On December 30, 2016, a decree was published on the journal “Periódico Oficial del Estado de Nuevo León” whereby several articles of the Tax Law for the State of Nuevo León were amended (“Ley de Hacienda del Estado de Nuevo León”), among others, those in connection with taxpayer obligations for Payroll Tax (Impuesto Sobre Nóminas (ISN)), which became applicable as of January 2, 2017.
The most transcendental amendment in connection with said tax is regarding companies who engage the rendering of services from taxpayers domiciled within the territory of the State or another Federal Entity.
By virtue of the foregoing, companies engaging the rendering of personnel services through a third party as of January 2017 are obliged to withhold and pay payroll tax for the services engaged as if these were their own employees.
Companies under the obligation to withhold the tax, pursuant to the provisions of the preceding paragraphs, shall register before the Federal Taxpayers’ Registry as Payroll Tax withholders and issue Payroll Tax withholding receipts in the form approved by the competent authorities.
It is important to mention that companies rendering personnel services shall inform the recipient of the personnel service, on a monthly basis, the amount of the payroll and the corresponding tax to be withheld from the subcontracted persons.
When, for the purpose of determining Payroll Tax withholding the amount of payment on personnel work performed by the engaged taxpayer is unknown, the withholding shall be determined by applying a rate of 3% to the total value of the consideration effectively paid for the engaged services for the corresponding month, without including Value Added Tax.
The tax withholding established on the preceding paragraph does not exempt taxpayers rendering the services from the obligation to file the corresponding tax return, where they may accredit the Tax withheld during the corresponding period. If applicable, the difference on Payroll Tax payable shall be paid, or request the refund of the corresponding tax if the withholding generates a balance in favor.
On April 5, 2017, the granting of administrative facilities was published on the journal “Periódico Oficial del Estado de Nuevo León”, for the benefit of companies under the obligation to make the withholding, the benefit consists on not withholding Payroll Tax (ISN) during all the months of 2017.
In order to adhere to this facility, companies obliged to withhold Payroll Tax shall obtain assurance of compliance of the obligations by their personnel service providers regarding Payroll Tax, such as:
I. Registry before the State Taxpayer Registry (Registro Estatal de Contribuyentes (REC)).
II. Domicile of record within the state territory.
In addition, in order to obtain this benefit, the withholder shall comply with the following requirements:
I. Registration on the State Payroll Tax Registry (Padrón Estatal de Retenciones del ISN) and have updated information before the REC.
II. If the company is subject to Payroll Tax payment, be in compliance with all payments.
III. No outstanding final tax liabilities payable regarding Payroll Tax.
IV. No defense claims, recourses or complaints filed in connection with Payroll Tax.
V. File a notice of adhesion to this facility, attaching proof that the service provider is registered before REC and its domicile is registered at Nuevo León, along with other requirements for the procedure.
VI. File information returns for the periods January-April, May-June, July-September and October-December 2017.
Due to the foregoing, we recommend that, if you are under this assumption, contact your executive (from the company providing the personnel service) in order to inform or coordinate the adhesion to this facility to become regularized and start to comply with this legal provision promptly in order to avoid sanctions in this regard.
Take into account that if there is no adhesion to this facility, taxpayers under the obligation and who have not complied with the withholding and payment of this tax, as of this date, shall pay updates and surcharges on the date the withholding is made.
Please contact us if you have any question or need clarification on this matter.