SPANISH VERSION

Tax Regime 2007

Financial Derivatives Transactions

Profits/ Derivatives Transaction	Individual Stocks (Local and Foreign) Physical Delivery	Individual Stocks (Local and Foreign) Cash Settlement	Mexican Stock Exchange Index IPC Cash Settlement	Government debt Securities, Interest Rates and Consumer Price Index	Exchange Rate
Residents in Mexico
Individuals	Without Withholding. (Art 109 frac XXVI). Non accumulable.	Withholding of 25% on the monthly net gain in transactions with the same institution. Always accumulable.	Without Withholding. (Art. 134 LISR Regulation). Non accumulable.	Withholding of 25% on the monthly net gain in transactions with the same institution. (Art. 171) Always accumulable. If it is settled by giving the security, the party who receives it must withhold 0.5% on capital, unless it is a tax-exempt title.	Withholding of 25% on the monthly net gain in transactions with the same institution.  (Art. 171) Always accumulable.
Corporations	Without Withholding. Always accumulable.	Without Withholding. Always accumulable.	Without Withholding. Always accumulable.	Without Withholding. Always accumulable.	Without Withholding. Always accumulable

Foreigners
Countries with a treaty to avoid the dual taxation.	Without Withholding. (Arts. 190, 109 frac XXVI and 264 LISR Regulation).	Withholding of 25% on the gain in the transaction (Art. 192 LISR Regulation), or 29 % on the monthly net gain in transactions with the same institution in accordance with the tariff stipulated in (Transit. for Art. 177 LISR Regulation), unless something else is indicated in the treaty.(2) Verify in the treaty the withholding tax applicable to the beneficiary. A table is attached with a summary of all the withholdings applicable to countries with which a treaty has been celebrated.(4)	Without Withholding (3).	Without  withholding on TIIE or Government debt Instruments,  in a market recognized by MexDer (Art.199 LISR.(6) Withholding of 4.9% for credit instrument interests (Art. 195 fr. II and 199). Withholding of 4.9% to foreign banks (Transit. for Art. 195 fr. I,a). Withholding of 10% to Financing Entities, Pensions and Retirement Funds and Foreign Investment Funds with registry before the Ministry of Finance and Public Credit (Art. 195 fr. I,a), unless something else is indicated in the treaty.(5)	Without Withholding.
Countries with NO Treaty	Without Withholding. (Arts. 190, 109 frac XXVI LISR and Art 264 LISR Regulation).	Withholding of 25% on the gain in the operation (Art. 192 LISR), or 29%on the monthly net gain in transactions with the same institution in accordance with the tariff stipulated in (Transit. for Art. 177 LISR).	Without Withholding.(3)	Without withholding on TIIE or Government debt Instruments, in a market recognized by MexDer (Art. 199 LISR).(6) Withholding of 10% for credit instrument interests (Art. 195 fr. l, b).  Withholding of 10% to Financing Entities, Pensions and Retirement  Funds and Foreign Investment Funds with registry before the Ministry of Finance and Public Credit (Art. 195 fr. I, a).(5) Withholding of 10.0% to Individuals and Corporations. (Art. 195 fr. I, c).	Without Withholding.
Tax Havens	Without Withholding. (Arts. 190, 109 frac XXVI LISR and Art 264 LISR Regulation).	Withholding of 40% on the gross quantity to be paid abroad. (Arts 204 and 205).	Without Withholding (3).	Without withholding on TIIE or Government debt Instruments, in a market recognized by MexDer (Art. 199 LISR).(6) Minimum Withholding of 10.0% to Financing Entities, Pensions and Retirement Funds and Foreign Investment Funds with registry before the Ministry of Finance and Public Credit (Art. 195 fr. I, a).(5) Withholding of 40.0% to Individuals and Corporations. (Arts 204 and 205).	Without Withholding.

 ⁽²⁾  Article 192 of the Federal Income Tax Law establishes that the tax must be determined by applying the 25% rate on the gain received by the resident in other country from the financial derivatives transactions, as the case may be, calculated in terms of article 22 of the aforementioned Law.

Said article 192 in its fourth paragraph establishes that residents in other countries  without preference fiscal regime and that have a legal representative in Mexico, will be able to choose the maximum rate to apply on the excess of the inferior limit that establishes the tax schedules contained in article 177 of the same law, on the gain obtained in financial derivatives transactions minus the deductible losses obtained in such transactions, executed during the month by the resident from abroad with the same institution or person.

 
In accordance to the Decree by which various provisions of the Federal Income Tax Law were reformed, added and repealed, published in the Official Gazette of the Federation on December 26, 2005, the tariff schedule contained in article 177 of the Federal Income Tax Law will be as follows, and the maximium rate to apply on the inferior limit corresponds to 28%.

                                                                                                                                          Reform 26-12-2005              

In such Decree of December 26, the "Annual valid provisions of the Federal Income Tax Law" appeared, and article 2 stated that...For the effects of what is established in the Federal Income Tax Law, during the fiscal year of 2006, the following provisions will apply...

lll. For the effects of article 177 of the Federal Income Tax Law, instead of applying the tariffs contained in such precept the following will apply:

                                                                                                                                           Reform 26-12-2005

⁽³⁾  No withholding applicable, because source of wealth in Mexico does not exists as the article 192 of the Federal Income Tax Regulation establishes that only applies withholding to financial derivatives transactions of which the underlying asset consists of individual stocks or securities that represents the property of goods.

 ⁽⁵⁾ Registry of Banks, Financing Entities, Pensions and Retirement Funds and Foreign Investment Funds are subject to rules issued by the Tax Administration Service.

Rule 3.23.14 of Provision 5 of the Amendments to the Miscellaneous Tax Rules for 2005 is not repealed, and its attachments 1 and 7, published on October 12,2005 on the Official Gazette of the Federation state that there will be no withholding in TIIE and Government debt Instruments, in recognized markets by MexDer, need not accredit their identity for global accounts or analogous and includes a clause excluding tax residents of Mexico with restriction to residents from countries with a Treaty.

 ⁽⁴⁾  Examples of withholding rates applicable to persons in countries with which a Treaty has been made to avoid dual taxation

Country	Interests subject to withholding Rate % on the gross interests amount	Withholding exempted interests
Canada	General: 15%	Governments For credits of exportation development banking
Korea	Banks: 5% Other cases: 15 %	Governments Central Bank Development banking Pension Funds
Spain	Banks: 10% Other cases: 15%	Governments For credits of exportation development banking
United States	Banks and Insurance Institutions: 4.9% Securities of recognized markets by MexDer: 4.9% Interests paid by banks: 10% Other cases: 15%	Governments Pension Funds For credits of exportation development banking
France	General: 15%	Governments For credits of exportation development banking
Italy	General: 15%	Governments For credits of exportation development banking