2002 FISCAL AMENDMENTS

CONTENTS

2002 ECONOMICAL PERSPECTIVES ................................................................................................... 6

Gross Domestic Product (PIB) ................................................................................................................... 8

Inflation ...................................................................................................................................................... 9

Rate of Exchange ........................................................................................................................................ 9

Interest Rate ................................................................................................................................................ 9

Oil income ................................................................................................................................................... 9

EXECUTIVE SUMMARY OF FISCAL AMENDMENTS FOR 2002

IVA (IVA) ................................................................................................................................................. 11

Tax on the of sale of luxury and commodity services ............................................................................... 11

Powers to federal entities ........................................................................................................................... 11

ISR (ISR) (INCOME TAX) ....................................................................................................................... 12

Substitute tax of credit to salary ................................................................................................................. 13

FEDERAL REVENUE FOR 2002 FISCAL YEAR

General remarks ......................................................................................................................................... 14

Federal revenue .......................................................................................................................................... 15

Extension for payment of fiscal credits ...................................................................................................... 15

Cancellation of fiscal credits ...................................................................................................................... 15

Fiscal incentives ......................................................................................................................................... 15

IVA (VALUE ADDED TAX) .................................................................................................................. 16

Power granted to the federal entities to establish tax on natural persons .................................................. 19

Power of granted to federal entities to establish tax on sales and services ................................................ 20

Tax on the sale of commodities and luxury services ................................................................................. 20

NEW INCOME TAX LAW .......................................................................................... 24

TITLE I GENERAL PROVISIONS

Permanent Establishment .......................................................................................................................... 24

System for the “maquila” industry ............................................................................................................ 25

International treaties ................................................................................................................................. 25

Transfer of property by merger or split .................................................................................................... 26

Creditable tax ............................................................................................................................................ 26

Profit-Sharing associations ....................................................................................................................... 26

Definition .................................................................................................................................................. 26

TITLE II CORPORATIONS

Tax rate ..................................................................................................................................................... 27

Settlement in payment .............................................................................................................................. 27

Distribution of dividends .......................................................................................................................... 27

Capital reduction ....................................................................................................................................... 29

Settlement (Liquidation) .......................................................................................................................... 30

Provisional payments................................................................................................................................. 30

Adjustment from inflation ......................................................................................................................... 31

Cumulative income .................................................................................................................................... 31

Gain on sale of shares ................................................................................................................................ 32

Corporate re-structuring ............................................................................................................................ 33

Deductions

IMSS dues for shares ................................................................................................................................ 34

Interest and annual adjustments for inflation ............................................................................................ 34

Deduction Requirements

General requirements ................................................................................................................................ 34

Payments made by checks ......................................................................................................................... 34

One-time deductions ................................................................................................................................. 35

Alcoholic Beverages ................................................................................................................................. 35

Interest ...................................................................................................................................................... 35

Payments for natural persons and corporate entities simplified system .................................................. 35

Social welfare benefits .............................................................................................................................. 36

Irrecoverable credits .................................................................................................................................. 36

Wages and salaries .................................................................................................................................... 37

Non-deductible expenses

Travel expenses ........................................................................................................................................ 37

Automobile rentals .................................................................................................................................... 37

PTU .......................................................................................................................................................... 37

Derivative financial transactions ............................................................................................................... 38

Dining in restaurants ................................................................................................................................. 38

Reserve for pension and retirement funds ................................................................................................ 38

Contributions to training, investigation and Technology funds ............................................................... 39

Investments

Immediate deduction ................................................................................................................................ 39

Automobiles ............................................................................................................................................. 40

Applicable rates ........................................................................................................................................ 40

Losses resulting from Acts of God or force majeure ................................................................................ 40

Obligations of corporate entities

Foreign affiliates ....................................................................................................................................... 41

Other deductions ....................................................................................................................................... 41

Financial system

Yields on inversions .................................................................................................................................. 42

Credit institutions ...................................................................................................................................... 42

Insurance institutions ................................................................................................................................ 43

Fiscal consolidation .................................................................................................................................. 43

New simplified system ............................................................................................................................. 44

Taxpayers of the system ........................................................................................................................... 45

Optional system ........................................................................................................................................ 46

Obligations ............................................................................................................................................... 46

Provisional payments ................................................................................................................................ 47

Annual tax ................................................................................................................................................ 47

Members of coordinates .......................................................................................................................... 48

Facilities for land transportation ............................................................................................................... 48

Termination of the previous simplifies system ........................................................................................ 49

TITLE III NON-PROFIT CORPORATE ENTITIES ............................................................. 50

Tax returns ................................................................................................................................................ 51

Mutual funds ............................................................................................................................................. 51

TITLE IV ............................................................................................................................................. 52

General provisions .................................................................................................................................... 52

Investments in tax heavens ....................................................................................................................... 53

Presumed income ...................................................................................................................................... 53

Exempt income

Indemnification of risks and illness .......................................................................................................... 53

Social welfare ........................................................................................................................................... 53

Saving funds ............................................................................................................................................. 54

Other payments from labor relation ......................................................................................................... 54

Sale of homes ........................................................................................................................................... 54

Interest ..................................................................................................................................................... 54

Indemnity for insurances .......................................................................................................................... 55

Donations .................................................................................................................................................. 55

Sale of stock .............................................................................................................................................. 55

Agriculture, livestock, forestry and fishing activities ............................................................................... 56

Copyrights ................................................................................................................................................. 56

Sale by settlement in payments ................................................................................................................. 56

Business or professional activities ............................................................................................................ 57

Tax return-exempt income ........................................................................................................................ 57

Chapter I Wages and Salaries

Income in services ............................................................................................................................. 57

Payment of withholdings ................................................................................................................... 58

Calculation procedure and tariffs ...................................................................................................... 58

Workers obligations .......................................................................................................................... 59

Employers obligations ....................................................................................................................... 59

Credit to salary ................................................................................................................................... 59

Chapter II Business and professional activities

Income ................................................................................................................................................ 60

Time for accumulating income .......................................................................................................... 60

Deductions ......................................................................................................................................... 61

Investments ........................................................................................................................................ 61

Requirements for the deductions ....................................................................................................... 62

Provisional payments ........................................................................................................................ 62

Adjustment to provisional payments ................................................................................................. 63

Fiscal losses ...................................................................................................................................... 63

Calculation of the annual tax ............................................................................................................. 64

Crediting of ISR against IMPAC ...................................................................................................... 64

Obligationa ....................................................................................................................................... 64

Intermediate system

Subjects ............................................................................................................................................. 65

Obligation ........................................................................................................................................ 65

Investments ....................................................................................................................................... 66

Small taxpayer system

Subjects.............................................................................................................................................. 66

Rate .................................................................................................................................................... 66

Obligations ....................................................................................................................................... 66

Aspects to be considered in regard to the system as the result of the amendment ............................ 67

Chapter III Income from lease

General Aspects ................................................................................................................................ 67

Income ............................................................................................................................................... 67

Deductions ........................................................................................................................................ 68

Provisional payments ........................................................................................................................ 68

Informative return ............................................................................................................................. 68

Chapter IV Sale of Commodities

General Aspects ................................................................................................................................. 69

Fiscal cost of shares of mutual funds ................................................................................................. 69

Deductible losses ................................................................................................................................ 69

Informative return of notaries or brokers ............................................................................................ 69

Chapter V Acquisition of properties

General Aspects ................................................................................................................................. 70

Chapter VI Interest

General Aspects ................................................................................................................................. 70

Concept of Interest ............................................................................................................................ 70

Accrual .............................................................................................................................................. 70

Loss in the inflationary adjustment ................................................................................................... 71

Interest paid by insurance companies ................................................................................................ 71

Provisional payments on interest ....................................................................................................... 72

Obligations ........................................................................................................................................ 73

Chapter VII Income from premiums

Withholding ....................................................................................................................................... 74

Payer obligations ............................................................................................................................... 75

Chapter VIII Income from dividends.

Acumulation ..................................................................................................................................... 75

Crediting ............................................................................................................................................ 75

Constructive dividends ...................................................................................................................... 76

Chapter IX Other income

General aspects ................................................................................................................................. 76

Interest .............................................................................................................................................. 76

Estimate of income ........................................................................................................................... 76

Income of insurance companies ......................................................................................................... 76

Income from royalties ........................................................................................................................ 76

Income from retirement plans ............................................................................................................ 76

Informative tax return ........................................................................................................................ 77

Derivative financial transactions ....................................................................................................... 77

Chapter X Requirements for Deductions

Non-deductible expenses .................................................................................................................. 78

Automobiles ..................................................................................................................................... 78

Salaries, commissions and fees ........................................................................................................ 78

Consumption at bars and restaurants ................................................................................................ 78

Chapter XI Annual Return

Filing date ......................................................................................................................................... 78

Personal deductions .......................................................................................................................... 78

Mortgage interest .............................................................................................................................. 78

Voluntary contributions .................................................................................................................... 80

Insurance premiums .......................................................................................................................... 80

Calculation of the annual tax ............................................................................................................ 80

TITLE V FOREIGN RESIDENTS WITH INCOME DERIVED FROM A SOURCE

OF WEALTH LOCATED IN NATIONAL TERRITORY

Parties subject to the tax ........................................................................................................................... 81

Income from fees ...................................................................................................................................... 81

Payments to members of the board, examiners, etc. ................................................................................ 82

Income from the lease of real properties .................................................................................................. 82

Income from the lease of personal properties .......................................................................................... 82

Time-shared tourist service agreements ................................................................................................... 82

Income from the sale of real properties .................................................................................................... 82

Income from the sale of shares ................................................................................................................. 82

Restructuring of companies that form part of the same group ................................................................ 83

Ingresos por operaciones de sustitución de deuda pública por capital .................................................... 84

Income from derivative financial transactions payable in cash ................................................................ 84

Income from dividends............................................................................................................................. 84

Income from interest ................................................................................................................................ 84

Royalties ................................................................................................................................................... 85

Income from construction services .......................................................................................................... 86

Premiums ................................................................................................................................................. 86

Income of artists and athletes .................................................................................................................... 86

TITLE VI TERRITORIES WITH PREFERENTIAL FISCAL SYSTEMS AND

MULTINATIONAL COMPANIES

Territories with preferential fiscal systems ............................................................................................... 86

Multinational companies .......................................................................................................................... 88

TAX THAT SUBSTITUTES CREDIT TO SALARY

Parties subject to payment ......................................................................................................................... 88

Rate .......................................................................................................................................................... 89

Annual tax ................................................................................................................................................. 89

Provisional payments ................................................................................................................................ 89

Exemption of the tax ................................................................................................................................. 89

Concept of a single corporate entity ......................................................................................................... 90

LAW OF THE SPECIAL TAX ON PRODUCTION AND SERVICES

New activities taxed ................................................................................................................................. 91

Levying of the tax ..................................................................................................................................... 91

Crediting ................................................................................................................................................... 91

General Rules ............................................................................................................................................ 92

Exports ..................................................................................................................................................... 92

Alcoholic beverages ................................................................................................................................. 92

Soft drinks and hydrating beverages

Parties subject to the tax ........................................................................................................................... 93

Exempt activities ...................................................................................................................................... 93

Exempt inventories .................................................................................................................................. 93