Energy Reform Chapter II: Income By The State From Activities Of Exploration And Extraction Of Hydrocarbons (Upstream)
The State shall receive income from activities in connection with the Exploration and Extraction of Hydrocarbons, including general concepts: (i) fees and (ii) taxes, and (iii) specific: Sign-in bonus, contractual fee, Royalties, specific Considerations set forth in the Contracts, and state Dividend by PEMEX and its EPS.
We believe a classification that provides a practical understanding of such income has been proposed by Carlos Giuliani Fonrouge1 within the scope of Financial Law, which classifies income in tax-based and non-tax-based, depending on the legal tax income of their origin or source.
Tax-based income are those that arise from the legal-tax relationship, that is, taxpayers' obligation to contribute part of their income, profits or yielding to be contributed towards public expense; whereas non-tax based income are those that have another origin or source, they are not generated from the above-mentioned legal-tax relationship.
The regime of tax-based and non-tax-based income for activities in connection with the Exploration and Extraction of Hydrocarbons is established mainly by the LISH, the LPEMEX, and their corresponding regulations.
General scheme of tax-based income and non-tax-based income from activities related with the Exploration and Extraction of Hydrocarbons
Contributions on energy matter arising from activities related to Exploration and Extraction of Hydrocarbons.
The following five are contributions on energy matters arising from activities related to Hydrocarbons:
Fee for shared profits, Fee for the extraction of Hydrocarbons and Fee for exploration of Hydrocarbons), Tax on the activities of Exploration and Extraction of Hydrocarbons. Income tax for profits arising for Contractors and Assignees. The three above-mentioned Fees (Fee for shared profits, Fee for the extraction of Hydrocarbons and Fee for exploration of Hydrocarbons), are contributions especially designed for Assignees, which are regulated in the LISH.
Let us be reminded that the only subject that can act as Assignees2 are PEMEX or any other EPE that is holder of an Assignment and operator of an Assignment Area; understanding as Assignment the administrative act by which the Federal Executive grants the right to carry on with Exploration and Extraction activities of Hydrocarbons in the Assignment Area, exclusively to an Assignee, for a given duration.
Taxes for Exploration and Extraction activities of Hydrocarbons are a...
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