A guide for U.S. companies with a subsidiary or contractors in Mexico. The short answer: since the 2021 labor reform, Mexico prohibits personnel subcontracting (labor outsourcing). A company may only contract specialized services or works that are not part of its corporate purpose or main economic activity, and the provider must hold a current registration in the REPSE, the registry run by Mexico's Ministry of Labor (Secretaría del Trabajo y Previsión Social, STPS).
What the 2021 outsourcing reform changed
- The ban: Article 12 of the Federal Labor Law (Ley Federal del Trabajo) prohibits one company from supplying or placing its own workers at the disposal of another.
- The exception: Article 13, as amended by the decree of April 23, 2021, allows specialized services or works outside the client's corporate purpose (objeto social) and main economic activity (actividad económica preponderante), if the contractor is listed in the STPS public registry.
Who must register in the REPSE and how often it is renewed
REPSE stands for Registro de Prestadoras de Servicios Especializados u Obras Especializadas (Registry of Providers of Specialized Services or Works). Whoever performs the service or work with its own workers must register.
The provider must be current with the SAT (tax authority), the IMSS (social security institute) and INFONAVIT (workers' housing fund), and must show why each activity is specialized. The STPS must answer within 20 business days. The registration is renewed every three years, within the three months before expiry; failing to renew on time is a ground for cancellation.
The contract and the reports to IMSS and INFONAVIT
The contract must be in writing and state the purpose of the services or works and the approximate number of workers who will take part. The provider reports its contracts to the IMSS (ICSOE) and to INFONAVIT (SISUB) every four months, no later than the 17th of January, May and September.
What the client company must check and keep
The Income Tax Law requires the client to verify, each time it pays, that the contractor holds the registration, and to obtain copies of the payroll, social security and VAT documents for the workers assigned. If the contractor does not deliver the VAT information within the legal period, the client must reduce the VAT it credited.
Two situations deserve a review in foreign-owned companies: the pre-2021 structure, with one entity that only employs the staff and another that operates, and the assumption that services between companies of the same group, or on-site providers at a plant under an IMMEX program, are exempt.
Joint liability and penalties
- Joint liability: if the contractor fails to comply, the client answers for the labor, social security, housing and tax obligations relating to the workers used.
- Labor fine: 2,000 to 50,000 times the UMA (Mexico's daily reference unit), for the unregistered provider and for whoever benefits.
- Tax effect: payments for personnel subcontracting are not deductible and do not allow a VAT credit.
- Tax-crime exposure: the Federal Tax Code lists simulated specialized-services schemes among the circumstances of aggravated tax fraud.
What is at stake is the deduction, the VAT credit and joint liability for workers who are not your own. The first step is to have counsel review the service contracts and your providers' registrations.
How we help
Mariela Cárdenas, LL.M., attorney admitted in Mexico, practices from the Nuevo Laredo, Mexico office. She reviews contracts and provider registrations and keeps the company's compliance file, as part of our legal department in Mexico.
Frequently asked questions
Does my U.S. company need to register in the REPSE?
Registration falls on whoever performs the specialized service or work in Mexico with its own workers. The company that hires, parent or subsidiary, does not register; it must verify the provider's registration and keep the documents.
How often must a REPSE registration be renewed?
Every three years. Renewal is requested from the STPS within the three months before the registration expires.
Do shared-services entities inside a corporate group need to register?
Yes. The law treats complementary or shared services or works between companies of the same group as specialized when they fall outside the corporate purpose and main activity of the recipient, and the STPS rules make registration mandatory.
What happens if my provider has no registration or loses it?
Without a current registration, the payment does not meet the requirements for the deduction or the VAT credit, and both provider and client are exposed to the labor fine.
General information, updated October 2026. It does not replace legal advice for a specific case.
Request a first review
Tell us how your company contracts services in Mexico and which providers concern you: Schedule a consultation or write to mariela@cardenaslegal.mx