Do you know about the procedure for complying with the new Payroll Tax obligation that came into effect in Mexico City in 2021?

Background

Derived from the comprehensive Tax Reform Bill signed by the Mexican President, Andres Manuel Lopez Obrador, aimed at regulating outsourcing and with the intention of harmonizing the Federal Labor Law, the Tax Code and the Social Security, National Workers’ Housing Fund Institute (Instituto del Fondo Nacional de la Vivienda para los Trabajadores - INFONAVIT), Income Tax and Value Added Tax laws, and which was published in November 2020, the Ministry of Administration and Finance (Secretaría de Administración y Finanzas – SAF) of Mexico City reported that on Monday, December 21 last year, the decree that reformed, added and repealed diverse provisions of the Tax Code of Mexico City (Código Fiscal de la Ciudad de México - CDFCDMX) was published in the Official Gazette of Mexico City.

What is new?

This Decree added Article 156 bis, which establishes the new obligation for individuals and legal entities that contract or outsource services in the terms of the applicable regulations (irrespective of the name and even when the payment for the remuneration of subordinated personal work is made by another person), and as a result, henceforth a notice must be filed with the SAF within 10 days following the date on which an outsourcing contract is signed or amended, attaching the original or a certified copy. The authorities may require individuals or legal entities to file such notice.

The transitory articles also contained the following information:

• Article 1 stipulates that the Decree came into effect on January 1, 2021.
• Article 37 establishes that individuals and legal entities must file the contracts notice referred to in Article 156 bis within 30 calendar days following the effective date of the Decree, irrespective of the date on which the contracts have been made or amended.

With this Decree, the Mexico City governments ratifies its support of the bill presented by the Federal Government based on the argument of preventing tax evasion, actions that infringe the rights of workers, and unfair competition in detriment of companies in compliance, in order to strengthen social security and the public treasury, among other factors.

Consequences for Mexican companies

The authority is now publishing the procedure, as well as the form for submitting and registering the necessary information. The process will be digital soon as a preventive measure given the health contingency caused by COVID and to facilitate the process, however, at the moment there is a temporary alternative to this process that must be used in order to comply with the obligation.

It is important to consider that failure to comply with the obligation or untimely compliance will tentatively entail economic sanctions ranging from $ 3,713.00 (three thousand seven hundred and thirteen pesos) to $ 9,413.00 (nine thousand four hundred and thirteen pesos).

If you are interested in knowing the procedure, obtaining the form or require support and advice to carry out this process, do not hesitate to contact us.