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abroad but at a tax rate less than 75 percent of what would have been paid in Mexico,and (c) income generated through transparent legal entities or figures.The tax authorities have the authority to determine the existence of simulation in legalacts exclusively for tax purposes in cases of (a) income related to a Preferential TaxRegime, (b) transfer pricing, and (c) income determined to have come from a source ofwealth within the country.2.3. Nonresidents Who Obtain Earnings from a Source of Wealth Locatedin MexicoAs discussed previously, non-residents must pay Mexican income tax when they have apermanent residence in Mexico or when they obtain earnings that are considered tocome from a source of wealth in Mexico.It is very important to point out that Mexico has signed double taxation treaties withdifferent countries, the application of which depends on the tax residence of the actualbeneficiary of the income. These treaties establish treatment exceptions that reduce oreliminate the tax, and therefore is it essential to review the possible application of saidtreaties in all transactions.2.3.1. Treatment set out in the ISR LawAs a general rule the tax imposed under these circumstances is calculated on gross incomeand it is paid through the withholding made by the person making the payment. Thereare certain exceptions in which the nonresident is allowed to choose to pay on a net basis(income minus deductions), for which is it necessary to have a representative in Mexico.We can say that the most representative types of income that can be considered tocome from an income source located in Mexico are the following:a) Income taxed at a rate of 40 percent, obtained as a result of representational transactions(commission, brokerage, agency, distribution, consignment or appraisal, and ingeneral, income for undertaking another’s interest) that residents of Preferential TaxRegimes obtain, when the one paying is a resident or has a tax domicile in Mexico;b) Income taxed at a rate of 25 percent;i) Income received for fees and the provision of independent services when theservice is provided in Mexico;ii) Remuneration to members of boards of directors for auditing, consulting orof any other kind, when it is paid by Mexican companies;iii) Income received for granting the temporary use or enjoyment of real estatelocated in Mexico;iv) Income obtained from time-share tourist service contracts when the propertyshared is in Mexico;117Tax Regime