As we had already announced in our newsletter “Labor Topics 2021” https://nra.com.mx/en/labor-topics-2021/ as part of the meetings and talks between the government, companies and the labor sector, finally the amendments to the scheme commonly known as “Subcontracting” have materialized. Last Friday April 23rd, a series of amendments to the following laws was finally published.
- Federal Labor Law
- Social Security Law
- Law of the National Workers’ Housing Fund Institute
- Federal Fiscal Code
- Income Tax Law
- Value Added Tax Law
- Federal Law of Workers in the Service of the State.
Below, we inform on the changes that have been approved and that shall be mandatory for all taxpayers and employers. Throughout the amendments that will be mentioned, reference is made to concepts such as “Contractor” who will be the individual or legal entity that provides personnel services and “Contracting Party” is the one who receives the services.
FEDERAL LABOR LAW
All provisions related to the previous subcontracting scheme are eliminated. It is established as a general principle that the subcontracting of personnel is prohibited, in addition to specifying that subcontracting will be understood as when an individual or legal entity provides or makes its workers available for the benefit of another individual or legal entity. It is provided that employment agencies or intermediaries that intervene in the process of hiring personnel, recruitment, selection, training and qualification will not be considered as employers. It is clarified that some subcontracting activities will be allowed, but only in the case of specialized services, provided that whoever receives these services uses them to cover work or activities that are not contemplated in its corporate purpose; companies of the same group may provide specialized services to each other, complying with the same restrictions; they may not receive services to perform and/or fulfill their corporate purpose or their predominant economic activity. In order to understand what is meant by a corporate group, it is necessary to consider what is set forth in Article 2, Section X of the Securities Market Law. “A group of legal entities organized under schemes of direct or indirect participation of the share capital, in which the same company maintains the control of such legal entities. Likewise, financial groups formed in accordance with the Law to Regulate Financial Groupings will be considered as a business group.” In the event of receiving services for the rendering of specialized services or the execution of specialized works, it must be formalized by means of a written contract, which shall indicate the purpose of the services to be received, as well as the approximate number of workers that will participate in the performance of such contract. The person who receives specialized services will be jointly and severally liable when the contractor fails to comply with the obligations arising from the labor relations with its workers. The prohibition of subcontracting services, as well as the permission to provide specialized services became effective as of April 24, 2021. Companies that provide outsourcing services of specialized services must
- Register before the Secretary of Labor and Social Security, to obtain this registration, such registration must be renewed every three years.
- Be up to date with their tax and social security obligations (it does not specify what is up to date with their obligations)
Individuals or legal entities that obtain the registration will be included in a registry that will be public and will be available on an internet portal. Since some issues have not yet been clarified in these amendments, it is contemplated that the Secretary of Labor and Social Security will issue rules or procedures to comply with this registration. In view of these changes, it is understandable that employees are transferred from one company to another, for which a new requirement is incorporated to carry out this employer substitution, which indicates that the company’s assets must also be transferred. However, it is specified that if this transfer of employees is carried out within the following 90 calendar days from April 24, 2021, it will not be necessary to transfer the assets of the company, as long as the labor rights and seniority of the employees are preserved. There are also changes to the maximum amount of Worker’s Profit Sharing (PTU by its Spanish acronym) to be distributed to the majority of employees; currently there is a maximum limit of three months’ salary or the average PTU paid in the last three years, whichever is deemed in the best interest of the employee. Fines ranging from 250 to 5,000 UMA’s, that is, from $22,405 to 448,100 pesos have been considered for employers who do not allow the inspection and surveillance ordered by the authorities. Those who provide subcontracting services, as well as those who benefit from these services, may be fined from 2,000 to 50,000 UMA’s, that is, from $179,240 to $4’481,000 pesos.
SOCIAL SECURITY LAW
Article 15-A is amended to establish that the hiring of specialized services must comply with the provisions of the Federal Labor Law. It is specified that those who contract services will be jointly and severally liable as of April 24, 2021 in case of non-compliance of employers with their social security obligations. Those who provide specialized services will have the obligation to provide information on the contracts entered into during the relevant four-month period, no later than January 17, May and September. The data to be submitted in each report will include a simple copy of the registration with the Secretary of Labor and Social Security as a provider of specialized services. Specialized service providers will be required to provide the service contract and the list of workers indicating their CURP, name, social security number and contribution base salaries within 90 calendar days from April 24, 2021 to whoever receives the service. In the event of failure to submit the information indicated in the preceding paragraph, fines ranging from 500 to 2,000 UMA’s, that is, from $44,810 to $179,240 pesos, are established.
LAW OF THE NATIONAL WORKERS’ HOUSING FUND INSTITUTE (INSTITUTO DEL FONDO NACIONAL DE LA VIVIENDA PARA LOS TRABAJADORES)
It is established that in case of employer substitution, the substituted employer will be responsible for the obligations of this law arising before the date of the substitution for a period of three months, after which the new employer will be responsible for the new obligations. Furthermore, those who receive specialized services will be jointly and severally liable for any non-compliance that the contractor may incur with respect to the workers used to perform the services. Similar to the changes in the Social Security Law, this law provides that those who provide specialized services must report information on a four-monthly basis. It is foreseen that within 60 calendar days from April 24 the Institute must issue the rules for the submission of the four-monthly reports.
FEDERAL FISCAL CODE
One of the changes in this legal ordinance is to provide that payments made or considerations paid for subcontracting personnel will not have tax effects when such services are to perform activities related to the corporate purpose, as well as to the economic activity of the person receiving the services, which means that the payments made may not be deductible, and the VAT paid may not be credited. Payments may not be deducted, and VAT may not be credited when the contractor’s employees
- They were originally employees of the person receiving the services.
- The contractor’s employees perform predominant activities of the contracting party.
It is mentioned that payments made for the subcontracting of specialized services may be deductible and VAT may be credited, provided that the person rendering the services has the registration mentioned in the Federal Labor Law. It is also provided that the contracting parties are jointly and severally liable for the taxes incurred by the workers who rendered services to them. A penalty is contemplated for the contractor who does not provide the contracting party with the information contemplated in the Income Tax Law and the Value Added Tax Law, the fines range from $150,000 to $300,000 pesos. But perhaps one of the most relevant changes is that it will be considered a tax fraud offense to use simulated schemes for the rendering of specialized services or the execution of specialized works, or to subcontract personnel. The amendments to the Fiscal Code will become effective on August 1, 2021.
INCOME TAX LAW
It is established that in order to be able to deduct the rendering of specialized services, the contracting party must
- Verify that the contractor has the registration established in the Federal Labor Law.
- Obtain from the contractor the tax receipts for the payment of salaries of the employees who have rendered their services
- Receipt of the payment issued by the banking institution for
- Employee income tax withholdings
- IMSS fees
- INFONAVIT contributions
It also states that payments made for the subcontracting of services will not be deductible. Amendments to the Income Tax Law will be mandatory as of August 1, 2021.
VALUE ADDED TAX LAW
It is considered that the VAT paid for the subcontracting of services will not be creditable. Guidelines have been established in order to be able to credit VAT on payments for specialized services, the contracting party must verify that the contractor has the registration mentioned in the Federal Labor Law, in addition to obtaining a copy of the VAT return and the acknowledgment of receipt of the payment of the value added tax. In turn, the contractor is obligated to provide the aforementioned information no later than the last day of the month following the month in which the payments for the services rendered were received. If this information is not provided, then the person receiving the services must file a complementary tax return in which the VAT that was credited is reduced. The changes to the Value Added Tax Law will become effective as of August 1, 2021.
OTHER AMENDMENTS
Lastly, as of fiscal year 2022, these amendments prohibit the subcontracting of personnel for the benefit of government agencies; only the subcontracting of specialized services or specialized works will be allowed as long as the contractor is listed in the single registry mentioned in the Federal Labor Law. As explained, there are several laws that have been modified, so it will be necessary for all companies to make a diagnosis to review the services they are receiving or the services they are providing in order to be able to comply with all these changes. It is expected that the Secretary of Labor will issue rules during the month of May at the latest to clarify, specify and, mainly, dictate the applicable rules for the enrollment in the registry of suppliers that provide subcontracting services, so we will have to follow these publications. Once the rules mentioned in the previous paragraph are published, there will be 90 calendar days to obtain the registration before the Secretary of Labor.
At Nuñez Rosas y Asociados, we understand the relevance of these changes, which could affect the operation of many taxpayers, for which we offer our services to review together with their labor lawyers, the current situation of each company, seeking at all times that they are complying with the tax provisions that have been amended, as well as the labor and social security provisions mentioned in this newsletter.
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