Telecommuting and remote work, omissions of significant tax issues
On 11 January 2021, (effective the following day), amendments to the Federal Labour Act related to remote work and telecommuting modalities, pursuant to the amendment to Article 311 and in addition of Chapter XII-Bis (Articles 330-A to 330-K) were published in the Official Daily Gazette.
The reform to Article 311 conceptualizes “remote work” which is carried out in benefit of the employer at the domicile of the worker or at any other place chosen freely by the worker, neither being subject to surveillance nor immediate direction by the person who provides the work.
“Telecommuting” is defined in Chapter XIII BIS (Art.330-A) as a form of subordinate employment arrangement that meets the following characteristics:
- Performance of remunerated activities.
- It is carried out at places other than in the establishment or establishments of the employer.
- The worker is not required to be physically present at the work centre.
- Use of information technologies and communication for contact and command between the worker and the employer. Technological and communication information are considered as the range of services such as infrastructure, networks, software, informatics applications and slides that are geared toward facilitating the tasks and duties at work centres, as well as those needed for managing and transforming information; particularly, the technological components that allow for creating, modifying, storing, protecting, and recovering that information.
- More than 40 % of working time must be performed at the worker's domicile or other place than the work centre indicated by the employer.
- Work performed sporadically or occasionally is not considered telecommuting.
Since it is an employment modality other than set forth in general employment conditions, telecommuting implies that special conditions be necessarily specified in writing. Likewise, the new obligations for both the employer and worker should be known and set out in the hiring.
Within the new employer obligations, we are able to find that the employer should provide the worker with the necessary equipment to carry out the activities in the telecommuting modality, which include computer equipment, printers, among other things. On the other hand, the worker, in the telecommuting modality, should make appropriate use of the equipment and tools, as well as report the maintenance and repair needs of such equipment and tools on a timely basis.
On one hand, the employer's relevant obligations contained in this reform is the obligation related to the fact that the employer must assume the payment of both communication and the proportionate part of electricity services, on the other hand, the worker in the telecommuting modality should report the costs agreed of telecommunications consumption from telecommuting for electricity services on a timely basis.
On the other hand, the Federal Executive Branch has 18 months to issue the Mexican Official Standard, which governs the occupational job security and health obligations for telecommuting.
Although, this new modality is significant and transcendent, it is undeniable that the tax implications arising from the new obligations generated have failed to be observed, specifically, the obligation related to absorbing both communication and the proportionate part of electricity cost by the employer in the present context.
Toward this end, it is important to analyse some scenarios in which this payment, support or absorption of costs by the employer could be developed:
- The employer should consider the payment that will be made on the disbursements for both communication and the proportionate part of electricity disbursements should be considered as reimbursed expenses, which poses its difficulty for being deducted, since the tax receipts would not be in the name of the employer. Value added tax would not be creditable in this scenario, either.
- The costs assumed by the employer should be considered as income for the worker and be taxed for income tax purposes, since such income cannot be exempted since it is not considered as income; therefore, the tax is not paid in the income tax law. This scenario would have major implications for the worker, who, in a determined case, could be bound to filing a tax return for total income.
- The amounts paid by the employer related to these costs should be considered as income that is part of the computed daily wage for determining contributions to social security and the housing fund.
- In the case of local taxes, the effects of these costs assumed by the employer are considered the base of those taxes, since they will arise from the employer-employee relationship, and they are not considered as exempt items for purposes of taxes on remunerations to personnel or payroll taxes.
- If applicable, a “self-invoice” can be drawn up by the employer to be able to be considered as an authorised deduction, which would imply having the tax authority issue general rules.
At the time of making the practical application of the remote work and telecommuting labour reform, we would be faced with the above considerations, but consider that the tax authorities should generate agreements, rules and/or criteria quickly, in order to be able to establish the correct treatment for this new labour obligation.