Yesterday, the President of the Republic introduce a bill in the House of Representatives to reform the Federal Labor Law, the IMSS [Social Security] Law, the INFONAVIT [National Worker’s Housing Fund Institute] Law, the Federal Tax Code, the Income Tax Law and the VAT Law.
The reform to all of these laws relates to the termination of labor subcontracting practice. Therefore, by virtue of the reform bill, articles 15-A, 15-B. 15-C, and 15-D, that regulate labor subcontracting, will be derogated..
The reform establishes, that the rendering of specialized services or of specialized works that are not a part of the corporate purpose, or the core business of the company receiving those services, will not be considered as labor subcontracting. The rendering of said services and the performance of works, must be formalized by means of a written contract specifying the scope of the service or work, and the number of workers required to that end.
Additionally, it is established that, in the event that the Contractor fails to comply with labor or social security obligations, the Contracting Party will be jointly liable.
Furthermore, it is established, as an obligation of specialized provider companies, to obtain an authorization by the Department of Labor and Social Welfare, renewable every three years, to legally validate the contracts of specialized goods or services.
The IMSS Law is homologated to prohibit subcontracting and the deduction of Income Tax and VAT crediting, will be permitted only, if the Federal Labor Law is complied with, and a written contract for specialized services or specialized works has been executed, registered and authorized by the Department of Labor and Social Welfare.
The elimination of labor outsourcing will force companies that hire outsourcing or third party contracting services, to undertake an exhaustive review of the terms under which they are contracting these services, considering that non-compliance with the new labor and tax provisions carries serious risks, ranging from fines, to the non-deductibility of Income Tax, the non-refund of VAT and the possibility to incur in tax fraud.
Our Firm, we will be following the progress of this bill closely, both in the House of Representatives and in the Senate, to keep you informed in a timely and opportune manner. We also remain at your service to provide the necessary counseling, with the objective of avoiding non-compliance with the Law and to revise the legal status of your service provision contracts.
De la Vega & Martínez Rojas, S.C.