Now that corporate and individual yearly returns have been filed, it is that time of year to comply with Article 123 of the Mexican Constitution and chapter VIII of the Labor Code which state that employees are entitled to a share of their employer’s tax profit. The percentage of profits to be shared has changed throughout time as have the mechanisms to calculate how much each employee is entitled to and what the basis is (you can find the first resolution on this dated 1963 here); however, on March 4th, 1985, the committee mentioned in Article 118 of the Labor Code, established 10% would be shared and that percentage has not changed since then as all requests for a reduction have been rejected.
As this is something that might come as a surprise to employers, we have put together this list of FAQs which should be helpful:
How much is PTU?
PTU is a flat 10% on the fiscal profit. Look for the words “Utilidad fiscal” on your yearly return to know how much your profit was.
Do all employers have the PTU obligation?
No, there are some exceptions:
Newly created companies during their first year.
Newly created companies dedicated to the development of a new product during the first two years of operations.
The newly created extractive industry companies, during the exploration period (mainly referring to the mining industrial branch),for the exception period to apply, they must be newly created.
Private assistance institutions, recognized by law that, with private assets, carry out acts for humanitarian assistance, without profit purposes and without individually designating beneficiaries, such as nursing homes, foundations, among others. Non-profits, that carry out the aforementioned acts but have not been formally recognized as such by Secretaría del Trabajo, will have a profit sharing obligation.
IMSS and decentralized public institutions for cultural, welfare or charitable purposes.
Employers whose taxable income is not higher than 300,000 pesos.
When is it due?
Article 122 in the Labor Code establishes that PTU is due within 60 days of the yearly return being due. Corporate returns are due by March 31st, while individual ones are due by April 30th, so PTU is due by May 30th and June 29th, respectively.
How is it split among workers?
Half the PTU is split among them based on the number of days they worked throughout the fiscal year while the other half is split based on their salaries.
Is there a cap on PTU?
PTU is capped at 90 days’ salary or the average PTU amount an employee has received in the past three years, whichever is most convenient for the employee.
Who is entitled to PTU?
Current and former employees who are hired indefinitely.
Current and former employees who are hired for a specific period of time and who were employed for at least 60 days throughout the fiscal year.
What is the process for letting employees know how much they are entitled to?
Article 121 in the Labor Code establishes the following procedures to ensure that all the employees are aware of how much they are entitled to and are all in agreement:
Within 10 days of filing the yearly return, the employer is to supply a copy to all employees entitled to PTU. The employees cannot share that information with third parties.
The employees have 30 days so either their union representatives or a majority of employees can submit their comments to the Secretaría de Hacienda y Crédito Público through the means SAT has established for this process. Tax authorities are to respond in writing once they have gone through the audit process established in the Federal Tax Code.
Any resolution issued by tax authorities cannot be contested by employees.
The employer is then to pay PTU based on said resolution within 30 days even if they go through the administrative proceeding to contest it in court. If the administrative trial resulted in less PTU than was paid, employers will deduct the difference from the next year’s PTU.
If employees go through the process of contesting PTU, the original amount is to be paid within 60 days of the yearly return being due, even if the process is not finished yet.
If tax authorities determine a higher tax profit at any given time (through a separate, unrelated audit, for example), employers are to pay the balance within 60 days of the higher tax profit being determined.
What protects the employees’ right to PTU?
Article 130 in the Labor Code states that PTU rights are protected in terms of Article 98 in the same law which states that:
Employees have the right to freely get amounts owed to them. Any agreement that is contrary to this, will be void.
The right to PTU is not renounceable.
PTU is to be paid to the employee only, unless they give POA to a third party to received it on their behalf.
PTU must be paid in cash and it cannot be traded for goods, certificates, or any other substitute for money. They can also be paid by transfer.
Any type of assignment of PTU is void.
PTU does cannot be offset by any other type of payment.
PTU must be paid at the employees' workplace.
The obligation of paying PTU is only suspended in terms of the Labor Code.
PTU must be paid during working days and hours or immediately afterwards.
Is PTU taxable income for employees?
The equivalent of 15 days of minimum wage is exempt from taxes; the rest of PTU will be taxed at the regular rate.
How long do employees have to claim their right to PTU?
PTU can be formally claimed by employees for up to a year from the date on which it was due to be paid to them. Any unclaimed PTU will be added to the following year’s PTU and split among that year’s employees.
Who enforces compliance?
Secretaría del Trabajo y Previsión Social conducts inspections of workplaces to make sure employers are complying with all obligations. They can only determine whether the procedures were followed as they do not have the legal ability to determine whether amounts were correct or not, so they request SAT to audit the employers’ returns as SAT is the only one who can resolve on what the tax profit was.
Since the latest labor reform on outsourcing, labor authorities are expecting PTU to be considerably higher throughout the country as that was one of the main reasons for reforming the Labor Code; they have statistics SAT provides them with, as PTU pay slips are electronically issued and digitally stamped through SAT’s servers. This means they have plenty of information to be able to carry out inspections when they notice something either unusual or inconsistent.
What are the fines for not complying with PTU regulations?
The employer who does not comply with the obligation to share with his workers the profits he obtains, will be sanctioned with 250 to 5,000 times the general minimum wage at the time the violation is committed.
You can find SAT’s PTU guidelines with plenty more information on the matter here.
If you have questions regarding PTU, feel free to contact us at pblanco@equilibrium.mx or through our website’s contact form here.
Paula Blanco, CPA