Therefore, a new term is being proposed in order for the contracting party use the data application and consults the authorized information by the contractor in connection with labor subcontracting activities in substitution of the obligation to obtain documentation referred in articles 27, section V of the Income Tax Law (“IT”) and 5, section II of the Law of Value Added Tax (“VAT”) for purposes to deduct the expenses for IT and credit the corresponding VAT.

It should be noted that there is no change in the deadline for the contracting parties to file the fulfillment obligations notice for the tax year 2017, announced on the TAS website on last February 7; that is, no later than September 30.

Comments

There is legal uncertainty in order to define when we are in presence of a provision of independent services, a labor intermediation, or a labor subcontracting, in which case the aforementioned provisions must be observed.

The aforementioned, because through the tax audits carried out by the TAS, on multiple occasions the authority has considered that the agreements for provision of services that require workers or employees of the contractor to effectively provide the services to the contracting party, are not provision of services, re-characterizing the legal relationship between both parties and, therefore, causing a tax contingency to the contracting party.

Even, the Mexican Institute of Social Security has required to the contracting parties in this type of services, the payment of employer-employee fees that left or should have paid the contractors.

Recommendations

It is essential to review and analyze the contracting scheme for provision of services implemented with its several contractors (i.e. suppliers), in order to establish a diagnosis and the necessary recommendations to continue operating such scheme, paying special attention and emphasis on tax issues because the potential contingencies that may be generated.

If you have any questions regarding the foregoing, please do not hesitate to contact us.

Mexico City, October 3, 2018

Article 15 A, fifth paragraph of the SSL establishes that the contractors (contractor and contracting party) must communicate to the MISS within the first 15 days of the months of January, April, July and October, several information in connection to the Contracts and Agreements celebrated in the quarter in question.

It is necessary to point out that the first paragraph of the aforementioned article 15 A of the SSL, states that when hiring workers for an employer in order to perform works or provide services for him, a labor intermediary participates, both will be jointly and severally liable with each other and with the workers, regarding with the social security obligations.

Remember that the general rules published by the TAS specify that the contracting party can use the data application to consult the information authorized by the contractor in connection with labor subcontracting activities and if obtain the acknowledgment of receipt without inconsistencies, they will not have any contingency for Income Tax and Value Added Tax purposes.

Comments

We considered that the Ruling confuses the legal institutions of labor intermediation and labor subcontracting, and therefore the respective obligations and consequences of such institutions.

In labor subcontracting the contractor performs the works or provides services with his workers and must comply the requirements and conditions set forth in article 15-A of the Federal Labor Law, otherwise the contracting party will be considered the employer of the workers.

On the other hand, in labor intermediation the contractor intervenes to hire workers for the contracting party, with the purpose of executing works or rendering services for the latter and, at all times, both will be jointly and severally liable, that is, they will be considered workers’ employers.

This Ruling aggravates the legal uncertainty that exists in order to define when we are in the presence of a provision of independent services, a labor intermediation, or a labor subcontracting, because the tax obligations and their consequences are different in all cases.

Recommendations

We considered that it is essential to review and analyze the contracting scheme for provision of services implemented with its several contractors (i.e. suppliers), in order to establish a diagnosis and the necessary recommendations to continue operating such scheme, with special attention and emphasis on tax issues because the potential contingencies that may be generated.

If you have any questions regarding the foregoing, please do not hesitate to contact us.

 Mexico City, September 10, 2018

Within his speech, he has repeatedly stated and before several forums, the three pillars of his government on which his bases will be set: (i) implementation of an austerity plan in the federal public administration; (ii) no increase in taxes; and, (ii) fight against corruption, a problem in which has emphasized that it costs to Mexico the equivalent of 9% of the Gross Domestic Product.

Comments

Regardless the percentage of 9% is real or not, it is evident that the corruption has cost a lot to our country, however, before an imminent tax policy that will be characterized by the absence in the increase of taxes, it is conclusive that the fight against corruption will be a fundamental instrument for the new federal government to obtain the necessary resources to be able to face its obligations, among them, the several social and sponsorship policies announced by the elected President.

The federal legal regulations in order to prevent, detect and punish corruption conducts establishes as penalties for a legal entity, amounts equivalent to twice the benefits unduly obtained, or if not, the amount of MXN$80,600.00 and up to MXN$120’900,000.00, and even the suspension of activities or until its dissolution.

Recommendations

It is very important to review and analyze that within the corporate governance of any legal entity exists anti-corruption policies, mechanisms and integrity tools, in order to have the best practices in that matter, since they could mitigate a possible penalty.

If you have any questions regarding the foregoing, please do not hesitate to contact us.

Mexico City, July 12, 2018

Due the last anticipated version of the Second Amendment Resolution of the MTR of the 2018 published on the TAS website, there is enough time for such purposes, since it foresees that as of the last day of September 2018 the contracting party could consult through the data application the information authorized by the contractor related with labor subcontracting activities of January to August of 2018.

In addition, no later than September 30, 2018 the contracting parties must have to file the fulfillment obligations notice for the tax year 2017, announced on the TAS website on last February 7.

Comments

Legal uncertainty has been caused in order to define when we are in presence of a provision of independent services, a labor intermediation, or a labor subcontracting, in which case the aforementioned provisions must be observed.

The aforementioned, because through the tax audits carried out by the TAS, on multiple occasions the authority has considered that the agreements for provision of services that require workers or employees of the contractor to effectively provide the services to the contracting party, are not provision of services, re-characterizing the legal relationship between both parties and, therefore, causing a tax contingency to the contracting party.

Even, the Mexican Institute of Social Security has required to the contracting parties in this type of services, the payment of employer-employee fees that left or should have paid the contractors.

Recommendations

It is essential to review and analyze the contracting scheme for provision of services implemented with its several contractors (i.e. suppliers), in order to establish a diagnosis and the necessary recommendations to continue operating such scheme, paying special attention and emphasis on tax issues because the potential contingencies that may be generated.

If you have any questions regarding the foregoing, please do not hesitate to contact us.

Mexico City, July 2, 2018