Yesterday, the Chamber of Deputies announced the approval of the report on the reform bill to regulate subcontracting, a bill submitted at the end of last year by the Federal Executive. The laws that would be affected by the proposed reform are the Federal Labor Law, the Social Security Law, the Law of the Institute of the National Housing Fund for Workers, the Federal Tax Code, the Income Tax Law (hereinafter, ISR) and the Law of
The report approved by the Chamber of Deputies, once approved by the Senate, will enter into force on the day following its publication in the Official Gazette of the Federation, with certain exceptions that will enter into force on August 1, 2021, which are detailed below in section B), and includes the following essential considerations: A) For labor purposes: 1. The subcontracting of personnel is prohibited, consisting of an individual or legal entity providing or making available its own workers for the benefit of another. 2. The subcontracting of specialized services or the execution of specialized works is permitted, provided that they do not form part of the corporate purpose or the predominant economic activity of the beneficiary thereof and that the contractor is registered before the Ministry of Labor and Social Welfare (hereinafter, STPS) for such purposes. 3. The provision of specialized services regarding complementary or shared activities rendered between companies of the same corporate group is permitted, provided that such activities do not form part of the corporate purpose or the predominant economic activity of the company receiving them. In other words, shared service centers are permitted. 4. The formalities and requirements for the subcontracting of specialized services or the execution of specialized works are established, which include the formalization of a written contract stating the object of the services to be provided or the works to be executed, as well as the number of workers who will participate in fulfilling it. 5. It is established that the individual or legal entity that subcontracts specialized services or the execution of specialized works with a contractor that fails to comply with the obligations arising from the relationships with its workers will be jointly and severally liable with respect to the workers used for such provision of services. 6. As a requirement for those who provide the aforementioned services (subcontracting of specialized services), the requirement of being registered before the STPS is included. The registration must be renewed every 3 years. The STPS will create a registry of providers that will be public and may be consulted on the internet. The regulations governing the issuance of the registration must be issued within the 30 calendar days following the entry into force of the reform. Individuals or legal entities that provide subcontracting services will have a period of 90 calendar days to complete such registration. 7. Regarding employer substitution, it is established that the assets that are the object of the company or establishment must be transferred to the substitute employer for the employer substitution to take effect. With the exception that, for purposes of regularizing companies that currently have employees under a subcontracting regime, the transfer of assets will not be required as a requirement provided that the rights and seniority of the transferred workers are respected for a period of 90 calendar days counted from the entry into force of the Reform. 8. A limit is established on the payment of profit sharing, which will be a maximum of three months' salary or the average of the profit sharing received over the last three years, whichever is more favorable to the worker being applicable. 9. Sanctions are included for those who: a. Refuse the practice of inspection and oversight by the labor authorities at their establishment – 250 to 5,000 times the Unit of Measurement and Updating (hereinafter, UMA – currently MX$89.62). b. Carry out subcontracting of personnel or provide subcontracting services without holding the corresponding registration – 2,000 to 50,000 times the UMA. c. Benefit from subcontracting in contravention of what is stipulated by law – 2,000 to 50,000 times the UMA. B) For tax purposes: 1. Payments or considerations made for the subcontracting of personnel (a definition incorporated into the Federal Tax Code in harmony with the amendments to the Federal Labor Law) to perform activities related both to the corporate purpose and to the predominant economic activity of the contracting party may not have tax effects of deduction (for ISR purposes) or crediting (for VAT purposes). 2. Nor will tax effects of deduction or crediting be granted to services in which personnel is provided or made available to the contracting party, when any of the following circumstances arise: a. When the workers that the contractor provides or makes available to the contracting party were originally workers of the latter and were transferred to the contractor, through any legal figure, and b. When the workers that the contractor provides or makes available cover the predominant activities of the contracting party. 3. The deduction and crediting of payments or considerations made for the subcontracting of specialized services or the execution of works (that do not form part of the corporate purpose or the predominant economic activity of the beneficiary thereof) is conditioned upon the contracting party obtaining certain documentation from the contractor and the latter providing it. In line with the foregoing, the requirement of withholding 6% of the value of the consideration effectively paid for VAT purposes is repealed. 4. Complementary or shared services or works rendered between companies of the same corporate group will also be considered specialized, provided that they do not form part of the corporate purpose or the predominant economic activity of the company receiving them. 5. A circumstance of joint and several tax liability is incorporated for the recipient of specialized services or for the contracting party of specialized works, with respect to the contributions that may have accrued as a charge to the contractor's workers. 6. Circumstances of recidivism are incorporated that aggravate the penalties for cases in which illegal services are deducted or credited; and an infraction and its sanction are established for the case in which the contractor does not provide the contracting party with the information that will be necessary for the expense to be deductible or the transferred VAT creditable (from MX$150,000.00 to MX$300,000.00 pesos for each noncompliance). 7. Conduct consisting of using simulated schemes for the provision of specialized services or the execution of specialized works, or carrying out the subcontracting of personnel, constitutes an aggravating circumstance in the commission of the crime of tax fraud and its equivalents. C) For social security purposes: 1. The contracting party of services or works will be jointly and severally liable with the contractor that fails to comply with its social security obligations in relation to the workers used to provide such services or execute such works. 2. Contractors of specialized services or specialized works must submit, on a four-month basis (no later than the 17th day of the months of January, May, and September), for purposes of the Social Security Law and the Law of the Institute of the National Housing Fund for Workers, various information on the contracts entered into during the four-month period in question. Failure to submit or the late submission of such four-month information (for purposes of the Social Security Law) will be sanctioned with a fine of 500 to 2,000 times the value of the UMA. 3. For purposes of the Law of the Institute of the National Housing Fund for Workers, it is established that, in the case of employer substitution, the substituted employer will be jointly and severally liable with the new one for the obligations arising before the date of the substitution, for up to a term of three months. 4. During the 90 calendar days following the entry into force of the reform, the migration of workers from companies that operated under the labor subcontracting regime will be considered an employer substitution (for purposes of the Social Security Law), provided that the destination company of the workers recognizes their labor rights before the corresponding legal authorities. Furthermore, certain rules are established for the determination of the class, fraction, and premium of the Occupational Risk Insurance in the case of this type of employer substitution. The next step in the legislative process is for the Senate to review the approved report and, subsequently, amend or approve it. We will continue to keep you informed of any progress or developments, reiterating that we are at your disposal to resolve any questions regarding the matter, as well as for the preparation and implementation of action plans to comply with the reform. For additional information, please contact our experts: Rodolfo Trampe, Partner: + 52 (55) 5258-1054 | rtrampe@vwys.com.mx Fernando Moreno, Partner: +52 (55) 5258-1008 | fmoreno@vwys.com.mx Jorge Díaz Carvajal, Associate: +52 (55) 5258-1008 | jdiaz@vwys.com.mx Alix Trimmer, Associate: +52 (55) 5258-1016 | atrimmer@vwys.com.mx Diego Benítez, Associate: +52 (55) 5258-1008 | dbenitez@vwys.com.mx Alejandro Pérez, Associate: +52 (55) 5258-1054 | alperez@vwys.com.mx
