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138C H A P T E R V I IThe other system imposes this tax on individuals and legal entities that make expendituresfor such concepts for work carried out within the territory. That is to say, thetax must be paid if the payments come from work provided within the territory. In thislast case, and in the case of outsourcing, normally it is required from individuals andlegal entities that contract with companies domiciled outside the territory of the statethat withholds and delivers the corresponding tax, a situation which should be takeninto account at the time of choosing suppliers.Expenditures consisting of salaries and wages, overtime, premiums and bonuses,remunerations, gratuities, holiday bonuses, employer contributions to a savings fund,etc., are considered within the taxable base of this tax. Obviously, each local code willdetermine the items that are included in the taxable base for purposes of this tax.Normally, the tax is calculated by applying to the taxable base a tax rate of 2 percentand it must be paid by means of a tax return that must be presented by the 17 th of themonth immediately following the month in which the payment is made.7.3. Real Estate Transfer TaxThis is a tax or charge on real estate property and therefore, according to the Constitution,in the case of the states, the municipalities therein will receive the revenues resultingfrom such tax. Individuals and legal entities that purchase real estate situated withinthe territory of a state or the Federal District are obliged to pay this tax. This tax is a levyon whoever purchases land or land with buildings attached. Each code in particular willdefine what concepts are considered a purchase, and it is possible to include other conceptsnot traditionally considered as a purchase.The calculation of the tax is made based on the highest value among the value of thetransaction, the cadastral value, and the value of the appraisal. In some cases, a predeterminedrate is applied to this taxable base, or a rate or percentage which will dependupon the particular state.In general terms, if the transfer of the property is recorded in the public deed beforea Notary Public, the latter is obliged to calculate and pay the respective tax.7.4. Local Income TaxThis tax comes from the resolutions adopted in the National Treasury Convention heldat the end of 2004, where the states and the Federal Government met for the purposeof trying to change the country’s fiscal policy.The objective of this tax is to increase the states’ resources. The states can, therefore,if they think it advisable, impose a local tax on the income of individuals without therebyviolating the fiscal coordination agreements.