Mexico has introduced new rules to prevent employers avoiding
their profit share and other obligations by using outsourcing and
subcontracting arrangements.
Background
Reformed rules on subcontracting and outsourcing in Mexico were
published on 23 April, 2021 (the ‘Reform'). The Reform
amends several Mexican laws, including the Federal Labour Law,
Social Security Law, National Workers' Housing Fund Law, Tax
Code, Income Tax Law and Value Added Tax Law.
One of the key drivers of the Reform relates to the obligation
on employer to share 10% of the company's taxable profits
amongst its employees. For years, it has been common practice for
employers to minimise the financial impact of this legal obligation
by using services entities. In the most common structure, there is
an operating company, which generates the business profit, and a
separate service entity that employs the workers who perform
services for the benefit of the operating company. The
