This article is intended as a "caution" light for companies sending or receiving an executive or technician ("expat") to perform work in Mexico. This situation may create immigration, social security, tax and labor obligations on one or more of the foreign and Mexican companies involved, as well as for the expat.
To determine, and possibly limit the extent of these obligations, or even avoid them, it is essential to analyze, in each individual case, the appropriateness of the contractual relationship of the expat with the foreign and Mexican companies from both a tax and labor standpoint and the nature of the underlying motive for the move; duration and other conditions of the expat's stay in Mexico; whether the foreign and/or Mexican company will be the payer of the expat's compensation; the expat's immigration status and relationship to the Mexican company; whether the expat will be accompanied by his family; whether the expat is a homeowner abroad and will retain his home abroad, the scope of the expat's activities in Mexico for the foreign and Mexican companies, whether the expat will carry out actions in Mexico on behalf of the foreign company and/or will hold a power of attorney for the Mexican company, among many others.
The analysis of all of the above circumstances will permit a determination of employer status of the foreign and/or Mexican companies, work scope and entitlement of the expat, application of, and exemptions under, applicable double taxation treaties, residency status of the expat, tax and social security payment and withholding implications for the foreign and Mexican companies and for the expat, existence of a Permanent Establishment of the foreign company, and other circumstances relative to tax and labor consequences.
As a consequence of the foregoing it is prudent for companies to periodically carry out an audit of expat compliance with Mexican rules relating to their stay in Mexico. Performing an audit that covers all of the factual circumstances involved in the case of each expat to permit a proper analysis of the Mexican consequences mentioned above and of the foreign and Mexican companies and expat's Mexican obligations, if any, is strongly recommended. Also, the establishment of a continuous follow-up mechanism that allows for an updated ongoing review is suggested.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.