Chihuahua, Chih., 24th October, 2019.

On August 20th of this year, the First Resolution of Modifications to the Miscellaneous Fiscal Resolution (MFR) was published for 2019, by which several rules regarding labor subcontracting (outsourcing) were repealed. Such rules granted the Contracting Party and Contractor certain benefits, such as, the possibility of using an application called “Authorization of the contracting party for the CFDI consultation and declarations” that was available in the tax mailbox (the “Application”), to comply with labor outsourcing provisions provided within the Value Added Tax Law (VATL) and the Income Tax Law (ITL) .

Thus, taxpayers who are under the labor outsourcing regime, in accordance with the provisions of the Federal Labor Law (FLL), who used the Application, as of August 1 of 2019, they must comply with the obligations established under the VATL and the ITL in order to credit the Value Added Tax (VAT) and the tax deductions that may correspond them, therefore, they must physically collect the information monthly provided by the Contractor, consisting of :

• Copy of tax receipts corresponding to the payment of wages of employees who provided the outsourced service (ITL).
• Receipts (ITL).
• Withholding tax statement made to the aforementioned employees (ITL).
• Payment of employer-employee fees to the Mexican Social Security Institute (ITL).
• Copy of the corresponding declaration (VATL).
• Acknowledgment of received of the tax payment (VATL).
• Reported information to the Tax Administration Service regarding the payment of the aforementioned tax (VATL).

In the event that the taxpayer fails to comply the abovementioned provisions, it will result that the consideration of the contracted service will not be deductible and the VAT will not be accreditable.

An appropriate contractual framework within your services agreements, may entitle you to request this information from your provider in order to comply with the tax provisions, as well as avoiding being in the legal scenario of labor subcontracting, thus, not having this management load for your company.

At Inintegrum we have wide experience in labor, tax and contractual matters, therefore, we are at your service in order to assess your outsourcing schemes and verify their compliance with current legislation.

[1] Rules: 3.3.1.44., 3.3.1.45., 3.3.1.46., 3.3.1.47. and 3.3.1.48. of the MFR for 2019.

[2] For the purposes of articles 27, section V, last paragraph of the ILT, 5, section II and 32, section VIII of the VATL

[3] Idem.