Outsourcing, A Vulnerable Activity

This memorandum analyzes the legal opinion that was recently published by the Financial Intelligence Unit ("UIF") on the Anti-Money Laundering portal of the Tax Administration Service ("SAT") in which the Outsourcing activity was included as a Vulnerable Activity in Mexico, pursuant to the provisions of the Federal Law on the Prevention and Identification of Operations from Illicit Sources ("LFPIORPI").

1. What does Outsourcing mean?

Outsourcing refers to a subcontracting or service scheme. In other words, it is a legal and tax concept that allows an employer to indirectly hire, i.e. through an external company, the services provided by one or more employees.

The tax benefits offered by this contracting model, such as tax deduction, are one of the reasons why more and more businesses opt for this solution. However, the advantages or drawbacks of this system will depend on how both the contracting company and the service provider manage their business