; the Federal Tax Code; the Income Tax Law; the VAT Law; the Federal Law of Workers in the Service of the State, Regulatory of Section B) of Article 123 of the Constitution; the Regulatory Law of Section XIII Bis of Section B, of Article 123 of the Political Constitution of the United Mexican States, in matters of Labor Subcontracting.
The following are the substantive aspects of the reform:
1) Subcontracting of personnel is prohibited (both outsourcing and insourcing), defined as the action of a natural or legal person to provide or make available its own workers for the benefit of another person.
2) Employment agencies or intermediaries involved in the recruitment process may only participate in recruitment, selection, training and coaching. These agencies or intermediaries shall not be considered as employers, since only the beneficiary of the services shall be considered as such.
3) Subcontracting shall only be permitted for specialized services or the execution of specialized works that do not form part of the corporate purpose or the predominant economic activity of the beneficiary natural or legal person, for which the contractor must obtain a registration/registry before the Ministry of Labor and Social Welfare, which shall be granted once it has accredited that it is up to date with its tax and social security obligations. The Labor Ministry (STPS) will create a registry, which will be public and will be available for consultation on an internet platform. Registration will be renewable every three years a. Registration must be obtained by all legal entities within three months of the publication by the STPS of the general provisions regulating the obtaining of registration, which will be issued within thirty days of the publication of the reform (the authority shall publish the rules before or by May 24th, 2021, and therefore, all the legal entities shall comply with all the requirements of the reform by August 23rd, 2021).
4) Complementary or shared services or works provided between companies of the same business group shall also be considered as specialized, provided that they do not form part of the corporate purpose or the predominant activity of the beneficiary company.
5) The subcontracting must be set out in a written contract specifying the object of the services to be provided or the works to be executed, as well as the approximate number of workers to be involved in the performance of the contract.
6) The PTU is capped, the amount of which shall have a maximum limit of three months of the worker's salary, or the average of the share received in the last three years, applying the amount that is most favorable to the worker.
7) The joint and several liability of the contracting party and the contractor is maintained when the latter fails to comply with the obligations arising from relations with its workers.
8) Penalties of 2,000 to 50,000 UMAS ($179,240.00 to $4’481,000.00 Mexican pesos) for individuals or legal entities that provide subcontracting services without registration, as well as for the beneficiaries of the services, without prejudice to other legally applicable penalties.
9) For an employer substitution to take effect, the assets of the business or establishment must be transferred to the substitute employer. Companies operating under a subcontracting regime are exempted from this obligation for a period of three months from the entry into force of the reform, provided that the contractor transfers its workers to the beneficiary, recognizing their labor rights, including their seniority.
10) It shall be mandatory to provide IMSS, on a four-monthly basis, with information regarding the provider of specialized services or the execution of specialized works for a beneficiary, as well as the contract and attach a simple copy of the registration issued by the STPS. The IMSS shall inform the Secretariat of non-compliance with this obligation. The Institute may also impose a fine of 500 to 2000 UMAS ($44,810.00 to $179,240.00 Mexican pesos).
11) For INFONAVIT purposes, the period of two years is modified to three months, in which the replaced employer is jointly and severally liable with the new employer with respect to the obligations derived from the Law that governs said Institute, born before the date of the substitution.
12) It shall also be mandatory to provide INFONAVIT, on a four-monthly basis, with information on the provider of specialized services or execution of specialized works rendered for a beneficiary, as well as the contract, amounts of contributions and amortizations, information on the workers and attach a simple copy of the registration issued by the STPS. INFONAVIT shall inform the Secretariat (STPS) of any failure to comply with this obligation.
13) Payments or considerations made for the subcontracting of personnel to carry out activities related to both the corporate purpose and the principal economic activity of the contractor shall not be deductible.
14) Payments or considerations for the subcontracting of specialized services or the execution of specialized works may be deductible, provided that they do not form part of the corporate purpose or of the main economic activity of the beneficiary of the same and that they are registered with the STPS, in addition to complying with the requirements of the Income Tax and VAT Law.
15) There will be joint and several liability in tax matters when legal entities or individuals receive services or contract works to carry out activities related to both the corporate purpose and the predominant economic activity of the contracting party, among other cases.
16) It shall be considered an offense of tax fraud to simulate the provision of specialized services, or the execution of specialized works permitted by the Fiscal Code of the Federation or to carry out subcontracting not permitted by the said legislation.
17) The authorized deduction of ISR, in the case of the provision of specialized services or the execution of permitted specialized works, the contractor must verify that when the payment of the consideration for the service received is made, the contractor has the registration of the STPS, among other requirements.
18) VAT that is transferred for subcontracting services not permitted by the Federal Fiscal Code shall not be creditable in accordance with the Law governing this tax.
19) In order for VAT to be creditable in the case of the provision of specialized services or the execution of specialized works permitted by the Fiscal Code, the contractor must verify that when the payment of the consideration for the service received is made, the contractor has the registration of the STPS, among other requirements.
Please feel free to contact us in case you’d like to discuss further this reforms.
Lic. Rubén Alberto Cano Balcorta