3. How to Structure an Independent Contractor Relationship

a. How to Properly Document the Relationship

To reduce the risk of reclassification as an employment relationship, an Independent Professional Services Agreement should:

• Be in writing, and clearly state that the relationship is governed by civil or commercial law (not labour law);
• Avoid references to supervision, subordination, exclusivity, or integration into the client’s operations;
• Exclude any mention of the number of employees involved, and avoid language suggesting personnel placement;
• Not be reported by either party as a specialised service before government platforms such as:
  • ICSOE (IMSS reporting platform), or
  • SISUB (INFONAVIT reporting system).

If the contractor issues invoices (CFDIs), the description of services should accurately reflect the professional or technical nature of the work being performed.

To strengthen the independent nature of the relationship:

• The contractor (individual or entity) must:
  • Operate under its own authority;
  • Use its own tools, materials, and facilities (e.g., office space, equipment, systems);
  • Be free to set its own schedule, without reporting obligations to the client;
  • Maintain multiple clients, and not rely exclusively on the beneficiary of the services.
• If the contractor performs the services using its own employees, it must be responsible for:
  • Labor, social security, and tax obligations;
  • Registering and complying with IMSS and INFONAVIT requirements, as applicable.
• At no point should the contractor place personnel at the disposal of the client to perform tasks under the client’s direction, as this may be deemed illegal subcontracting unless structured as a specialised service under the REPSE regime.
• The contracting party may deduct the cost of the services for Income Tax (ISR) purposes and credit the corresponding VAT, provided that:
  • The contractor issues a valid CFDI (electronic invoice);
  • The services are directly related to the company’s business activity; and
  • The deductibility conditions under Article 27 of the Income Tax Law and Article 5 of the VAT Law are met.

b. Day-to-Day Management of the Relationship.

To preserve the independent nature of the relationship and avoid the appearance of subordination, the client (service recipient) must avoid exercising control over the contractor or its personnel.

In particular:

• The client should not issue instructions, work orders, or performance evaluations to the contractor’s employees;
• The contractor’s personnel must not be integrated into the client’s operations (e.g., assigned company email addresses, business cards, uniforms, or other corporate identifiers);
• The client should not grant powers of attorney, access credentials, or internal authority to contractor personnel;
• Any communication regarding deliverables should be made through a designated representative and in accordance with the terms of the commercial agreement.

These measures are essential to ensure that the relationship is seen as a true services arrangement, not disguised employment. Maintaining clear operational separation is critical from both a labour and tax perspective.