PTU in Mexico is the legal requirement for locally-based companies that they share a portion their profits with employees. This is something that investors must consider when planning a market entry.
If you are interested in starting a business in MexicoIf you plan to do business in the country, you will need to be familiar with how employee profit sharing works there.
Officially called Employee Participation In Company Profits, PTU in Spanish is the abbreviation.Participación de los Trabajadores en las Utilidades de la Empresa. PTU payments cannot be considered as part of an employee’s salary.
Employees will not be eligible to receive compensation if they are subject to loss and profit.
This article will cover some of the finer points of Mexican employee profit sharing.
- Mexico’s profit sharing laws: Which companies are required to participate?
- What companies are exempted from PTU in Mexico
- What employees are entitled to a portion of the profits?
- How Mexico calculates profit sharing
- When PTU is paid in Mexico
To discuss how we can help with profit sharing in Mexico and other back-office concerns, please get in touch. contact us now.
What companies must participate in profit sharing in Mexico
Any company with employees that makes more than MXN $300,000. (approximately USD 14,850 at the time of publication) must share some of its profits.
These profits are based upon what is declared to Mexico’s Tax Administration Service (MTAS).SAT.
As you can see, not all companies have to pay PTU in Mexico at the beginning of their operations.
What companies are exempted from PTU in Mexico
According to Article 126 of Mexico’s Federal Labor LawAny company that is in its first year of operation is exempted from paying PTU in Mexico. Entities whose primary objective is to create a new product are exempted for the first two years.
Further exemptions are available to the following entities
- New companies that are focused on mining and still in exploration
- Private institutions that are charitable and non-profitable
- Non-centralized institutions offering cultural or social aid purposes
- Organizations generating social capital, as established in an index established by Mexico’s Ministry of Labor and Social Welfare.
Which employees have a right to a portion of the profits?
The majority of employees who provide remunerated services for an employer are eligible to receive a share in the profits. This includes:
- Permanent workers and subcontractors
- Temporary workers who work for more than 60 days in a financial calendar
- Former employees who worked at least 60 days in the financial year for PTU were eligible to be paid.
Note that a period of non-work due to statutory maternity leave does not affect an employee’s eligibility for receiving PTU in Mexico.
These employees are not eligible to receive PTU payments
- Directors, administrators, senior executives
- Stock owners and shareholders
- Temporary workers who worked less than 60 days in a financial year
- A service contract hires professionals
- Domestic workers
Non-unionized workers should be aware that they are not eligible to receive PTU in Mexico if the salary they earn is less than the highest salary earned by a unionized employee within the company. Meanwhile, employees whose main responsibilities involve caring for profit generating goods or real estate may only receive PTU when it does not exceed one month’s salary.
How is profit sharing in Mexico calculated
According to the National Commission for the Participation of Workers in the Profits of Companies, a company must currently share 10% of the profits it generates during a given fiscal year with its workers.
To calculate PTU in Mexico, a company must first divide its profits into two equal parts. The first portion of profits is divided equally between employees based on how many work days they have worked.
The second is based upon the employee’s gross salary, with bonuses and benefits excluded.
When is PTU paid in Mexico?
According to Article 122 of Federal Labor Law, PTU Mexico must be paid within 60 days of the company’s annual tax contribution.
That is to say, if a company’s tax payment deadline is set for March 31, it is obliged to make profit sharing payments sometime between April 1 and May 31 of that same year.
Employers who are hired by individuals and not companies would pay PTU between May 1 and June 30, due to the fact individual taxes must also be paid by April 31.
Biz Latin Hub is able to assist you with PTU Mexico
Biz Latin Hub has the expertise and personnel to help you manage PTU in Mexico. Our extensive portfolio of back-office solutions includes accounting & taxation? company formationWe can help you launch and do business in Mexico or any other market in Latin America and/or the Caribbean, where we have teams.
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