1. FROM PRINCIPLES TO PLANNING Recent Developments in International Tax - Mexico FROM PRINCIPLES TO PLANNING

2. Recent Developments in Mexico Raul Montemayor, Mazars México

3. Mexico new labor law and other developments New terminology was introduce in the new law. Terms such as, Discrimination, Sexual harassment and bullying are now part of the law. Cases involving this kind of behavior will be prosecuted. The labor reform establishes the different types of employments that will exist: 1.Specific project. 2.Temporary employment. 3.Seasonal employment. 4.Indefinite term. Initial training periods. – 90 days for workers. 180 days for mgt level employees Trial periods.- 30 days for workers. 180 days for mgt level employees. No severance payment upon termination will be necessary in these cases.

4. Mexico new labor law and other developments Outsourcing Specialized tasks performed by a subcontractor with its own work force that fall outside the beneficiary's ordinary course of business, where the beneficiary supervises and controls the services or work being done. In order to comply with the regulation that defines the Outsourcing services, companies must fulfill the following : (i)the relationship is documented through an outsourcing agreement (ii)does not cover all of the activities carried out in the workplace, (iii)is justified by its specialized nature, and (iv)does not cover tasks that are the same or similar to those performed by the beneficiary's employees. If these requirements are not met the beneficiary of the services will be considered an employer of the contracted work force for all matters of the law including those of social security nature.

5. Mexico new labor law and other developments Outsourcing –Additional obligations The contracting party must make sure that at the time the service contract is sign the subcontracting company complies with all labor and social security regulations, furthermore, the contracting party must continue to evaluate or review the subcontracting company in order to ensure that all these labor, social security, work environment and taxes continue to be file by the subcontractor in accordance with the applicable tax regulations. Penalties- Will range from $ 15,582.50 pesos to $ 311,650 pesos Termination Employers must still provide written notice of termination to each employee prior to termination. If an employee refuses to accept the notice, the employer must provide the written notice to the Conciliation and Arbitration Board. The notice must include the grounds for termination to establish that the employer had just cause for the termination. Employees have a 60 days period to challenge what they may consider to be a wrongful termination. After this period is past they can no longer request any severance pay.

6. Mexico new labor law and other developments Another significant change resulting from the Labor Reform is the recognition of an hourly wage system, as opposed to the previous monthly wage system. This amendment allows employers and employees to explore alternative employment mechanisms as long as the maximum work shift is not exceeded (8 hours during day shifts, 7 hours during night shifts, and 7.5 hours for mixed shifts) and, at the very least, the minimum hourly wage and overtime hours are paid. It is important to note that the mechanics to calculate the Social Security contributions that companies must pay for this hourly workers has not yet been established, therefore additional regulations are expected to come out in the following weeks for this and other less than clear regulations of this labor reform. Salary payment Prior consented by the employee, the company will be able to pay his salary by bank deposit, debit card, wire transfer or any other electronic method. The cost and fees related to these transfers should always be paid by the company.

7. Mexico new labor law and other developments Other Developments - Social Security reform Both houses of the Mexican congress are currently debating this new reform. The main focus of this reform is to harmonize the Social Security compensation base with the one use for the Income tax. Among those non-salary contributions that will be affected are: Savings fund Food coupons Retirement, old age and disability insurance Pension plan contributions Profit sharing Bonuses for punctuality or attendance Meals and housing benefits Overtime The 25 minimum wages salary ceiling remains unchanged.

8. Mexico new labor law and other developments Other Developments - Social Security reform Type of compensationCurrent Social Security Law New Social Security Law Savings FundExempt in must casesWill be exempt up to 1.3 the annual minimum wage (MW) MX$30,728 Food CouponsExempt up to 40% of the MW (MX$787) Same. Cannot be paid in cash Bonuses for punctuality or attendance Exempt up to 10% of the employee’s salary Taxed in full Over timeExempt up to 3 hours per day in a week period up to 9 hours Same Profit SharingExemptExempt up to 15 days of MW

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10. To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. IRS Circular 230 Disclosure

11. Mexico new labor law and other developments Contact Information Raul Montemayor, Mazars México raul.montemayor@mazars.com.mx