TOWARDS A NEW ECONOMIC BILL

Héctor Silva

Meeting - Breakfast

September 16, 2009

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

2010 PROPOSED ECONOMIC BILL

• General Economic Politic Criteria

• Disbursement Budget

• Income Law

• Sundry modifications for various tax laws- New tax to fight poverty- Income tax law- Cash deposit tax law- Excise tax- Federal tax code

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

MACRO-ECONOMICS

ITEM

GDP

Inflation

CETES rate

Exchange Rate (Dlls.)

Oil (Dlls./Barrel)

2009

-6.8%

4.3%

5.4%

13.6

51.0

2010

3%

5.3%

4.5%

13.8

53.9

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OBJECTIVE OF THE REFORM

- Strength tax collection

-Improve fight against tax evasion

-Simplify the tax system

-Improve Taxpayer’s legal certainty

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

INCOME LAW

• Interest rate 0.75%

• Interest for late payment of taxes 1.5% per month

• Tax incentives

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INCOME TAX LAW

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

• For individuals Tariff increases up to 30% (7.2% from 5 minimum wages)

• For corporationsChange of rate from 28% to 30%

• Maximum rate returns to 28% in 2014 (29% in 2013)

INCOME TAX LAW

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

INCOME TAX LAW

• Tax for groups (tax consolidation). Any deferral will have to be paid in the fifth year (60%). The remaining 40% in four years.

• Applicable since 2004.

•Elimination of tax credit for research and development.

•Donations received (for approved entities) are taxed if receiving revenues for sales and services are in excess of 10%.

•Interests to individuals from the financial sector.

•No other changes affects the maquila operations (TP; SH, Fox credit, etc.)

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

BUSINESS FLAT TAX(IETU)

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

IETU

• No changes in the Law

• Changes made in the Income Law

- No offset of IETU loss against income tax

- New report (full disclosure on monthly and annual calculations.

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

CASH DEPOSIT TAX

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

IETU

• Increase of rate from 2% to 3%

• Decrease of exemption from Ps$20,000 to Ps$15, 000

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

NEW TAX TO FIGHT POVERTY

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

NEW TAX TO FIGHT POVERTY

• Object, any of the following within:

- Alienations- Services- Rent- Import

• Tax rate: 2% (0% for export)

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

NEW TAX TO FIGHT POVERTY

• Similar to VAT

• On cash basis

• No credit if the payment is not made on time

• Minimal exemptions; consequently taxes

- Sale of houses- Book, newspaper, magazines- Food- Medicine- School- Interests, etc.

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

EXICE TAX

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

EXICE TAX

Increase on:

- Alcoholic beverages- Beer (from 25% to 28%)- New on telecommunications (4%)- Tobacco (from 0.80 up to 1.60 in 2012)- Games and lottery (from 20% to 30%)

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

FEDERAL TAX CODE

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

FEDERAL TAX CODE

• The definition of tax domicile includes the domicile of the legal representative.

• Changing of tax domicile would require demonstration of the change of Administration.

• Jointly responsibility to the stockholder’s when tax credits cannot be warranted by the taxpayer.

• Tax receipts can be digitalized.

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©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados.

Héctor Silvahsilva@deloittemx.com+52 (664) 622 7840