For that part of monthly income included between 1,000.01 pesos and 1,500 pesos. 1.50 per cent. For that part of monthly income included between 1,500.01 pesos and 2,000 pesos, 1.75 per cent. For that part of monthly income in excess of 2,000 pesos, 2 per cent. B. For persons included in Section III of Article 1: From one centavo to 1,200 pesos per semester, exempt. For that part of net semi-annual income included between 1,200.01 pesos and 3,000.00 pesos, 1 per cent. For that part of net semi-annual income included between 3,000.01 pesos and 6,000.00 pesos, 1.25 per cent. For that part of net semi-annual income included between 6,000.01 pesos and 9,000.00 pesos, 1.50 per cent. For that part of net semi-annual income included between 9,000.01 pesos and 12,000.00 pesos, 1.75 per cent. For that part of net semi-annual income in excess of 12,000.00 pesos, 2 per cent. Art. 5.-Retaining fees, commissions, participations, bonuses and special remunerations received by persons who are not employees, workmen or clerks, shall not be considered as included in the tax on wages and salaries, but in the tax on emoluments and fees. Art. 6.—Public officials and employees, as well as private employees, who hold more than one position, shall pay the tax on the total of their salaries. CHAPTER II TAX ON PROFITS OF COMPANIES AND ORGANIZATIONS Art. 7.-The following are subject to the tax on profits of companies and organizations whatever may be the nature of their business. I-National corporations, collective and silent partnerships and co-operative societies. V. Private individuals and organizations engaged in commerce. VI. Any other individuals, who, separately or collectively, have or exploit, with their own or other capital, any business-industrial, mining, transportation, banking, amusement, educational, or any other in which capital is employed, excepting only agricultural enterprises belonging to private individuals. Art. 8.-Mexican companies, temporary or profit sharing enterprises and organizations, shall pay the tax on their total net profits, whether obtained in or out of the Republic. Art. 9.-Foreign companies and organizations legally established in the Republic, shall be subject to the tax on the net profits obtained therein. When a foreign company operates in the Republic without having complied with the legal requisites, the tax shall be levied and paid, jointly and severally by the person or persons, who in fact have conducted the business of the said company in the Republic. Art. 10. The profits affected by this law are those which are realized during the year, in cash or in kind, and the tax is imposed by taking into account, not the time when the profit was earned but when it was actually received. Art. 11.-For the effects of this chapter the following do not constitute profits: I.-Gifts between living persons. II. Legacies and inheritances. III.-Profits derived from gifts of fortune wagers and lotteries authorized by law; raffles permitted by law and discovery of treasure. IV. Increase in the value of personal and real property, whatever its cause; excepting when such increase proceeds from the re-investment of the profits in the same business; but these last increments shall not cause a tax greater than that which corresponds to the re-invested profits. When the normal profits of a company or an organization, as mentioned in this chapter, proceed from the increase in the value of its property, as in the case of speculators, merchants, or any other person or concern, which profits by the increase in the value of its capital, such increments do not constitute an exception; but these same increments are not subject to the tax until they are realized upon. Nevertheless all increase in value shall be considered as profit when it figures as an element in the profit and loss account. V. The payments made by the insured, to insurance companies as premiums; and those made by the companies to the insured on account of maturing policies, annuities, loans, cancellation of contracts and dividends on premiums; but the net earnings which the insurance companies realize in their business, once the legal reserve of their policies has been created, shall be considered as profits. VI. The acquisition of patents of inventions, trade marks and artistic and literary copyrights. Art. 12.-The following are exempt from payment of the tax:— I. Companies and organizations whose net profits do not exceed 2,400 pesos in one year and only for the year in which this may be the case. II. III. Agricultural enterprises belonging to private individuals. Charitable institutions legally established. Associations, whatever their form, established for scientific, literary, artistic, political, religious, sporting and mutual aid purposes, provided their profits, if any, are not distributed among private individuals. V.-National Chambers of Commerce, Industrial Chambers and their confedera tions. VI. Every group, association, or corporation legally constituted without lucrative object. The foregoing Sections do not include in their exemptions the salaries and remunerations paid by said institutions to their employees, physicians, lawyers and other professionals, as such salaries and remunerations are subject to the tax referred to in the preceding chapter of this decree. VII. Enterprises exploited directly and especially by the Federal Government, the States and Municipalities, in respect to such profits as must go into the Federal, local or municipal treasuries. VIII. Cooperative societies for production and consumption which solely distribute their products or sales among their members and do not apportion dividends or quotas among them. Art. 13. To be entitled to the exemptions referred to in the preceding Article it will be necessary to obtain a certificate issued by the Assessment Board, at the request of the interested party, and revised by the Treasury Department, which may refuse same if in its judgment it is not warranted. Such certificate may be revoked if it is later proven that the organization has ceased to be entitled to classification under the specifications of the preceding Article. Art. 14. The net profits shall be calculated, making the deductions authorized by the Regulations of this decree. Art. 15.-When a company or organization is engaged in various activities or has various establishments or branches, the tax shall be levied on the net profit obtained from all the establishments, activities or branches belonging to said company or organization. Art. 16.-When one and the same person owns various separate organizations, each of these organizations shall pay its tax separately. Art. 17. The tax shall be levied according to the following: TARIFF From one centavo to 2,400 pesos per year, exempt. cent. For the part of profits included between 2,400.01 pesos and 5,000 pesos, 2 per For the part of profits included between 5,000.01 pesos and 10,000 pesos, 2.25 per cent. For the part of profits included between 10,000.01 pesos and 15,000 pesos, 2.50 per cent. For the part of profits included between 15,000.01 pesos and 20,000 pesos, 2.75 per cent. For the part of profits included between 20,000.01 pesos and 50,000 pesos, 3 per cent. For the part of profits included between 50,000.01 pesos and 100,000 pesos, 3.50 per cent. For the part of profits in excess of 100,000.00 pesos, 4 per cent. Art. 18.-Companies and concerns in a state of bankruptcy which for any reason continue carrying on any business, as also those in liquidation, shall pay the tax on net profits which they actually obtain. Art. 19.-Estates, whether testamentary or intestate, which own any organization affected by this law, shall also pay the tax as stipulated in the foregoing articles on the profits they may obtain. CHAPTER III DECLARATIONS, COLLECTIONS AND MISCELLANEOUS PROVISIONS Art. 20. For the payment of the tax on profits of companies and organizations and the tax on wages, salaries and emoluments, those subject to the first named and those included in Section III of Article 1, shall present declarations at the Tax Collector's Office nearest their domicile, within the time and in the manner which the Regulations of this law may stipulate. The taxpayers, included in the first two Sections of the aforesaid article, shall declare at the Tax Collector's Office the income they received during the month immediately preceding when they hold two or more positions, and provided they receive wages, salaries or emoluments in excess of 200 pesos per month. Art. 21. The assessment of the declarations shall be in charge of an Assessment Board which shall be composed of representatives of the Government and of the taxpayers, and shall be made in accordance with the rules established by the Regulations. Art. 22.-For the payment of the tax on wages, salaries and emoluments, the employers and payers of the persons comprised in Sections I and II of Art. 1, are obliged to discount each month from their employees, laborers or clerks the amount of the tax and to present to the Tax Collector's Office a payroll drawn up in the manner and terms specified in the Regulations to substantiate the payment of the Tax. Art. 23.-The Tax Collector's Office shall exercise vigilance over the payrolls referred to in the preceding Article to see that they contain the enumeration of all taxpayers, showing the amounts subject to payment of the tax, and shall investigate as to what persons or firms have failed to issue and present same, or have presented incorrect statements, in order to apply the prescribed penalties to violators. For this purpose they shall be invested with all the authority conferred upon the Assessment Board and may make such visits of inspection as they deem necessary. Art. 24.-Paymasters and employers, as well as managers of companies, shall be jointly responsible with the taxpayers for the payment of the respective taxes. Art. 25.-The fact of being included in any of the Sections of Art. 12 does not release the interested parties from the obligation to present the declaration referred to in Art. 20; but said declaration will not render them liable to the tax. Persons included in Section II of Art. 2, shall also present declarations, whatever may be their profits, subject to the same exemption. Art. 26.-The Tax Collector's Offices shall be:-The Treasury Department, the Internal Revenue (Timbre) offices and the Federal Tax Collector's offices which may be designated by the Treasury Department. Art. 27.-All public offices and private ones engaged in the administration or exploitation of a public service, must aid the Tax Collector's offices, furnishing the information and data which may be solicited. Art. 28.-The claims which may be made against the decisions of the Assessment Board, shall not suspend the collection proceedings, unless the interested party deposit in the nearest Tax Collector's Office cash to the amount of the sum demanded, when this is less than 5,000 pesos. When it exceeds that amount, the deposit may be made in bonds of the Public Debt and all kinds of securities, bonds, certificates of credit, negotiable documents, or the sum may be guaranteed by a bond sufficient to cover the payment, at the discretion and upon the responsibility of the Tax Collector's Office. Art. 29.-The Treasury department shall fix the remuneration to be given to the members of the Assessment Boards for the performance of their duties. * Art. 30. From the proceeds of the tax on the profits of companies, ten per cent shall be applied to the State and ten per cent to the Municipaltiy where the tax is levied. Art. 31.-All members of the Assessment Board or Revising Board are under strict obligation to observe absolute secrecy as to the declarations of the taxpayers, to whom they shall communicate their decision in sealed envelopes. Art. 32. In all matters not provided for by this decree and its regulations, the collection of the tax shall be subject to the provisions of the Federal Internal Revenue (Timbre) Law and its Regulations. CHAPTER IV VIOLATIONS AND PENALTIES Art. 33.-The following shall be liable to a penalty as violators of this law: and with the respective requisites. III. Those who refuse to present, when requested to do so, documents or account books which must be available in the establishments and which are directly related to the payment of the tax in order to verify the veracity of the declarations. IV. The chiefs of public offices and of private offices engaged in the administration or exploitation of a public service who fail to render within the proper time such information as is requested of them relating directly to the compliance with and execution of this law. V.--Those who declare profits or wages, salaries, emoluments and fees less than they actually are, or make false reports resulting in loss to the Treasury. VI. Those who fail to pay the tax within the allotted periods. VII. Those who keep double sets of books, alter or make false entries in the books or contribute in any other manner to defraud, in whole or in part, in the payment of the tax. VIII. Those who keep the books of business houses, and at the order of their superior officer or employer, alter the accounts or post or carry false entries, or keep double sets of books. IX. Notaries, judges, licensed brokers, and functionaries authorized by the law as officers of record, who authorize contracts of sale or the transfer of a business subject to the payment of the tax upon profits of companies and organizations without previous proof that said tax has been paid up to date. X.-Members of the Assessment or Revising Board who fail to observe the secrecy referred to in Art. 31, or who reveal information declared by the taxpayers, or take advantage of such information in any manner. XI. Those who in any other manner fail to comply with this law and its Regulations. Art. 34. Those to whom the foregoing article refers: I.If they are included in Sections I and III they shall pay the annual tax surcharged 100%. If the party failing to make the declaration is not subject to the tax due to exemption under Art. 12, the penalty shall be a fine of from $10 to $300. II. If they are included in Section II, they shall pay a fine of from 5 pesos to 100 pesos for each violation. III.If they are included in Section IV, they shall pay a fine of from 10 pesos to 500 pesos. IV. If they are included in Section V, they shall pay the tax corresponding to the unreported amounts with a surcharge of 200%. If requested by the Assessment Board to rectify their declarations, and they fail to do so, the surcharge shall be increased by 10%. The above penalties do not apply on the excess over declared profits which the Assessment Board may increase without recourse to revision on the part of the taxpayer. V. If they are included in Section VI, the tax corresponding to each period of payment, shall be paid with a surcharge of 25%, for the first month of delay, 50% for the second, 75% for the third and thereafter successively increasing 25% for each month payment is delayed ; VI.-If they are included in Section VII, a surcharge twenty times the amount of the defrauded payment shall be paid when it is possible to determine the amount, or a fine of from $50 to $500 when the amount cannot be verified, without prejudice to the penalty which the judge may impose for criminal liability incurred. VII. If they are included in Section VIII, they shall pay a fine of from 10 pesos to 300 pesos. VIII. If they are included in Section X of Article 33 they shall pay a fine of from 50 pesos to 500 pesos. IX. If they are included in Sections IX and XI, they shall pay a fine of from 10 pesos to 500 pesos. Art. 35.-Repetition of the offense shall be punished; in the first instance by 25% over and above the amount that is to be paid for the first offense; in the second instance by 50%, etc. Art. 36. The following shall not be subject to the penalties established by the foregoing Article: I. Taxpayers who before the beginning of an investigation present their documents or account books, or present or rectify their declarations. In such case they shall pay the corresponding tax without right of revision. II. Those persons who keep the books of business houses and who rectify the information they may have given, provided that such rectification is made before an investigation is begun. III. The chiefs of offices who, before an investigation is begun, complete or rectify the information they may have rendered. Art. 37. The third part of the prescribed penalties of Art. 34 shall be incurred by those taxpayers comprised in Sections V, VII, IX and XI of Art. 33, if within 90 days from the date on which the violation occurred and without prior denunciation or investigation, the violation is acknowledged before the respective office, and true declaration is presented or the infringed provisions complied with. Art. 38. The taxpayers shall pay the expenses incurred by the Assessment Board in correcting deficiencies in their declarations or in rectifying same. Art. 39. The responsbility for the payment of the tax and fines provided for in this law expires by prescription in five years. Art. 40.-Heirs and legatees of taxpayers, as representatives of the deceased, are liable for the payment of the tax and fines incurred by the deceased to the extent of the value of the property inherited or received as legacy. Art. 41.-If in the course of the judicial settlement of an Estate it is revealed that the deceased in question has incurred any of the responsibilities specified in this Law, the courts, judges and administrative authorities shall refer the matter to the Tax Collector's Office of the place of his residence, in order that it may proceed in accordance with said Law. TRANSITORY This law shall take effect from the first day of next March. The companies and organizations on making their declarations in the coming month of July shall cancel, for this time only, stamps equal to two-thirds of the amount corresponding to the semester. The same shall be done by those persons included in Section III of Article 1 of this law. Therefore I order that it be printed, published, circulated and given due compliance. Given in the Palace of the Executive Federal Power, in Mexico, on the 21st day of the month of February, 1924. (Signed) A. OBREGÓN. |