7- I. GENERAL CHARACTERISTICS 1. Entities subject to tax: The new law establishes two classes of taxpayers, each of which is treated differently for tax purposes: l) business enterprises and 2) individuals. The "Tax on Combined Income of Enterprises" is applicable to the total income of all business entities and individuals that engage in commercial, industrial, agricultural, livestock raising or fishing activities, regardless of the source or type of income; the previous system based on schedules disappears. Also subject to this tax are those economic entities which, although they do not have a specific legal form, engage in such activities. The "Tax on Income of Individuals" taxes the income obtained by individuals from personal compensation or from capital investments, but the nature of the income continues to be the factor which determines the applicable tax rate. Individuals are subject to the "Tax on Combined Income of Individuals" when their taxable income from personal compensa-tion and/or from capital investments exceeds US$12,000 in a calendar year. 2. Tax on dividends paid: The new law establishes a withholding tax on dividends paid, in place of the previous tax on distributable profits (Schedule VII). This new tax is withheld and paid only on the amount actually distributed as dividends to individual stockholders, foreign companies, or agencies or branches of foreign companies. The previous tax on distributable profits was payable by companies for account of their stockholders within three months of the close of the fiscal year, whether or not there was a distribution of dividends, on a taxable profit which normally did not coincide with the book profit nor with that actually distributable. However, for agencies or branches of foreign companies, the tax continues to be payable on distributable profits (the amount re-maining after deducting the regular income tax from the total taxable profit) and is due within three months of the close of the fiscal year. The tax now in effect is computed by applying the following rate table to the dividends received by each stockholder during a calendar year: Up to US$14,400.00 15.0% From US$14,400.01 to US$21,600.00 17.5% Over US$21,600.00 20.0%