Mexico: Withholding tax measures when subcontracting is involved (Yucatán)

A decree that addresses subcontracting and the related payroll tax measures was published

Withholding tax measures when subcontracting is involved

The government of Yucatán state on 23 November 2021 published a decree that addresses subcontracting and the related payroll tax measures.

The decree addresses the requirement to withhold tax with regard to those who subcontract specialized services or execute certain specialized works with an intermediary, contractor or third party. The measures are in conformity with federal labor laws regarding subcontracting.

The person withholding the tax must issue to the person providing the service, proof of the withholding within five days following the date when the withholding was made. The tax administration of Yucatán will provide an authorized format and rules for this purpose. The notice under the withholding rules regarding subcontracting applies with the signing of a contract, at the first of the month when the provision of service begins, or from the date when the conditions or terms of the service were modified. The notice must specify that the person with whom the contract for the provision of specialized services or the execution of specialized works was signed is registered in a state registry (if not registered, the tax administration will take certain steps to register the provider of specialized services or of specialized works).

Even when there is no withholding tax to be remitted, there is an obligation to file a monthly return, with “zeros” listed as the amount until such time that there is a reduction of obligations as withholding agent or suspension of activities. There is joint and several liability for those withholding such tax.

The tax withholding does not release the providers of specialized services or of specialized works from an obligation to present a monthly tax payment declaration.

Read a December 2021 report (Spanish) prepared by the KPMG member firm in Mexico

 

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