Mexico’s reform to various labor and tax laws which prohibit employee outsourcing took effect September 1, 2021. Companies are no longer allowed to outsource personnel who perform the primary activities of a business. The new laws have impacted many US companies with expanded operations in Mexico as it was common practice to maintain the entire workforce through an employee outsourcing company.
Violations for not being compliant with the new laws carry fines of up to $220,000 USD to both the company and the vendor. In addition, any payments made that are deemed to be in violation will not be deductible for tax purposes and the associated value-added tax (VAT) paid will not be creditable.
The initial deadline for compliance was set for August 1, 2021 but was extended to September 1, 2021.