ARTICLE 14 B: CASES IN WHICH THERE IS NO ALIENATION IN A MERGER OR CORPORATE SPIN-OFF

For the purposes of the provisions of article 14, section IX, of this Code (CFF: Art. 14), it will be considered that there is no alienation in the following cases:

The requirement referred to in this subsection will not be enforceable, when the company that subsists is liquidated before a year after the date on which the merger takes effect.

For the purposes of the preceding paragraph, the shares that are considered placed among the large public investors will not be computed in accordance with the rules issued for this purpose by the Service Tax Administration (Servicio de Administración Tributaria) and provided that such actions have been effectively offered and placed among the general public investor. Nor are shares that have been repurchased by the issuer considered placed among the large public investors.

In the case of companies other than by shares, the value of the social parties will be considered instead of the voting shares, in which case, 51% of the social parties must represent at least 51% of the votes that correspond to the total contributions.

During the period referred to in this subsection, the shareholders of at least 51% of the voting shares or the partners of at least 51% of the aforementioned corporate parties, as applicable, of the parent company , must maintain the same proportion in the capital of the spun-off company that they had in the original before the spin-off, as well as the original company, when it exists.

When within a five-year period following the merger or corporate spin-off, a merger is intended, authorization must be requested from the tax authorities prior to said merger. In this case to verify compliance with the requirements established in this article, taxpayers will be in accordance with the general rules issued by the Service Tax Administration (Servicio de Administración Tributaria).

For the purposes of this article, the requirement of shareholding provided for therein is not breached, when the transfer of ownership of the shares is due to death, settlement, judicial adjudication or donation, provided that in the latter case they met the requirements established in section XXIII of article 93 of the Income Tax Law (Ley del Impuesto sobre la Renta).

The provisions of this article shall not apply when, under the terms of the Income Tax Law (Ley del Impuesto sobre la Renta), the capital reduction treatment is granted.

In cases where the merger or corporate spin-off are part of a corporate restructuring, the requirements established for restructuring in the Income Tax Law (Ley del Impuesto sobre la Renta) must also be met.

In cases of merger or corporate spin-off, when the parent company disappears, the company that subsists, the one that arises on the occasion of the merger or the spin-off that is designated, must, without prejudice to the provisions of this article, pay the taxes corresponding or, where appropriate, shall have the right to request the refund or to compensate the balances in favor of the company that disappears, provided that the requirements established in the tax provisions are met.

In the declarations of the fiscal year corresponding to the merged company or the parent company that disappear, all cumulative income and authorized deductions must be considered; the total amount of acts or activities taxed and exempt and the accreditations; the value of all its assets or debts, as appropriate, that it had from the beginning of the year and until the day of its disappearance. In this case, the one that corresponds to the merger or the spin-off will be considered as the end date of the fiscal year.

The provisions of this article shall only be applied in the case of merger or corporate spin-offs? resident in the national territory and provided that the company or companies that arise as a result of said merger or spin-off are also resident in the national territory.