On May 29, 2013 the Second Chamber of the Mexican Supreme Court of Justice (“MSCJ”) issued a decision in contradiction of jurisprudential case law regarding the possibility of granting one-month´s salary to employees as Profit Sharing (“PS”) in accordance with the Federal Labor Law (“FLL”) to employees who render their services to: (i) individuals or entities whose income derives exclusively form their work; (ii) individuals or entities engaged in the administration of real property yielding revenue; or (iii) individuals or entities engaged in the recovery of credits and the interests thereon.

In this regard, the MSCJ ruled that the aforementioned limitation shall only apply to those employers that (a) obtain their income from the administration of real property yielding revenue or the recovery of credits and the interests thereon and (b) which constitute their only source of income; otherwise, if the employer in addition to these activities is involved in one or more activities that generate income, then the employer shall not be contemplated in the aforementioned statutory presumption, and therefore said employers shall pay PS in accordance with chapter VIII of the FLL, this is, distributing among employees the 10% of the company’s income tax in accordance with the Income Tax Law.

The MSCJ court precedent analyzes among other things, the congressional purposes at the moment of incorporating said article, stating the following:

  1. That the congressman’s intention in establishing the one-month salary limitation for PS, was to ensure that building owners or the titleholders of credits (including the financial sector) whose interests yield profit or revenue, and who have an employee for said activity, would not be without means to cover said benefit since PS cannot be paid on rents, credits and their interests, since this would not demonstrate a real and true participation of the employees in the activity producing the income.
  2. The real property yielding revenue, or the credits generating interests do not properly constitute a “company”. Therefore the profit of said activities cannot be understood as a result of capital and work.
  3. That in limiting PS to one-month of salary, the congressman had in mind those employers that had as a single source of income the revenue of their real property or the interests produced by the credits granted.

In view of the above, in future litigation, the labor and tax authorities may interpret that those employers that grant credits and that undertake additional commercial activities such as those mentioned in section 46 of the Financial Institution Law (receiving bank deposits, accepting loans and credits, issuing bank bonds, establishing bank deposits in financial institutions and foreign financial entities, granting of loans and credits, issuing of credit cards in accordance with the credit agreement on a current account, practicing trust fund operations and financial operations), would be compelled to pay their employees PS applying the general rule for said payment.