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Outsourcing Reform – How does it affect service providers?

After months of negotiations on April 23rd the decree to reform the outsourcing legislation has been published. The new regulation came into force on April 24th with exception of the changes for the tax law´s which will be applied from August 1st onwards. While the outsourcing of staff is no longer allowed, it is still possible to offer and contract independent services and specialized outsourcing services if the corresponding requirements are met. Recently the rules regarding the registration have been made public. The Ministry of Labor and Social Welfare (STPS) as well as the Prodecon have issued statements regarding the interpretation of the new legislation. Please find below the links to the corresponding documents in Spanish Language.

https://repse.stps.gob.mx/
https://www.prodecon.gob.mx/Documentos/bannerPrincipal/2021/1_banner_subcontratacion_ver_25052021_conceptos_y_ejemplos.pdf
https://www.dof.gob.mx/nota_detalle.php?codigo=5619148&fecha=24/05/2021

There are still some uncertainties regarding certain services, however the information provided by the government agencies limits the definition of a specialized service to a service where the contractor provides its personnel to the contracting party.

Transactions, like cleaning, security and transportation services or services where the contractor interferes in the production process should be reviewed in detail.

Specialized Outsourcing Services vs Independent Services

Specialized Outsourcing Services

  • Contractor provides personnel to contracting party to realize specific activities
  • The contracting party indicates when and how the services are realized.
  • Services are realized within or outside of the installation of the company.
  • Contractor provides services different from corporate purpose or the main economic activity.

Independent Services

  • Contractor provides a previously defined service and uses its own materials and tools.
  • Personnel is not under disposition of contracting party but receives instructions from contractor directly.
  • Services are realized within or outside of the installation of the company.
  • Contractor provides services different from corporate purpose or the main economic activity.
  • Requirements for Providers of Specialized Outsourcing Services

The following requirements apply to companies which do provide specialized outsourcing services.

  • Register as specialized Outsourcing service provider within 90 days of the publication of the reform on the following web page: https://repse.stps.gob.mx/
  • Prepare contracts with details about services provided and number of staff provided.
  • Provide to contracting partner monthly:
    o Payroll Receipt of staff
    o Payment Receipt for Social Security Payments
    o Monthly income tax and VAT declaration.
  • Register and Declare under the Anti-Money-Laundering Requirements (https://sppld.sat.gob.mx/pld/interiores/sppld.html)
  • Possess information and documentation related to training, certifications, permits or licenses that regulate the activity, equipment, technology, assets, machinery, risk level, average salary range and experience in the service to prove the specialized character depending on the type of service.

For providers of independent services, no additional requirements need to be met. However, we do expect that mainly larger companies will tend to implement a “one size fits all policy” regarding the new regulation. Not complying with the above-mentioned register and requirements will lead to the non-deductibility of the expenses.

Recommendations:

If you provide or receive specialized outsourcing services or suspect that your customers will request the register, we have the following recommendations:

  • Review and if necessary, redefine corporate purpose and main economic activity of your company to assure that it is limited to your actual core activity.
  • Review contracts elaborated with your clients and suppliers concerning the “disposition of personnel” as part of the provided services.
  • Analyze transactions with your service providers and identify specialized outsourcing services to avoid non deductible expenses.

Please feel free to contact our legal department and our tax specialists if you need support with the beforementioned topics.

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