On June 5th, the Department of Labor and Social Welfare (“STPS”) published in the Federal Official Gazette (“DOF”) the Regulations for Articles 121 and 122 of the Federal Labor Law (“Regulations”), same which have the purpose of regulating the procedure regarding the objections that workers may have in connection with the annual tax return and its annexes filed by employers before the Tax Administration Service (“SAT”).
In accordance with the Regulations, the union holding title of the collective bargaining agreement or industry-wide labor agreement in force at the company, or else, the majority of workers of the company, are entitled to formulate objections to the annual tax return and its annexes. To this end, union representatives or the majority of the workers shall prove their capacity.
In order to certify the majority of workers, the latter shall request to the competent labor authority to carry out an extraordinary inspection to certify the number of workers at the work center. Said request shall be made in writing specifying the name and domicile of the work center, as well as the domicile appointed to hear and receive notices, attaching a list of workers with their names and the positions they perform.
The extraordinary inspection shall take place within fifteen business days following the receipt of the written request. The authority will deliver a copy of the minutes to the workers during the fifteen business days following the inspection, in order for them to be able to formulate objections before the SAT.
As established by the Federal Labor Law (“FLL”), employers are obliged to deliver to their workers a copy of their annual tax return within a ten business day term starting on the date in which the tax return was filed.
The annexes to the annual tax return shall be kept at the company’s offices and the offices of the SAT in which the tax return was filed, during a thirty business day term starting on the date in which the employer delivered the copy of its annual tax return to the workers, for the latter’s review.
The union party to the collective bargaining agreement or industry-wide labor agreement in force at the company, or else, the majority of the workers, can formulate objections to the annual tax return as it considers appropriate before the SAT, within the thirty business days following the period during which workers had access to the annexes. It is worth mentioning that this term will not start to count until the employer has delivered copy of the annual tax return to the workers and made the respective annexes available to them.
The motion of objections shall precise the items of the tax return which are being objected, the grounds or basis to do so, the domiciles to hear and receive notices, and the name of the individual authorized to receive them during the procedure. Likewise, the document evidencing the capacity of the union or the majority of the workers shall be attached to the motion.
In case the aforementioned requirements are not met, the tax authorities will require the plaintiffs, on up to two occasions, in order to remedy the omitted requirements. Failure to comply with the second requirement will result in the non-admission of the motion of objections.
We must point out that once the motion of objections is admitted, the SAT shall conclude the procedure without being possible for workers to withdraw their claims and will issue the respective resolution.
In the event the SAT determines that the objections are valid, it shall indicate the terms in which the taxable income declared by the company shall be modified, as well as the legal grounds and basis to do so. The employer must carry out the respective profit sharing payment within thirty business days following the notification of the resolution increasing, or else, determining, the profits to be shared with the workers.
Please note that even though the motion of objections would not have been submitted by the workers, the SAT may exercise at any time its inspection powers; if SAT determines that the taxable income of the companies is greater, it will order the omitted income tax assessments and notify the employer, as well as the union or the majority of workers, that an additional profit sharing pay shall be made.
When employers file any legal remedy against the resolutions or tax assessments that increase their taxable income, the additional profit share may be suspended as long as the workers’ interest is guaranteed in terms of Article 985 of the Federal Labor Law, even though the SAT suspends the collection of the tax credit.
The Regulations create, as well, the Interministerial Committee for the Participation of Workers in the Company’s Profits (“Committee”), same which will be formed by officers of the STPS and the SAT. The Committee will attend the complaints filed by the workers for the breach of these Regulations by the tax or labor authorities.
These Regulations shall be become effective on the day following their publication in the DOF and abrogate the prior regulations for Articles 121 and 122 of the FLL published in the DOF on May 2nd, 1975.