Earlier this week, the Mexican Congress approved the proposed amendments on outsourcing and insourcing activities. A brief summary of the relevant provisions of these new laws can be found below:
As expected, the general outsourcing or insourcing of personnel is now prohibited, however, such activities are still permitted as long as the services provided by the third party are of a specialized nature or for a specific project. Subcontracting personnel is prohibited, with subcontracting of personnel being understood as a provision of services in which an entity or individual provides or makes available its own employees to another entity for said entity’s benefit.
Specialized services and project-based personnel service providers will need to be registered with the labor authorities (the registration will be valid for three years before it must be renewed). Note that shared services (e.g., management, accounting, legal, IT, logistics, etc.) among corporate groups will be considered specialized services as long as they are not part of the core business of the party benefitting from them.
Within 30 days after publishing these new laws, the labor authorities will issue guidelines and regulations for the registration of authorized outsourcing/insourcing service providers, who, in turn, will have 90 calendar days from the date of publication of these amendments to complete the aforementioned registration process.
Joint liability for labor and tax obligations is established for any person who engages in outsourcing/insourcing activities and the party providing such services.
Any parties that are found in violation of these new laws shall also be subject to monetary fines and, potentially, criminal liability.
Any payments made for unauthorized outsourcing/insourcing services shall be deemed non-deductible for Mexican income tax purposes and any value added tax associated with such payments will not qualify for a credit.
Once these amendments are published in the Official Gazette of the Federation (expected to occur on May 1, 2021), those parties with outsourcing/insourcing structures in place will have 90 calendar days to migrate into a legally compliant structure.