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Federal Government is obliged to grant the states a certain share of the Federal Government’srevenue.Thus, each state legislature can establish different classes of taxes complying with thelimitations described. Some examples of local taxes are: real estate tax, real estate transfertax, tax on local income, tax on public shows, lottery and gambling tax, payroll tax,motor vehicle use and possession tax, and acquisition of used vehicles tax.In this chapter, we will only briefly describe the most common local taxes established inthe state and Federal District laws, on the understanding that while there are significantsimilarities that allow them to be described as a whole, the information contained hereinshould be complemented with the contents of each law. Similarly, the possibility of thestates and the Federal District imposing certain bond taxes without violating the FiscalCoordination Agreements entered into with the Federal Government will be discussed.7.1. Real Estate TaxThis tax is established by the state legislatures or by the Legislative Assembly of the FederalDistrict. In the case of the states, the municipalities within the state will receive therevenues resulting from these taxes.In general terms, the taxable base of the real estate tax is the cadastral value of realestate (land and buildings). Those obligated to pay it can be the owners or even the possessorsof said assets.Each law in particular will indicate specifically the form in which the cadastral valueof the land will be calculated, which may vary depending on whether buildings exist,whether the land is used for residential purposes or some other use, or whether the landis leased or not.As a general rule, the tax is calculated by applying the corresponding rate to the determinedcadastral value, while the range of tax rates is between 0.25 percent and 1.5 percent.The tax so calculated is normally paid bimonthly.Certain land is exempt from the payment of real estate tax, among which is the propertyof foreign governments and property used for diplomatic purposes in the country,in accordance with the Vienna Convention on Diplomatic Relations.137Tax Regime7.2. Payroll Tax or Tax on Remuneration for Services RenderedThere are two different systems regarding the causation of this tax. One indicates thatindividuals and legal entities are obliged to pay this tax when they make, within the territoryof the state or the Federal District, expenditures in cash or in kind as a considerationfor services rendered (wages). Thus, the tax must be paid if the expenditure forsaid concepts is made within the respective territory.