Modifications to tax legislation regarding outsourcing
On April 23rd, 2021, a Decree was published in the Official Gazette of the Federation (“DOF”) amending, adding and repealing several provisions of the Federal Labor Law; the Social Security Law; the Law of the National Workers Housing Fund Institute; the Federal Fiscal Code (“CFF”); the Income Tax Law (“LISR”); the Value Added Tax Law (“LIVA”); the Federal Law of Workers in Service of the State, Regulatory of Section B) of Article 123 of the Constitution; and, of the Regulatory Law of Section XIII Bis, Section B of Article 123 of the Mexican Constitution (the “Decree”).
Such Decree states that the amendments to the mentioned laws will become effective until August 1st, 2021. Among the main changes to the tax laws are the following:
- Federal Tax Law
1.- Deduction and crediting. The provisions of the CFF establish several limitations so that invoices arising from the payment of subcontracting services may not be deducted or credited.
Payments for services in which personnel is placed at the disposal of the contractor may not be deducted or credited. This, only in the case that: (i) the workers made available to the hiring party, were originally its employee, and (ii) when the workers made available perform the same predominant economic activities, according to the bylaws and business object of the hiring party.
The exception to the general rules applies only if the outsourced service consists on specialized services or, for the execution of specialized works, different from the predominant economic activity of the hiring party. However, the application of such exception is subject to the condition that the person rendering the outsourcing services complies with the following: (i) is registered before the Ministry of Labor and Social Welfare (“STPS”), and (ii) it complies with the provisions of Articles 27, Section V of LISR and article 5, section II second paragraph of the LIVA.
2.- Penalties. If any of the aforementioned points are not complied with, the CFF establishes the following penalties:
- a) Deducting or crediting the payment for outsourcing services without complying with the provisions of articles 27, section V of the LISR and article 5, section II, second paragraph of the LIVA, will be considered as an aggravating circumstance in the commission of infractions. In addition, a fine of MXN$150,000.00 to MXN$300,000.00 will be applied for each failure to comply with the provisions of the articles.
- b) In the event that a taxpayer simulates schemes for the rendering of specialized services, the execution of specialized works or keeps its personnel outsourced, it will be equivalent to the crime of qualified tax fraud.
- Income Tax Law
1.- Deduction requirements. Regarding payments for the provision of specialized services or execution of specialized works, the hiring party must comply with the following: (i) verify that, at the time of the payment, the service provider is registered before the STPS, and (ii) request from the service provider a copy of the following:
- The invoices covering the payment of worker’s salaries.
- The receipt of payment of the withholding taxes made to the workers.
- Payment of labor-management contributions.
- Payment of INFONAVIT contributions.
III. Value Added Tax Law
- A) Withholding of 6%. Pursuant to the Decree, the six percent (6%) withholding that was established in article 1-A, section IV of the LIVA, for cases in which a person benefits from outsourcing services, was repealed, and therefore, as of August 1st, 2021, it will no longer have to be withheld.
- B) Requirements for crediting. Now, in order for the value added tax to be creditable, in the case of subcontracting activities of specialized services or the execution of specialized works, when paying for those services, the hiring party must comply with the following: (i) verify that the service provider is registered before the STPS, and (ii) request from the service provider a copy of the value added tax return and acknowledgment of receipt of payment, corresponding to the period in which the payment was made.
In the event that such information is not collected, the hiring party must file a supplementary return in which it will have to reduce the amounts credited for those services.
We hope you find this information useful. The complete publication of the Decree can be found through the following link:
If you have any questions or comments, please contact us at the following e-mail addresses:
Rafael Tena Castro email@example.com
Luis Kanchi Gómez firstname.lastname@example.org