Article 123 of the Mexican Constitution grants employees the right to participate in the profit its employer earns during each fiscal year, based on the percentage established by the National Profit-Sharing Commission.
Taking into account that tax legislation states that legal entities must present their income tax returns within the following 3 months after the end of the fiscal year, and that the Federal Labor Law states that profit must be distributed among employees within the following 60 days after the income tax return is made before the Ministry of Public Finance (“Hacienda”), our conclusion is that, if the tax return was filed on march 31 st , profit distribution must be carried out during the month of May.
The National Commission for the participation of workers in the profits of the corporations, has established that the amount that must be distributed should be equivalent to 10% of taxable profits.
A joint commission for Profit Sharing (“Commission”) must be incorporated in every company with representatives of the employer and employees. The main purpose of this Commission is to create a draft proposal of profit distribution, which will specify the amounts allocated to each individual worker. The employer must deliver to the Commission with a copy of the income tax return in order for the Commission to draft the aforementioned distribution proposal. The Commission may object the declaration before Hacienda within the next 60 days upon reception. It is important to mention that the term or statute of limitations for the Commission to object the income tax return, does not commence unless it has been formally delivered a copy of the same.
It is mandatory to formally serve the Joint Commission with a copy of the income tax return and draft a delivery deed, attaching the printed statement of the income tax declaration submitted through Hacienda’s web page.
The distribution must be made in two parts; the first one must be distributed equally among the workers according to the worked days, and the second part shall be distributed according to the received salary during the corresponding year.
Inspection from labor department
- Annual tax declaration.
- Incorporation of Joint committee
for profit sharing, with proof that
representatives of the employees
were selected by the employees.
- Minute to deliver tax declaration to
committee.
- Profit distribution project and
evidence of publication at the site.
- Profit sharing payment receipts.
It is common that the Labor Department conducts inspections on profit sharing during the months of June and July of every year. Please do not hesitate to contact us with any questions.
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