To provide more time for affected companies to comply with these new provisions on subcontracting, it was considered appropriate to extend the deadlines for one month (from 1 August 2021 to 1 September 2021). On 31 July 2021, theFederal Official Gazette published the Decree, which provides this extension, so that the parties obliged to comply with the decree on subcontracting can carry out all the actions that guarantee its execution.

Specifically, the first transitory articles of the initial Decree related to the tax obligations imposed by the Federal Tax Code, the Income Tax Law and the Value-Added Tax Law will be enforceable as of 1 September 2021,and not on 1 August 2021, as originally provided.

Moreover, the Decree extends the terms to comply till 1 September 2021 with the following specific labour and social security obligations:

- registering the service providers before the Specialized Service Provider Registry of the Ministry of Labor and Social Welfare (“REPSE”);

- transferring employees through an employment substitution without complying with the legal requirement of transferring assets to the new employer;

- to carry out the simplified employment substitution process before the National Social Security Institute (“IMSS”);

- to submit to the IMSS the information related to the existing services agreement;

- for those employers who need to deregister before the IMSS the multiple registration numbers requested prior the enactment of the initial Decree, and obtain another if it is the case.

Juan Antonio Castro, a member of the Foreign Trade Commission of the Mexican Association of Public Accountants, said that the postponement of the 1 August deadline for companies to comply with the legislation "means oxygen" for both the private sector and the government, because companies were not ready, but neither were public institutions, since the registration platforms have been saturated.

The Confederation of Industrial Chambers of the United Mexican States (CONCAMIN), in a statement on the publication of the decree, commented that  “[a]lthough many companies have implemented these new provisions, there are still several that are still in this process, so we acknowledge the work of the legislators to approve yesterday an extension of the deadline so that it will be from 1 September the date to comply with the new tax provisions, as well as to obtain registration with the Ministry of Labour and Social Welfare, among other aspects in the field of social security”.

As explained in our May 2021 issue, under this new law, outsourcing must be formalized through a written contract containing detailed information on the work and the number of workers to be employed, and it is required that individuals or legal entities providing outsourcing register with the Secretary of Labor and renew the registration in the National Outsourcing registry every three years.

Since April, it has been mandatory for companies providing specialised services to register in the Registry of Specialised Services or Work Providers (Repse), which is administered by the Ministry of Labour and Social Welfare (STPS). Although the reform granted a transition period has not yet ended, and until that happens this requirement is not enforceable by the authorities, it is an important rule to consider.

The STPS has already made available on the Repse platform the public register, where interested parties can consult the files of the more than 19,000 subcontractors registered to date and verify whether they have complied with this provision established in the Federal Labour Law since April.

Available data shows that only 42.22% have obtained the registration of companies before the REPSE.

In the Public Register of Contractors of Specialized Services or Specialized Works (‘Padrón Público de Contratistas de Servicios Especializados u Obras Especializadas’), it provides the company's registration number, the municipality and state of origin, and the activities offered.

The new legal framework allows companies to subcontract specialised services, as long as they are not part of their corporate purpose and main economic activity. The registration makes it easier for companies to verify that the contractor is actually registered to provide the service and that it does not coincide with their main activity.

In the opinion of the Cinsejo Coordinador Empresarial (CCE) “ It is clear that the mere fact that a person provides a service or performs a work within the contractor's facilities does not imply that it is subcontracting, nor that the contractor's personnel is made available to the contractor, however, the STPS has held that if a service is provided or a work is performed within the contractor's facilities, it should be considered as subcontracting and that the registration with the REPSE is appropriate, even if the personnel is not made available to the contractor itself”.

The CCE has further expresses that “It is urgent to have unified and adequate criteria from the different agencies that will apply the reform (STPS, SAT, IMSS and INFONAVIT) since we are a few days away from the entry into force of the Law, and failure to do so will cause serious problems by expanding from hundreds to thousands of suppliers per company, which if the aforementioned criteria are maintained, will be forced to register with the REPSE, which can damage competitiveness and affect the performance of economic activity in the country”.

This reform, which encompasses sweeping changes to eight laws, including the labour and social security laws and the income tax and value added tax laws, was prompted by a request from multiple employers, to have a longer deadline that allows them to implement and conclude all the necessary changes to comply with the legislation.

Companies with operations in Mexico also need to review their existing structures and consider reorganizing their Mexico operations and activities to ensure compliance.