Is Your Employee Leasing Company at Risk in Mexico?

Excerpt from Mexico Tax, Law and Business Briefing: 2009 by Esteban G. Dalehite, Ph.D.



Recent developments suggest that Mexico’s Federal Government is taking a tougher stance regarding employee leasing companies, a common component of the corporate and tax strategy used by multinational firms doing business in Mexico. In April 2008, Mexico’s House of Representatives approved a bill amending the Social Security Act (Ley del Seguro Social) which places controls on employee leasing. However, this bill is still under discussion in the Senate where it has developed opposition and has not yet been approved. In June 2008, Mexico’s Tax Administration Service (known for its Mexican acronym SAT) announced a joint auditing program with the Mexican Institute of Social Security (known for its Mexican acronym IMSS) and the Institute of the National Worker Housing Fund (known for its Mexican acronym INFONAVIT) to combat tax evasion through employee leasing companies with an initial target of 455 firms.In October 2008, the SAT announced an information exchange agreement with the Mexican Department of Labor and other agencies for the same purpose, and the House of Representatives hosted a congressional hearing where the General Director for the IMSS was repeatedly questioned about tax evasion through employee leasing companies. Finally, in December 2008, the SAT again announced that, at its request, an arrest warrant had been issued against a tax consultant which, according to the SAT, had pioneered aggressive tax schemes in the area of employee leasing.


Given the extent of employee outsourcing strategies implemented by multi-national firms in Mexico, this recent string of developments raises concern and questions about the scope of the Mexican Government’s program, its definition of the line between tax evasion, avoidance and planning in this area, and the legal powers that it may have to combat what it perceives as evasion through employee leasing.



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