Dear clients and friends,

On June 17, a bill initiative was published in the Parliamentary Gazette of the Mexican Congress proposing to add Article 132-Bis to the Federal Labor Law (“LFT”) and Article 186-B to the Income Tax Law (“LISR”) regarding tax incentives for first-time employment (the “Initiative”).

In general terms, the Initiative seeks to promote the formal hiring of young individuals between the ages of 18 and 29 who lack prior employment experience registered with the Mexican Social Security Institute (“IMSS”), through a tax credit equivalent to 25% of the employee’s base salary for social security contributions during the first twelve (12) months of the employment relationship. This tax benefit may be credited against the income tax incurred in the corresponding fiscal year.

Additionally, in order to retain the tax benefit, the employer is required to (i) register the worker with the IMSS, (ii) provide a minimum training program of three (3) months, and (iii) submit an annual report to the Ministry of Labor and Social Welfare.

If enacted, this reform could represent a significant opportunity for both individual and corporate employers seeking to expand their workforce by hiring inexperienced youth, thereby contributing to the development of formal youth employment in Mexico.

If you have any questions or require advice regarding this matter, our team of experts is available at the following email addresses:

Paul Kavanagh: paul@k-g.com.mx

Miguel Alonso: malonso@k-g.com.mx

Luis Kanchi: Lkanchi@k-g.com.mx