Outsourcing in Mexico is a common practice among companies because it allows them to focus on their business lines while hiring other companies that give attention to different non-priority activities of their operation.
This year, the tax obligations of organizations with a preference for this contracting scheme changed significantly as a result of the reform of the Value Added Tax Law, published in December 2019.
Currently, to deduct the expenses incurred for the payment of outsourcing services, companies must retain and pay 6% of the value of that consideration, for the concept of Value Added Tax (VAT).
In Mexico, 8 million people have a contract under the outsourcing scheme, which represents 40 percent of formal workers.
On October 27, 2020, Mexico’s current president announced to the Congress an initiative to regulate outsourcing. According to the head of the Dignified Work Unit of the STPS, Alejandro Salafranca Vázquez, the project to regulate outsourcing in Mexico, is considering five elements in favor of workers’ rights:
It is intended for the 15 A of the Federal Labor Law article to be modified, and the last three points would be changes to the aforementioned article.
Finally, it was announced that on Friday, May 14, 2021, a diagnosis of the labor and tax situation will be presented.
The Federal Labor Law already has a definition of subcontracting, which ensures its legality in the country, and section IV of article 1-A of the Law of Value Added Tax (VAT) establishes the withholding of 6% at companies dedicated to outsourcing.
Certain proposals allow the visualization of new forms of contracting, improving the business development of the country without neglecting the workers. Regulation is still under fire and the stereotype of outsourcing is left behind.
If as an entrepreneur, you are interested in updating your company for subcontracting, do not hesitate to contact us; at the Defend law firm we can help you simplify this process, so that you can comply with legal regulations and avoid penalties.
A proper update benefits both, workers ensuring their rights, as well as entrepreneurs, favoring business development in the country.
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