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Tax Newsletter – Subcontracting Services - Initiative for its Regulation (April, 2021)

Dear clients,

Last week, the Mexican legislative power sent to the Congress a new Initiative for the Congress, regarding the practice of personnel subcontracting (known as outsourcing or insourcing or subcontracting or personnel administration or other similar ones) that months ago had been detained for further analysis.

This attempt to regulate these type of services does not elicit any major alterations compared to the previous one. Its main characteristic is still the prohibition to hire outsourced services, although there will be regulation mechanisms in place so that those who intend to contract them will only do so in the case of specialized services that are different from their corporate purpose and main economic activity.

By the same token, it would be established that:

The Ministry of Labor and Social Prevision will implement a registry for the suppliers of the aforementioned services. Those who do not accomplish said liability could be subject to be fined in case of not getting registered, regardless of the tax effects their clients may have on the impossibility to deduct of such outsourcing service and to credit of the corresponding VAT.

  • Both client and supplier shall maintain a permanent solidary responsibility in the event of noncompliance with the employee-employer labor or social security liabilities and/or any arising tax and legal burden concerning the labor relationship with the staff involved.
  • As for the profit sharing (“PTU”), it is proposed to limit it to a maximum of three months of salary or to the average of salaries during the previous three years.
  • Outsourcing suppliers will be obliged to submit to Social Security Ministry information regarding their own staff on quarterly basis.

Consequently, the 6% VAT withholding in place for these outsourcing services would no longer be in effect.

Yesterday said Initiative was practically approved in such terms and it is awaiting to be notified in the Official Gazette, which will imply that the outsourcing supplier' staff will have to be added to the client's payroll in the terms established in the Labor Law, in the cases when said staff activities are directly related to the client's principal economic activity or main business purpose; however, we will have to wait for the guidelines for such process.

Consequently, it can be said that in the terms previously established, companies (clients) will still be able to hire outsourcing services to carry on activities unrelated to their main business, as it is the case of accountant or legal services, security staff or cleaning services among others.

Our specialists look forward to answering any questions you may have on this matter.

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Zip Code 03100, Mexico City
Tel: 55 3687 2700
E-mail: oma@oma.com.mx
Web: www.oma.com.mx

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