Mexico Update: 5 main modifications of the Ministry of Labor and Social Welfare (STPS) for the registration of natural or legal persons that provide personnel subcontracting services (Outsourcing)

The Registry of Companies Providing Specialized Services (REPSE), which depends on the Ministry of Labor and Social Welfare (STPS), published this February 3 in the Official Gazette of the Federation, the Agreement that modifies the General Provisions for the registration of natural or legal persons that provide specialized services or execute specialized works.

Recall that the REPSE works to regulate and supervise companies that provide specialized services in the country, and that is what Article 15 of the Federal Labor Law (LFT) refers to: Natural or legal persons who provide subcontracting services must have registration with the Ministry of Labor and Social Welfare.

These modifications by the Ministry of Labor, seek to streamline and give greater transparency to personnel subcontracting services, so they range from the power of the authority to monitor compliance through inspections, to new causes of cancellation and refusal to register, as well as the possibility of modification to the registry.

The main points in labor matters regarding the Outsourcing Reform Initiative are detailed below:

The decree reforming, adding and repealing various provisions related to the subcontracting of personnel of the Federal Labor Law, Social Security Law, Law of the Institute of the National Housing Fund for Workers was published in the Official Gazette of the Federation, of the Federal Tax Code, the Income Tax Law and the Value Added Tax Law.

Below, you will find a summary of the main points on labor, social security and tax matters of the published decree.

In labour and social security matters:

• The subcontracting of personnel is generally prohibited, understood as when a natural or legal person provides or makes available its own workers for the benefit of another.
• The subcontracting of specialized services or the execution of specialized works that are not part of the corporate purpose or the preponderant economic activity of the beneficiary of these is allowed, provided that the contractor has the registration issued by the Ministry of Labor and Social Welfare (STPS). Such services must be formalized by written contract.
• Likewise, shared or complementary services or works provided between companies of the same business group will be considered as specialized services, and therefore will be allowed, provided that said services are not part of the corporate purpose or the preponderant activity of the company that receives them.
• Companies or individuals that provide subcontracting services must be registered with the STPS. To obtain them, they must prove that they are up to date with their tax and social security obligations. The registration of the STPS will be renewed every three years.
• In relation to the distribution of profits (PTU), two modalities are established to make the payment: the amount to be paid will have as a maximum limit three months of salary of the worker or the average of the profits received in the last three years, and the amount that is most favorable for the worker must be applied.
• It is included that for an employer substitution to take effect, the goods object of the company or establishment must be transferred to the substitute employer. However, for companies operating under a personnel subcontracting regime, the transfer of assets for the purposes of employer replacement will not be required during the period of 90 calendar days from the entry into force of the decree, provided that the workers are transferred to the beneficiary within that period.
• Whoever subcontracts personnel, as well as natural or legal persons who provide subcontracting services without having the corresponding registration, will be fined from 2,000 to 50,000 times the Unit of Measure and Update, that is, between $ 179,240.00 and $ 4,481,000.00 pesos. The same penalty will be established for those natural and legal persons who benefit from the subcontracting of personnel.
• Whoever provides specialized services or executes specialized works, must provide quarterly to the Mexican Institute of Social Security (IMSS) no later than the 17th of the months January, May and September, the information of the contracts concluded, attaching the registration issued by the STPS.
• New rules are laid down for the classification of enterprises in relation to the occupational risk insurance premium;

In Tax matters:

• Reforms to the Federal Tax Code: It is indicated that tax effects of deduction or accreditation may be given to payments for subcontracting of specialized services or works, as well as to shared services, provided that they are not part of the corporate purpose or the preponderant activity of the beneficiary thereof, and that the contractor has the registration granted by the STPS.
• It is included as a crime of tax fraud to use simulated schemes for the provision of services or execution of specialized works, as well as to subcontract personnel, with penalties that could be punished with imprisonment.
• Amendments to the Income Tax Law: Regarding the authorized deductions, it was included that when the payment of the consideration for the service received is made, the contractor must verify that the contractor has the registration that must be obtained by the companies that provide subcontracting services.
• Amendments to the Value Added Tax Law: in relation to the accreditation of value added tax, it was included that when the payment of the consideration for the service received is made, the contractor must verify that the contractor has the registration granted by the STPS.
• The labor and social security reforms will enter into force the day after their publication, and the reforms to the articles of the Federal Tax Code, the Income Tax Law and the Value Added Tax Law, will enter into force on August 1, 2021.

By Jáuregui y Del Valle, S.C., Mexico, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact mexico@transatlanticlaw.com

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