Change Country

International Businesses

Independent Contractors in Mexico

Posted on December 22, 2015 by

Tim Finerty

Tim Finerty

Share This

A common practice for many US companies with activities in Mexico is to pay Mexican residents as independent contractors. US companies do this so they are not liable for Mexican labor obligations, such as payroll taxes and employee benefits. Additionally, they do not want to create a permanent establishment, or taxable presence, in Mexico.

Identifying this practice, the Mexican government recently enacted amendments to the federal labor law that would impose significant fines on companies using alternative legal arrangements to avoid or reduce its statutory labor obligations or employees’ fringe benefits. These amendments could create significant risk to US companies utilizing Mexican resident independent contractors. To limit their exposure, companies should make sure they thoroughly understand the requirements for Mexican independent contractors.

Independent Contractor Requirements

If you answer “yes” to all five questions, you likely have an independent contractor relationship and will be able to avoid Mexican labor obligations and the creation of a permanent establishment in Mexico.

  1. Is the “independent contractor” involved in all the activities developing in the workplace?
  2. Are you able to justify the specialized service of your “independent contractors”?
  3. Does your “independent contractor” have the capability to hire additional personnel?
  4. Does your “independent contractor” have sufficient autonomy?
  5. Does your “independent contractor” have more than one source of income?

If you answered “no” to any of the questions above, you may need to re-categorize your independent contractor as an employee.

Now what should I do?

The Mexican Government recently created a new opportunity where independent contractors and the companies they work for can come forward to receive a tax credit of 100 percent for all labor obligations; therefore, this is a great time to get company operations fully integrated and avoid any potential tax penalties.

Tim Finerty


Tim provides tax, accounting and consulting support to help industrial automation companies maximize profitability.

Related Insights

International Businesses

Bringing Mobility to Detroit

Posted on September 13, 2022 by

Teresa Gordon leader of the global accounting team at Clayton & McKervey
We’re excited to share this news from the Detroit Regional Partnership. For companies needing help planning mobility focused expansion to the US – from the UK, Europe or Asia, there is a well-connected team to help with all aspects of foreign direct investment.  Learn more about how we can help here.

International Businesses

The Future of Global Mobility Tax

Posted on September 12, 2022 by

Teresa Gordon leader of the global accounting team at Clayton & McKervey
The global mobility landscape is changing. What began as a need to work from home during the worldwide pandemic is evolving into a “work from anywhere” trend that appears to be here to stay. Learn how this impacts the competition for talent and multi-jurisdiction tax compliance.

International Businesses

Teresa Gordon Chosen for SelectUSA Mentorship

Posted on June 24, 2022 by

Clayton & Mckervey
C&M Shareholder Teresa Gordon will be participating in SelectUSA’s Select Global Women in Tech (SGWIT) Mentorship Network.

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content