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dan

Nov 30, 1919, 12:00 AM

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Honorarios

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Hi. I am taking over the management of a business in Mexico soon, and one of the employees has told me he wants to go on "honorario" status. I've been told it's like an independent contractor and the benefits for him are that he doesn't have to have any taxes taken out of his pay. Anyone know anything about this and whether it is like an independent contractor? Thanks for the help.



roberto

Nov 30, 1919, 12:00 AM

Post #2 of 4 (5906 views)

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Honorarios

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As far as I know, you are still required to retain Taxes from him and he is required to give you an official receipt (Factura) with his RFC for the earnings.<p>Depending on how he register himself with Hacienda, he might be able to apply more deductions when he files for his tax return .. but that I do not think relieves you from witholding taxes on his salary.<p>
: Hi. I am taking over the management of a business in Mexico soon, and one of the employees has told me he wants to go on "honorario" status. I've been told it's like an independent contractor and the benefits for him are that he doesn't have to have any taxes taken out of his pay. Anyone know anything about this and whether it is like an independent contractor? Thanks for the help.<p>


DavidMTY

Nov 30, 1919, 12:00 AM

Post #3 of 4 (5905 views)

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Honorarios

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Regarding the comments on being careful, yes, certainly do it right. But the request is very reasonable under most circumstances. Type out a simple one page contract for two months and specify it is a contract for professional services, or whatever he offers, and sign it. Perhaps in duplicate, though whether he gets a copy is your call (I would avoid it if possible).<p>Regarding his "Factura" mentioned in another prior post, technically they are not "facturas" although they look like facturas at first glance. They are "Recibos de Honorarios." To his fee (honarios), you probably have to add IVA of 15%, so be sure you put whether the amount includes IVA or not in the contract. You are required to retain, probably 10% ISR and 10% IVA for most categories of honorarios. (A very few professions are exempt). Considering IVA is 15%, the net payment to him will be probably 95% of the original. 100% + 15% IVA - 10% reten IVA - 10% reten ISR. The honorarios receipt will have space for each retention and will have been printed by S.C.H.P. (Hacienda) authorized printer. It is the contractors problem to get put on the hacienda roles with an RFC they will provide him. He then has his own problem to go to a Hacienda approved printer and get his Recibos de Honorarios printed. You don't pay without a Recibo official, anything, of course. With his check, you should give him a brief summary sheet of the deductions, etc. The real tax rate he is responsible for paying is not your problem in the least if you do this properly. He does his taxes and gets a refund or pays more depending on his deductions, but that is not your issue, which ends with the paycheck and summary sheet, and off the top of my head, one additional annual sheet that you total all thre payments to him on.<p>If you want more help email me privately about the specifics. I could even walk you through the process, billing for my services with my honorario receipts:)<p>The one potential point to watch for for is that it is not a long term contract where the contractor perceives more than 50% of his salary. Short term is OK, hence the 60 days' suggestion. Benefits to the Contractor are lower taxes (applying deductions and recovering IVA), but negatives for him is that he will be taking off your IMSS roles and lose all the benefits of an employee. Those benefits probably cost you about 35% of his base salary. He is now external. Oh, and if you fire him (not really firem, as he is not an employee) he cannot collect severance which under Mexican law is a lot.<p>Best...David(MTY)<p>: As far as I know, you are still required to retain Taxes from him and he is required to give you an official receipt (Factura) with his RFC for the earnings.<p>: Depending on how he register himself with Hacienda, he might be able to apply more deductions when he files for his tax return .. but that I do not think relieves you from witholding taxes on his salary.<p>:
: : Hi. I am taking over the management of a business in Mexico soon, and one of the employees has told me he wants to go on "honorario" status. I've been told it's like an independent contractor and the benefits for him are that he doesn't have to have any taxes taken out of his pay. Anyone know anything about this and whether it is like an independent contractor? Thanks for the help.<p>


Ron

Nov 30, 1919, 12:00 AM

Post #4 of 4 (5905 views)

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Honorarios

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I would be careful about this and get lots of things in writing. We do not allow this where I work unless you are a foreigner. The problem is a lot of individuals have gone on this status(and do not pay their taxes). Guess who ends up getting stiffed under the law if you did not do the proper paperwork (and many companies screw up on it).<p>
 
 
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