Reinvestment of Shares
Reinvestment of Profits
Pursuant to Article 10 of the Mexican Income Tax Law, income from dividends reinvested within thirty (30) days of their distribution is deemed realized in the year in which the capital contribution is refunded or the issuer is liquidated. Accordingly, for the purposes of Mexican accounting and tax rules, the subscription of the shares to be delivered to the shareholders on the Payment Date, will be deemed to be a reinvested dividend immediately upon its distribution, will not be subject to the Mexican withholding tax and will not be deemed realized until such time as we refund the capital contributions in connection with a decrease in our share capital pursuant to Article 78 of the Mexican Income Tax Law, or until our Company is liquidated.
No Decrease in Our Net Earnings Account
Because the dividend, with respect to shareholders who elect to receive the dividend in Series L shares, will be deemed to be reinvested immediately upon distribution of such dividend (i.e., within thirty (30) days of its distribution), we anticipate that such dividend will not result in a decrease in our net earnings account pursuant to Article 77 of the Mexican Income Tax Law.
No Increase in Our Contributed Capital Account
Pursuant to Article 78 of the Mexican Income Tax Law, the dividends reinvested within thirty (30) days of their distribution will not give rise to an increase in our contributed capital account.
Acquisition Costs
Pursuant to Article 23 of the Mexican Income Tax Law, the acquisition of shares through the reinvestment of dividends or profits within thirty (30) days of their distribution carries no acquisition-related costs.
U.S. Taxation
The following is a summary of certain U.S. federal income tax consequences of the receipt of the dividend to a holder of shares or ADSs that is a citizen or resident of the United States of America, a corporation (or other entity taxable as a corporation) organized under the laws of the United States of America or any state thereof, or otherwise subject to U.S. federal income taxation on a net income basis with respect to the shares or ADSs (a “U.S. holder”). This summary is subject to the limitations described in the Company’s Form 20-F under the heading “Taxation of Shares and ADSs—U.S. Federal Income Tax Considerations” and is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, each as of the date hereof, and does not purport to be a comprehensive description of all of the tax consequences of receiving the dividend.
This summary is not exhaustive, and does not describe all of the tax considerations that may be relevant to a U.S. holder’s decision to elect to receive cash, additional shares or ADSs, or a combination thereof. The consequences to any particular U.S. holder will depend on the personal circumstances of such holder. Each U.S. holder is advised to consult its own tax advisors regarding the tax consequences of the dividend to it, including the consequences under U.S. federal, state, local or foreign tax laws.
Very generally, regardless of a U.S. holder’s election to receive cash, additional shares or ADSs, or a combination thereof, a U.S. holder that receives the dividend will be treated as having received a taxable distribution with the consequences described in our Form 20-F under “Taxation of Shares and ADSs—U.S. Federal Income Tax Considerations—Taxation of Distributions.”
In the case of a U.S. holder that receives the dividend in Mexican pesos in whole or in part (including any paid in lieu of fractional shares), the U.S. holder generally will recognize dividend income as to such portion equal to the gross amount of Mexican pesos we pay. In general, the gross amount of any dividend will be includible in the gross income of a U.S. holder as ordinary income on the day on which it is received by the U.S. holder, in the case of shares, or by the depositary, in the case of ADSs. The dividend will be paid in pesos and will be includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date that it is received by the U.S. holder, in the case of shares, or by the depositary, in the
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