In relation to our Tax News No. 07 and the labor and fiscal reform initiative to regulate the subcontracting or outsourcing regime, we inform that in the plenary session of the Chamber of Deputies that began on April 13, 2021, it was held the discussion of the Report on said reform, which was approved on April 14, 2021 and sent to the Chamber of Senators.

 In general terms, the Report voted in the Chamber of Deputies maintains the modifications proposed by the Federal Executive; however, certain relevant details and additions were incorporated due to the agreements reached on April 5, 2021.

As a summary, below we list the modifications and additions of the referred Reform that we consider most relevant:

– Labor legislation

• The subcontracting of personnel is prohibited, this being when an individual or legal entity provides or makes its own workers available 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 predominant economic activity of the beneficiary of said services is allowed, to the extent that the contractor (service provider) is registered before the Public Register of the Ministry of Labor and Social Welfare, said registration must be renewed every three years.
• The employees’ profit sharing (PTU) will be limited to three months of the employee’s salary or the average of the participation received in the last three years, the amount that is most favorable to the worker will be applied.

The entry into force of these provisions is expected to be the day after their publication in the Official Gazette of the Federation (DOF).

–  Fiscal legislation

1. i) Federal Tax Code (CFF)

• Payments for subcontracting personnel to carry out activities related to both the corporate purpose and the predominant economic activity of the beneficiary will not have tax deduction or crediting effects. Similarly, no tax effect will be given to the services in the following cases:
  • When the workers that the provider of the service makes available or provides have been workers of the beneficiary and have been transferred to the provider.
  • When the workers that are provided or made available by the provider cover preponderant activities of the beneficiary.
• Tax deduction or accreditation of payments for subcontracting specialized services or execution of specialized works that are not part of the corporate purpose or the predominant economic activity of the beneficiary may be allowed, to the extent the provider is registered in the Register established in terms of the labor legislation and the requirements established in the Income Tax Law and the Value Added Tax Law are met.
• The legal entities or individuals who receive any of the previously indicated services or works will be jointly liable with the provider for the contributions that would have been caused in connection with its workers.

1. ii) Income Tax Law (LISR)

• Regarding the provision of specialized services or the execution of specialized works, it is established as a requirement for the deduction that the beneficiary verifies that the service provider has the registration in terms of the labor legislation and obtains from said provider a copy of the payment vouchers of wages of the workers who have provided the service, of the receipt of payment of the corresponding withholdings and of the receipt of payment of worker-employer fees, among others.
• Payments for subcontracting services that are not for specialized services or the execution of specialized works mentioned above will not be deductible in terms of article 28 of the Law *.

 iii) Value Added Tax Law (LIVA)

• The 6% value added tax withholding for services where personnel is made available to is repealed.
• The value added tax that is shifted for the subcontracting of services other than specialized services or the execution of specialized works mentioned above will not be creditable.
• It is established as a requirement for the accreditation of the value added tax shifted for the provision of specialized services or execution of specialized works previously mentioned* that the beneficiary verifies that the service provider has the corresponding registry in terms of the labor legislation and obtains a copy of the value added tax returns and their corresponding payments, which must be supplied by the service provider no later than the last day of the month following that in which the beneficiary made the payment and, in case the documentation is not collected within said period, it would be necessary to file a supplementary tax return reducing the amounts credited for corresponding the shifted tax.

Through transitory provisions, it is expected that the modifications to the tax provisions (CFF, LISR and LIVA) will come into force as of August 1, 2021.

Finally, we reiterate our disposition in order to evaluate the current structure maintained and, where appropriate, develop alternatives that could mitigate the effects of the approval of the referred reform.

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April 2021

México City