©2010 Galaz, Yamazaki, Ruiz Urquiza, S.C. “HIGHLIGHTS BEFORE FILING THE MEXICAN ANNUAL TAX RETURN” Héctor Silva Meeting - Breakfast March 17, 2010

©2010 Galaz, Yamazaki, Ruiz Urquiza, S.C. Computation of SH and tax credit requires the following information from the US. -Machinery of equipment.- Value and acquisition date. -Inventory.- Monthly balances of inventories kept in México. 2 COMPUTATION OF S. H. AND TAX CREDIT

©2010 Galaz, Yamazaki, Ruiz Urquiza, S.C. 3 S. H. NOTIFICATION -File a notice with the Mexico City tax authorities. -Pending to confirm if the electronic return is going to be mandatory; this will include companies electing the transfer pricing option.

©2010 Galaz, Yamazaki, Ruiz Urquiza, S.C. INFORMATION FOR IMPORT/EXPORT OPERATIONS 4 -Since 2008 this information is requested in the annual tax return. Necessary to obtain official customs database ("glosa" from SAT) to compare with own records is not mandatory to report in the annual tax return is mandatory for those filing an tax audit report.

©2010 Galaz, Yamazaki, Ruiz Urquiza, S.C. OFFSETTING OF INCOME TAX VS. FLAT TAX -During the year estimated income tax payments can be credited against monthly Flat Tax. -At year end, estimated income tax payment is offset (compensation) vs. Flat Tax. -Compensation notice must be filed within 5-18 days (upon the letter of the tax ID number). 5

©2010 Galaz, Yamazaki, Ruiz Urquiza, S.C. INTERCOMPANY ACCOUNT BALANCE Intercompay balances in excess of a reasonable period day may impact tax calculations. A/P.-More likely, will require a transfer pricing adjustment to report a reasonable mark up. Thin capitalization, when intercompany debt exceeds 3/1 equity, exchange losses, that are deemed as interest, may be limited for deduction. A/R.-May require a transfer pricing adjustment. May be considered as a deemed dividend for US tax purposes (956 IRS tax code). 5

©2010 Galaz, Yamazaki, Ruiz Urquiza, S.C. Héctor Silva +52 (664)