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Profit Sharing in Mexico: What Foreign Employers Must Know About PTU Obligations

Expanding your team to Mexico brings access to top-tier talent and cost-effective operations—but it also brings legal obligations that may surprise global employers. One of the most overlooked is Profit Sharing, known locally as Participación de los Trabajadores en las Utilidades (PTU).

If you’re hiring in Mexico—directly or through an entity—you may be legally required to share a portion of your company’s annual profits with your Mexican employees. In this article, we break down what foreign companies need to know about PTU, from calculation to compliance, and what happens if you fail to pay it.

What is PTU?

PTU (Profit Sharing) is a mandatory employee benefit in Mexico. It obliges employers to distribute 10% of the company’s annual taxable income among eligible employees.

This rule is not optional—it’s enshrined in the Mexican Federal Labor Law (LFT) and enforced by labor and tax authorities.

🔗 Federal Labor Law of Mexico (LFT) – Article 117 (External link, in Spanish)

Who Must Pay PTU?

All companies operating in Mexico must comply, unless they fall under very specific exemptions, such as:

  • New companies in their first year of operations
  • Non-profit institutions
  • Companies in preoperational stages (e.g., heavy R&D)
  • Companies with fewer than 300 employees may receive exemptions under specific conditions

If you employ workers through a legal entity, REPSE-registered outsourcing firm, or EOR, PTU may apply depending on the structure of your employment relationship.

Who Receives PTU?

Only employees (not contractors) who:

  • Have completed at least 60 days of work in the fiscal year
  • Are not directors, general managers, or senior executives
  • Are on the Mexican payroll during the profit year

Even remote employees working from Mexico for a foreign company may be eligible—depending on how your operations are structured and whether you’re considered to have a permanent establishment.

How is PTU Calculated?

The amount to be distributed is 10% of the company’s annual taxable profit reported to the Mexican tax authority (SAT). Distribution is then split:

  • 50% equally among all eligible employees based on days worked
  • 50% distributed proportionally based on earned wages

PTU must be paid within 60 days after the annual tax return is filed:

  • Corporations: Must pay by May 30
  • Individuals with business activity: Must pay by June 29

What Are the Legal Risks of Not Paying PTU?

Failing to comply can trigger:

  • Labor lawsuits
  • Fines from the Ministry of Labor (STPS)
  • Audits from SAT
  • Reputational damage among Mexican talent

PTU is one of the most closely watched compliance areas during labor inspections. If you’re hiring in Mexico—even through an EOR—make sure this is addressed in your contracts and payroll structure.

📘 Related article: Surviving Audits: How Global Teams Can Prepare for Labor Inspections

Can You Avoid PTU Legally?

There are legal strategies, but avoidance must be structure-based, not neglect:

  • Use of an EOR or outsourcing vendor must comply with REPSE and clarify PTU obligations contractually
  • Creating a non-operational entity (e.g., using the Mexican entity only for support functions) may limit the profit base—but must be legitimate
  • Employee compensation structures should clearly separate base pay from bonuses or equity

📘 Related guide: How to Use EORs in Mexico Without Violating REPSE Rules

Reporting and Documentation

To remain compliant:

  • Include PTU in your employee offer letters or contracts
  • Budget for PTU in annual forecasts
  • File correct profit reports with SAT
  • Ensure transparent communication with your team to avoid future claims

Key Takeaways

  • PTU is a mandatory 10% profit-sharing obligation for employers in Mexico
  • Applies to most companies, regardless of size or origin
  • Can trigger major penalties if not handled correctly
  • Should be part of every global HR strategy involving Mexico-based talent