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FISCAL REFORM 2008

FISCAL REFORM 2008. Introduction. The “Development National Plan 2007 – 2012”: Poverty combat reinforcement, Improve access and quality of education and health services, Dignified access to housing facility, Generate employment through major economic growth (tourism).

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FISCAL REFORM 2008

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  1. FISCAL REFORM 2008

  2. Introduction • The “Development National Plan 2007 – 2012”: • Poverty combat reinforcement, • Improve access and quality of education and health services, • Dignified access to housing facility, • Generate employment through major economic growth (tourism). • Social and productive impulse, oriented to reduce regional dissimilarity.

  3. Introduction • This proposition has four sides: • Taxable administration improvement to facilitate fulfillment of obligations and improve efficiency combat in tax evasion gaining that those who have to pay do so (Technological Platform). • Improve efficiency in public expense and account submission of Federation, States and Municipalities. In doing so, people will have assurance that their taxes are appropriately disbursed.

  4. Introduction • This proposition has four sides..… • Reinforce federalism. To endow major faculties resources and better incentives to States and Municipalities. Major strength to different government ordinance which will help attend needs of persons. Financial reporting will be the same for 3 levels of government (federal, state, municipal). • Establish the basis of taxable system that will permit an increase in tax collection by means of flexible and neutral taxable instruments and in respect to investments. • IETU (Flat tax) 17.5%. • IDE (Tax on cash deposits) 2%.

  5. Alternative sources of Income • Generate tax collection of 1.8% of (Gross Internal Product GIP ) in the following three years: • Introduction of Flat Tax (FT). • Tax on cash deposits. • Informality. • Encumber with the “Special tax on Production and Services” the Organization of gambling games, bets and raffles.

  6. FLAT TAX LAW (FT)

  7. FT • CONSIDERATIONS: • Asset tax elimination • Control tax? • Coexistence with Income tax (minimum 4 years) • Cash flow regime. • For the years 2008 and 2009 estimated to generate additional income of 1.3% and 1.8% of GIP (Gross Internal Product) respectively.

  8. FT • TAX PAYERS: Individuals and corporations residents in Mexico and non residents with permanent establishments who realize the following activities: • Commercial and Industrial • Independent services • Leasing of real property • TAXABLE BASIS: Net cash flow of aforementioned activities (collected income les paid authorized paid deductions) • RATE:2008-----16.5%, 2009 ----17 %, 2010-----17.5 %.

  9. FT • EXEMPTIONS: • Federation, States, Municipalities and Public Organizations; Political Parties, Unions, Civil Associations, Civil Corporations with scientific, political, religious and cultural means. • Trading and Industry Chambers, Agriculture, Cattle, Fishing and Forest Groupings and Professional Associations. • Organisms that group cooperative corporations, fund administrations or savings banks, and family parents associations. • Non profit entities authorized by Mexican Tax Authorities to receive deductible donations according Income Tax Law.

  10. FT • AUTHORIZED DEDUCTIONS (PAID): • Inventory purchases • Fixed Asset acquisitions, and land. • Administration, trading, distribution and production expenses. • Local and Federal Contributions • Independent Services • Property leasing • Refunded deposits or clients advance payments • Donations up to 7% from Fiscal Profit or from income in case of individuals • New assets acquired in September-December 07 (Deduct a third part each year) • 5% for 10 years of net tax value of assets owned not included in the preceding paragraph.

  11. FT • NON DEDUCTIBLE DISBURSEMENTS: • Payroll and fringe benefits (tax credit). • Social Security and Housing Fund (tax credit). • Royalties, interests and derivative financial operations paid to related parties. • Income Tax. • Tax on cash deposits. • VAT and FT.

  12. Income effectively collected less: Paid deductions equal: FMCT Taxable Basis times: 17.5% tax rate equal: FMCT for the period less: Income Tax of the period Fiscal Credit(Deductions >Income) Taxable payroll at 17.5% credit Social Security contributions 17.5% credit equal: Tax payable less: FMCT Provisional payments equal: Tax payable (favorable balance)

  13. FISCAL REFORM 2008 TO DO: • Flat Tax and Bank Deposits Tax (BDT) Regulations. • Presidential Decree • Inventory- and land purchased before 2008 • Fiscal Losses as of December 31, 2007 • Immediate deduction (2005 to 2007) • 2001 exit of old simplified region • “Maquiladoras”

  14. TAX ON CASH BANK DEPOSITS

  15. TAX ON CASH / BANK DEPOSITS • New Federal Tax, against informality and Tax Evasion. • Tax Payers: Individuals and corporations , respect to all deposits in cash in domestic or foreign currency received by Financial Institutions. • “Cash deposits” are not: • Electronic and withdrawal bank transfers, securities • Foreign Remittances • Cash deposits from granted credits

  16. TAX ON CASH / BANK DEPOSITS • Tax rate will be 2% • For cash deposits that are more than $25,000.00 , accrued in each month of the period. • The Financial Institutions: • Obligation withhold at the end of the month and pay tax. • Deliver to taxpayer and authorities certificates of tax withheld • Lack of funds not available to withhold will generate fiscal credit.

  17. TAX ON CASH / BANK DEPOSITS • Creditable Tax Against Income Tax ones own or withheld for the same period. • In case of balance in favor a universal compensation should be applied or a tax return requested. • Creditable vs. advance Income Tax Returns payments. • In force starting July 1, 2008.

  18. INCOME TAX LAW

  19. CORPORATIONS WILL INFORM (to the SAT): • AMOUNTS HIGHER THAN $600,000 RECEIVED IN CASH OR IN FOREIGN CURRENCY FOR: • LOANS • CONTRIBUTIONS TO FURTHER INCREASE IN CAPITAL STOCK • CAPITAL STOCK INCREASES

  20. INDIVIDUALS • DECLARE IN ANNUAL TAX RETURN AMOUNTS OF $600,000 received(Before a million) FOR THE FOLLOWING CONCEPTS: • LOANS. • DONATIONS • PRIZES. • IN ADDITION, FISCAL AUTHORITIES, SHOULD BE INFORMED 15 DAYS AFTER THE RECEPTION OF THE PREVIOUS CONCEPTS • NOT TO INFORM LOANS OR DONATIONS IS CONSIDERED AN INCOME OMISSION. • SHARES SOLD THAT EXCEDE 10% OF CAPITAL STOCK IN THE LAST 24 MONTHS ARE TAXABLE.

  21. FEDERATION FISCAL CODE

  22. FINES ATTRIBUTABLE TO THIRD PARTIES HARMFUL ACTIVITIES: • Advise or counsel the partial or total omission of taxes. • Alter books and accounting. • Be accomplice or accessory in any way or form not foreseen on fiscal fines • FINE-PENALTY: From $35,000 to $55,000 • CONSULTANT AGGRAVATION BY IMPROPER PRACTICE: Penalty increase from 10% to 20% without exceeding double collection of fees. • FINES THAT DO NOT PROCEED. When in written opinion it is established improper practices or that this could be contrary to that of the fiscal authorities.

  23. SPECIAL TAX LAW ON PRODUCTION AND SERVICES (STLPS)

  24. S T L P S • 20% RATE ON GAMBLING BETTING GAMES AND RAFFLES. CORPORATIONS DEFINED AS NOT LUCRATIVE ARE EXEMPTED. • FACULTY TO FEDERAL ENTITIES TO ESTABLISH LOCAL STLPS ON CONSUMER GOODS: • GASOLINE, DIESEL, ALCOHOLIC, BEVERAGES, TILLED TABACCO AND SOF DRINKS. • ARTICLE 73 OF THE CONSTITUTION IS AMENDED FOR THESE EFFECTS.

  25. www.gossler.com.mx

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