2- 2. The new law provides for a withholding tax on dividends at rates ranging from 15% to 20%, which is not payable until such time as dividends are distributed. This tax replaces the previous tax on distributable profits (Schedule VII) which was payable whether or not dividends were distributed, unless reinvestment was authorized. The previous tax rate was 15% plus an additional 5% payable at the time of distribution of dividends in certain cases of dividends on bearer shares. This additional 5% tax has been repealed. Dividends paid from profits accumulated prior to January 1, 1965, are subject to the previous tax, at the rate of 15%, except for stock dividends which are exempt. Taxable income. Among the more significant changes in the tax treatment of items entering into the determination of taxable income are the following: 1. Losses incurred after December 31, 1964, can be carried over and offset against income of the succeeding five taxable years. 2. Dividends received by a Mexican company from another Mexican com pany are not includable in the taxable income of the recipient. 3. Bad debt losses are deductible when the statute of limitations for collection has run or when it becomes evident that collection will not be effected. Deductions for bad debt losses are no longer limited to one-tenth of 1% of net revenues, although uncollectible accounts must first be charged against bad debt reserves (previously deducted for tax purposes) established as of December 31, 1964. 4. Gains on sales of fixed assets held for more than 10 years are not taxable, and are only partially taxable if held for more than two years and less than 10 years. 5. Losses on sale or other disposition of fixed assets are not deductible, although such losses can be offset against taxable gains on sales of other fixed assets during the current year or the succeeding five years. 6. Losses arising from mergers (goodwill) or liquidations of companies are not deductible. Previously, amortization of goodwill arising from a merger was permitted at the rate of 5% annually. However, losses arising from mergers or liquidation after December 31, 1964 can be offset against gains of a similar nature or gains from sales of fixed assets during the current year or the succeeding five years. 7. Payments which are conditional on profits are not deductible. 8. Revaluations of fixed assets no longer have any tax effect. However, revaluations previously authorized and on which the related tax previously applicable was paid, continue to have tax effect.