EconomyFailure to comply with the new outsourcing law will...

Failure to comply with the new outsourcing law will have tax consequences

With the entry into force of the new outsourcing scheme in Mexico there will be changes that companies must comply with in administrative and fiscal matters, since in case of non-compliance they will face setbacks such as the impossibility of deducting expenditures, credit VAT, deduct ISR and even having the connotation of committing a possible crime of tax fraud.

Businesses must take care of all transactions between related parties, which includes incorporating specialists who work on changes in social security matters, signing the degree of risk and incorporating new employer registers. All management must also be reviewed for compliance, it is a multidisciplinary issue, in which all areas of the companies must be involved, detailed Mario Ríos, EY Reporting and Compliance partner.

“The deadline for compliance with the migration of labor personnel expires on July 23 and tax matters begin on August 1, 2021,” explained the specialist.

On April 24, the subcontracting reform came into force , the main objective is for companies to stop hiring their personnel through third parties, after the objective of paying less taxes, salaries and benefits. Companies may contract specialized services, as long as they are not part of their predominant economic activity.

Failure to comply leads to administrative sanctions with the Ministry of Labor and Social Welfare (STPS), and in tax matters with the Tax Administration Service (SAT) and even face review procedures with the Financial Intelligence Unit (UIF).

In the case of contractors, there may be a denial or revocation of their registration. For beneficiaries and contractors, a fine is applied for the surveillance inspection, in addition to the fact that the employer who is inspected will have to go and present himself before the labor authority to prove that he is complying with the legislation, explained Karina Herrera, professor in Labor Relations & Compliance of Latam Business School.

“The most serious, and which represents an important and delicate leap, for those who carry out subcontracting in the terms prohibited by the labor authority may have a fine of up to four and a half million pesos,” the specialist explained.

Doubts for the deduction

If the new provisions on labor matters are not complied with, the tax authority (the SAT) may question the deduction of income tax and the proof of VAT.

“This is important, because even when there is a fine of up to 4.5 million pesos, it is also significant that the possibility of deducting income tax and crediting VAT is questioned,” Herrera explained.

Fines of 150,000 and up to 300,000 pesos are also contemplated for non-compliance with the tax legislation that came with the reform, but what is even more serious is that it may be considered as a crime of tax fraud, if the authority qualifies the provision as simulation. or hiring of specialized services, that is, that are hired in the company and that are not part of its main economic activity.

“With the characteristics of a criminal nature, the crime of tax fraud is serious, in addition to considering that a company carries out some vulnerable activity with resources of illicit origin, it will be observed through the FIU to determine that its activity is not vulnerable”, said the specialist from Latam Business School.

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