TAX. Data Application on Subcontracting Labor – Consultation of information from January to September 2018 October 3, 2018
On September 28, 2018, was published on the Tax Administration Service (“TAS”) website, the early version of the Third Amendment Resolution of the Miscellaneous Tax Resolution of the 2018, which provides in its Fifth Resolution Article that the date from which the contracting party will make the consult through the data application the information authorized by the contractor related with labor subcontracting activities of January to September of 2018 authorized by the contractor, will be the last day of October 2018.
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.
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.
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