Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. New Information Requirements on Mexican Tax Return February 18, 2009

2 New Information Requirements on Mexican Tax Return Detailed information on domestic and foreign related party transactions. –Balance Sheet Intercompany accounts receivables and payables –P&L Sales, purchases, expenses, interest income and expenses, currency gains and losses –Transfer pricing methodology applied on certain transactions –Customs valuation

3 New Information Requirements on Mexican Tax Return IETU calculation - Detailed information on –Taxable revenues, –Authorized Deductions –IETU credits

4 New Information Requirements on Mexican Tax Return Detailed information for Maquiladoras –Calculation of IETU credit for Maquiladoras: IETU benefit not applicable to non-maquila operations New form requires detailed breakdown between taxable revenues and deductions related to maquiladora and non- maquiladora activities –Definition of maquila and non-maquila activities not clear. Transfer pricing methodology applied Value of the M&E owned by the foreign related party

5 New Information Requirements on Mexican Tax Return Detailed information of import/export operations –Tangible and intangible property What type of intangibles should be reported? –All customs regimes should be reported: Temporary, definitive, bonded warehouse, fiscal deposit, etc. –Customs values declared on related party transactions Transfer pricing methodology applied –Customs values declared on non-related party transactions –VAT and customs duty payments

6 Issues and concerns Administrative burden –Filing date: March 31, –Some of this information is already filed in other forms. –Mexican customs already has information about import/export transaction –Tax audit report (Dictamen Fiscal) will also include significant changes What are they looking for? –Customs valuation and transfer pricing regulations are different by definition. –Potential audit and information request

7 Income Tax – Incentives - Mexico “Internal” criteria issued by SAT: Tax incentives are taxable for income tax purposes. –Legal arguments to support that certain tax incentives are not taxable. Legal uncertainty - Will SAT engage in a general audit program? –Potential exposure? In principle 28% of the amount of the tax incentive plus surcharges and penalties. 10% profit sharing, if applicable. –What to do? Evaluate potential risks, analyze arguments to defend current position, internal communications, risk minimization alternatives, legal defense, Lobbying

8 Income Tax – Incentives - Mexico Changes on R&D credit program: –Current program – income tax credit of 30% of R&D investment in qualifying projects. –New program: Funds provided directly to the company based on qualifying projects. 3 new funds created by the government: –INNOVAPYME (up to 35% of R&D investment or 18 mill pesos per company), –INNOVATEC (up to 21 million pesos per company) –PROINNOVA (up to 22% of R&D investment or 36 mill pesos per company).

Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. For questions: Mr. Ernesto Ocampo Mr. Leobardo Tenorio