The Mexican Tax Authorities (SAT) published Frequently Asked Questions (FAQ) regarding the Repatriation Decree described in our Alert 4 by means of which certain important topics and open issues in connection with the interpretation of the Decree are clarified. Following you will find a description of said FAQs:

1. The Decree establishes a mechanism for the computation of the tax due as follows. First, the amount that will be repatriated should be identified. Second, the funds that will be repatriated should be converted to Mexican pesos by applying the exchange rate corresponding to the date on which the 8% tax is paid. This amount may be reduced in case taxes have been already paid or if it includes income that should not be subject to taxation. Finally, the resulting amount must be multiplied by the 8% rate established by the Decree.

2. It is possible to repatriate only part of the investment maintained abroad, in which case, the procedure for the tax computation is the same as if the investment were to be returned in full.

3. If the total investment is not to be repatriated, only gains or returns of investment may be returned to Mexico. However, regular tax at the general rate (30% or 35%) should be paid in connection with the funds that will be maintained abroad.

4. Revenues derived from investments that qualify as deductible items may be subject to the Program, provided that these proceeds have not been deducted by a Mexican resident or a foreign resident with a PE in Mexico.

5. It is possible to return capital and funds maintained abroad in joint bank accounts directly into Mexican joint accounts provided that the taxpayer applying the Decree has control over the corresponding bank account.

6. When individuals invest in shares issued by Mexican legal entities, no need exists to use such capital in the specific types of investments described in the Program.

7. Repatriated capital may be invested in United Mexican State Bonds (UMS).

8. Real Estate Investments maintained abroad.

a. If a taxpayer transfers real estate located abroad during the previous five or ten fiscal years (depending on the specific type of statute of limitation), the total amount received should be returned in order to benefit from the Decree. b. Revenues derived from granting the use or enjoyment of such property abroad (rental income) may be repatriated without having to sell the property.

9. Funds maintained abroad invested in shares.

a. It is possible to repatriate only the dividends and yields derived from this type of investment without having to sell the shares provided that income tax on the principal has already been paid. b. If the shares were transferred during the previous ten or five fiscal years, the total amount of capital gains and dividends should be repatriated.

10. Regarding investments maintained abroad for more than five or ten years prior to the application of the Decree, (depending on the type of statue of limitation), the tax due on the amount of funds repatriated should be computed by considering the investment balance as of January 1st 2012 or January 1st 2007, that is, the initial date of investment within the statute of limitation period of either five or ten years prior to 2017 -i.e. the year capital is returned.

11. The investing requirements established in the Decree will not be breached in cases where the amount of repatriated funds decreases due to market variations.

12. Income tax on interest and currency gains derived from investments maintained abroad and returned to Mexico under the Decree may not be computed by using the alternative factor published by the SAT under the Regulations to the Income Tax Law.

13. Individuals may invest in domestic life insurance policies with an investment component provided that the covered risk is the insured's life.

14. Inheritance income not properly and timely declared as tax-exempt, which consequently should be considered as accruable income, may be regularized through the application of the 8% tax under the Decree.

Finally, please bear in mind that the deadline to apply the Repatriation Decree so as to be entitled to its benefits is 19 July 2017. To the best of our knowledge as of the date of this Alert, there will be no extension.