Payment of Value added Tax by Subcontracting

Payment of Value added tax by subcontracting. Based on the decree by which various provisions of the Income Tax Law, the Value Added Tax Law, the Law on the Special Tax on Production and Service and the Tax Code of the Reform are amended, added and repealed. federation, published on December 9, 2019, a fraction IV was added to article 1.- A, of the Value Added Tax Law, in which it is established that moral persons and individuals with business activities, who receive Services through which personnel who perform functions in the contractor’s facilities or a related party thereof, or even outside of them, whether or not under the direction, supervision, coordination or dependency of the contractor, will be made available a retention of 6% of the value of the consideration actually paid.

In attention to this new provision, it can be clearly seen that the intention of the Federal Treasury is to capture resources from the activities carried out by subcontracting, being one of the mechanisms most resorted to by legal entities, as well as natural persons with business activity, already said organization allows to decrease some expenses.

However, from the reform in question, companies that, to fulfill their purpose, subcontract personnel, even if it is not under their direction or supervision, must pay 6% of the total value of the contract executed, which represents an important expense and must be well planned, especially since the amounts of subcontracting contracts are generally over a million pesos.

Consequently, it is clear that companies must have specialized tax advice, in order to have a planning and strategy to carry out their main activities, as well as to be able to apply the deductions allowed by law.

Likewise, it can be expected that the tax authority may incur in illegal acts derived from the application of the new section IV of Article 1.- A of the Value Added Tax Law, since the law establishes that it is a direct or related service, which leaves a wide field for interpretation, since the legislator did not stipulate the conditions under which they will be considered as related services, which may lead to an arbitrary exercise of said provision.

At Bandala, Díaz García, we offer you the best legal advice in tax matters, in order to protect your rights and your assets, in matters of payment of value added tax by subcontracting and other related matters.

LEGAL NOTICE

The main purpose of this information is to provide guidance to the general public. It does not replace the provisions of applicable law. Nor does it replace the specialized legal advice or consultancy that can be offered by any of the lawyers and/or accountants of Bandala | Díaz | García