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The Mexican Senate approved legislation on April 20 that will modify the tax and labor law treatment of subcontracted services in Mexico. These law reforms may result in significant financial impacts to Mexican investments, as well as human resource considerations.

The Labor Law modifications will be effective the day following their publication in the Official Gazette. However, the legislative changes to the Income Tax Law, Value Added Tax (VAT) Law and Federal Fiscal Code will be effective August 1, 2021.

Failure to comply with the new rules could result in significant penalties, including potential characterization of tax fraud.