How do legislative reforms affect how specialized service providers are evaluated and engaged?
How are tax and labor risks derived from current regulations managed?
The companies engaging specialized service providers through the designation of personnel have become a channel for monitoring tax compliance. For the leaders of the organizations, it is vital to find out, evaluate and manage this information to prevent tax and labor risks that could imply a high cost.
The foregoing requires collecting and keeping documentation such as the payroll receipts (CFDI) of the personnel that provided the service, the Income Tax (IT) return with the tax withheld from said workers by the supplier, the Value Added Tax (VAT) return with the tax paid, as well as the payments of social security contributions and the current folio of the Registry of Providers of Specialized Services or Specialized Works (Repse, per Spanish acronym) related to the engaged activity. Failure to comply with this regulation could represent an increase in the tax burden of up to 46% on the cost of said expenses.
Considering the tax and labor impact this regulation represents for companies, the following four considerations are important:
1. Comprehensive control mechanisms
The different authorities in Mexico have implemented coordinated control actions for taxpayers engaging in specialized services, increasing the efforts to detect those linked to possible non-existent operations. Therefore, it is pertinent to have timely evidence to disprove, within the legal deadlines, the presumption of having incurred in said assumption, before the authority determines that such operations as definitely non-existent and the tax rights on the associated expenses are lost. The need for healthy control mechanisms and a comprehensive strategy to justify the nature of the services becomes essential for companies.
2. Internal resources and external support
Increasingly, teams need to accomplish more with less. Evaluating whether there are available resources within the organizations to manage and control this regulation is necessary. Promptly identifying the time to include the advice of a third-party specialist on the subject to minimize the risk of non-compliance is highly beneficial.
It is pertinent for engagement teams to focus on business development, having, when required, the support of an external advisor. This will allow for compliance efforts to be the least disruptive to the organization's staff. Shifting the administrative burden allows better control and monitoring of compliance with provisions and their possible tax effects.
3. Classification of specialized services
As a result of the different operations that occur in companies, it is common to have external suppliers that now require a classification and identification as providers of specialized services, regardless of whether they are related to the activity of each company. The lack of classification and identification can result in violations and breaches of regulations.
4. Highly configurable systems
Systems are an increasingly used alternative to optimize resources, as they contribute to improving processes and speeding up compliance with obligations. It is beneficial for organizations to have a highly configurable system, which safeguards the evidence of compliance with obligations, and with a control dashboard in real time. Similarly, the ease of consulting the documentation required by the authorities for the deduction of the expense and the VAT accreditation represents an advantage.
The financial impact that non-compliance with this regulation could mean represents 46% of the current cost of this type of services; that is, up to 30% of IT for being non-deductible and 16% VAT for not being creditable, without overlooking the joint responsibility that is acquired.
Fuente: Reform regarding subcontracting. Federal Gazette. 2021
Our technology tool for Comprehensive Control of Service Providers (CIPS, per Spanish acronym) accompanies organizations in the management of compliance with obligations. This will allow to identify, in a timely manner and in real time, the level of risk or financial impact that not having information on service providers and other issues may represent.
Identifying and knowing the type of operations that are carried out on a day-to-day basis makes it possible to deal with the new tax regulations imposed by the authority on each of them in a timely manner.
Contact KPMG specialists to design and implement a comprehensive strategy tailored to your business in the management of service providers.
Our services
We work shoulder to shoulder with you to become your business partner in matters of social security, payroll management, evaluation of operational structures in accordance with the Federal Labor Law, the Mexican Social Security Institute (IMSS), the National Work er Housing Fund Institute (Infonavit).
With a comprehensive approach, we can assist you in evaluating specialized services, providing an analysis of the systems, as well as improving controls and tools to safeguard information.
Similarly, we are prepared to provide the following services:
― Technologies and control mechanisms, considering geographic factors
― Structure and alignment of business processes
― Risk management
― Regulatory compliance
― Planning and strategic alliances
― Price forecasts, optimization of consumption curves and strategic negotiations for the supply
Contact our specialists to learn about the CIPS system and the benefits it can bring to your business.
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