We are not a law firm. Do not consider our information as legal advice. This information has been summarized based on our legal inquiries. Information can become obsolete from one day to another due to changes in laws, regulations, or government procedures. Consult labor and tax attorneys for legal advice. (Note from HR Mexico staff)
Independent Contractor(s) in Mexico
Here in Mexico, there really is no such thing as independent contractors or commission only sales agents. The individuals most likely should be legally employed by a Mexican entity to be legitimate and to safeguard the foreign company from a de facto legal presence in Mexico.
The Hiring of Independent Contractors on a Commission Basis or Commercial Agents in Mexico by Foreign Companies.
The hiring of independent commissioned contractors or those known as commercial agents in Mexico is an issue that must be analyzed very carefully by companies interested in entering into such arrangements, even if these companies are foreign. Parties seeking to hire independent contractors to carry out certain economic activities in Mexico, or who already use such, should take into account different aspects of Mexican law to avoid falling into situations that can lead to obligations for which such parties may not be prepared. The hiring of an independent contractor may have implications not only of a labor nature, but also with respect to social security and fiscal matters. In this regard, in accordance with that established in Article 285 of Mexico's Federal Labor Law (FLL), the independent commissioned contractors in Mexico hired as commercial agents, insurance agents, as well as vendors, travel agents, promoters, or sales or commission agents and other similar agents, may be considered employees of the contracting company for all purposes under the Mexican Federal Labor Law (FLL) when "his or her activity is permanent, except when they do not personally conduct the work or when they only intervene in isolated operations."
Mexico's judicial and labor authorities, under various interpretations of the FLL, have determined criteria pursuant to which those parties hiring such service agents may be considered their employers. This rule applies regardless of whether the foreign company has a physical presence in Mexico, given that this does not allow them to avoid being subject to the application of the provisions established in the FLL and other applicable Mexican laws, as well as various other obligations such as taxes, payment of social security fees and other obligations with which all employers within the Mexican territory must comply.
Additionally, social security authorities may also petition the aforementioned judicial and labor authorities to attempt to charge social security fees, in the event that it is determined that these agents were employees of such companies when they rendered services. Another important topic to consider in such relationships is the possibility that the hiring of these agents may constitute the creation of a permanent establishment in Mexico for tax purposes for the employer. In accordance with that established in the Mexican Income Tax Law. Therefore, it is important for those companies that intend to hire independent commissioned contractors or commercial agents to render services in Mexico to seek legal advice from attorneys who will help them to determine, on a case by case basis, the best strategy to follow in conducting such contracting activities, in accordance with the results sought by the company and in compliance with applicable law.
The information above was originally published at www.mexicoreport.com