In accordance with the provisions of Article 123 paragraph A, section IX, of the Political Constitution of the United Mexican States, (CPEUM, by is Spanish acronym): “Employees shall be entitled to a share in the profits of the companies …”.
Profit sharing must be made within 60 days after the date on which the annual tax is due, which means that during the month of May for corporations and in June for individuals who have generated profits, the profit sharing for the year 2023 must be calculated and paid to their employees.
All individuals and legal entities with employees are obliged to pay profit sharing.
Determination of the basis for distribution
Article 123 of the Mexican Constitution states that taxable income will be taken as the basis, in accordance with the provisions of the Income Tax Law (LISR, by its Spanish acronym). By means of a resolution for the National Commission for Employee Profit Sharing determined the percentage of profits to be distributed of 10%
The amount of unclaimed profits for the year, which are receivable, will be added to the distributable profit for the following year.
In 2021, the Federal Labor Law established a limitation on the maximum amount to be distributed to employees, which will be three months of the employee’s salary or the average PTU received by the employee in the last three years, whichever result is more favorable for each employee.
Taking into consideration the above, employers will have to perform the following three calculations:
- Considering a total amount of profits to be distributed of 10% of the taxable income according to the Income Tax Law.
- Considering 3 months of salary, the last salary considered in fiscal year 2023 will be taken into account.
- Considering the average PTU paid to each employee in the last three years.
Basis for determination
Taxable income under the Income Tax Law
The mechanics established to determine the PTU to be distributed among employees are as follows;
Taxable income
(less) Non-deducted part of the exempt provision (art. 28 f. XXX LISR)
(equal) Basis for determination of employee profit sharing (PTU)
(by) 10% (equal)
(equal) PTU for fiscal year 2023
(plus) Unclaimed employees’ profit sharing for 2022
(equal) PTU to be paid in 2024 corresponding to the year 2023.
Article 9 of the Income Tax Law states that in order to calculate taxable income, the PTU paid in the year shall not be reduced; this is specified so that the PTU paid is not subtracted from the taxable income to determine the payment for such concept. Neither will the tax loss carryforwards from previous years be reduced.
Three months’ salary basis
In this calculation, three months of salaries will be considered, taking into account the daily salary, in accordance with articles 89 and 124 of the Federal Labor Law.
Average basis of employee profit sharing for the last three years
The PTU paid to each employee in the last three fiscal years must be taken into consideration. The PTU paid in the last three years will be added and the result will be divided by three. If in any year or years no PTU was generated, the year or years in which PTU was paid will be added and divided by three.
It is important to mention that these calculations must be made for each of the employees, so that some employees may receive their PTU on the taxable basis, the basis of three months’ salary or the basis of the average PTU paid in the last three years.
PTU amount payable in a fiscal year
The calculation of the three months’ salary and the average PTU paid in the last three years will be made when there is a taxable base, in accordance with the Mexican Constitution and the Income Tax Law, if there is no taxable base then no PTU amount will be paid to the employees.
- When the amount of the PTU taxable base is less than three months’ wages or the average of the PTU paid in the last three years, then it will be paid based on the calculation of the taxable base.
- If the amount of the three months’ wages is less than the PTU, considering the taxable base, and is greater than the average PTU paid in the last three years, then PTU will be paid based on the three months’ wages.
- If the amount of the average employee profit sharing for the last three years is less than the employee profit sharing considering the taxable base, and is greater than the basis of the three months of wages, then the average employee profit sharing for the last three years will be paid.
Here are some examples:
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Who is entitled to ptu
The employees who are entitled to receive PTU are as follows:
- Regular employees for any period worked.
- Temporary employees when they have worked at least 60 days during the year.
- Workers of trust (over a maximum salary of 20% over the highest paid unionized employee or the highest paid employee within the company).
Who is not entitled to PTU
Those who meet the following criteria are not entitled to participate in the employees’ profits:
- Directors, administrators and general managers.
- Domestic workers.
- Professionals rendering independent services in a company (as well as those assimilated to salaries).
Objection of employees to the statement of income for the year
Pursuant to Article 121 of the Federal Labor Law, in the event that the employees do not agree with the annual income tax return, the following procedure is established:
- The employer, within a term of 10 days from the date of filing the annual tax return, shall deliver a copy thereof to the employees.
- Within the following thirty days, the union that holds the collective bargaining agreement or the majority of the workers of the companies may submit to the Treasury Department (SHCP, by its Spanish acronym) such observations as it deems appropriate.
- The final resolution issued by the SHCP itself may not be appealed by the workers.
Joint committee of PTU
In accordance with Article 125 of the Federal Labor Law, a committee must be formed by an equal number of representatives of the employees and the employer. A project will be formulated to determine the PTU for each worker. The employer will make available to the committee the workers’ attendance list and the list of employees and other elements available to the committee. In the event of any objection, it will be resolved by the same committee within a term of 15 days.
Calculation of income tax withholding on employee profit sharing
Article 93, Section XIV of the Income Tax Law states that no PTU tax is payable up to the equivalent of the unit of measurement and updating raised to 15 days, i.e. $1,628.55 pesos on the difference, withholding must be made in accordance with the provisions of Article 96, fourth paragraph of the Income Tax Law, and Article 174 of the Income Tax Law.
Considerations for determining payment
a) Days considered for counting working days:
- Maternity leave.
- Disability due to occupational risk.
- Holidays, seventh day, vacations and contractual leave.
- Leaves to perform union commissions.
b) Days not considered as workdays:
- Paid and unpaid leaves of absence.
- Disabilities due to general illness.
- Unjustified absences.
c) Wage basis for calculation (art. 124 LFT)
- Fixed salary: the daily quota will be considered, not including extraordinary work, bonuses and other benefits referred to in Article 84 LFT.
- Variable salary: the average of the payments obtained in the fiscal year, not including extraordinary work, bonuses and other benefits referred to in article 84 LFT, will be taken.
- Mixed salary: the daily quota plus the average or annual variable salary, not including extraordinary work, bonuses and other benefits referred to in article 84 LFT will be taken
The result of the calculation of the PTU must be individualized considering two variables.
a) 50% of the employee profit sharing to be distributed among all employees, considering the proportion of the days that each employee actually worked.
b) 50% is distributed considering the proportion of the salary that each employee earned, with respect to the total wages earned.
The amount of the participation of workers in the service of persons whose income derives exclusively from their work, such as services for fees from an SC, when they are engaged in the care of goods that produce income, or in the collection of credits and their interest, may not exceed one month’s salary.
At Núñez Rosas we are aware of the complication that the calculation of the PTU can generate, we offer you our services for the preparation of the PTU calculations to be distributed among your workers considering all the obligations mentioned in this publication, in order to generate the correct amount to be delivered to each of your employees.
