CLIENT ALERT | DRAFT LAW THAT ESTABLISH SOME TAX MEASURES THAT ARE PART OF THE EMERGENCY PLAN FOR ECONOMIC RECOVERY | DECREE NUMBER 1.043 OF THE MINISTRY OF FINANCE THAT AMENDS SUPREME DECREE NUMBER 420, INCORPORATING NEW TAX MEASURES TO SUPPORT FAMILIES, WORKERS AND MICRO, SMALL AND MEDIUM ENTERPRISES, IN THE DIFFICULTIES GENERATED BY THE CURRENT HEALTH CRISIS
In view of the current health context, the COVID-19 pandemic and its possible effects on the economy, on June 24, 2020, the President of the Republic presented a bill that establishes a series of new tax measures that are part of the emergency plan for economic and employment recovery.
The main measures established in these regulations are:
A. Temporary reduction of the First Category Tax rate, for companies under the Pro-SME Regime:
The project establishes that those incomes that are received or accrued by companies under the Pro-SME regime, during the years 2020, 2021 and 2022 will be taxed at a rate of 12.5%.
In the same sense, those taxpayers who benefit from this transitional rate reduction will have their Monthly Provisional Payments (MPP) rate halved, which, in accordance with the provisions of Article 14(D), for the years 2020, 2021 and 2022.
B. Refund of accumulated VAT tax credit for SMEs:
It is proposed that the option of requesting a refund of the accumulated balance of the VAT tax credit be determined in the VAT return to be made in the months of July, August or September of the year 2020.
Those taxpayers who meet the following cumulative requirements will be eligible for this benefit:
- That, in the period between January 1 and May 31, 2020, the average income affected has experienced a decrease of at least 30% with respect to the average of the same type of income obtained in 2019.
- That from the declaration made in the month of June, there is a remainder of tax credit, generated by the acquisition of goods or the use of services between January 1 and May 31.
- That it is not included in any of the grounds of Article 59 bis of the Tax Code.
- That all the VAT returns have been filed in the last 36 tax periods.
- That the operations for which the refund is granted are registered in the purchase and sale registry established in Article 59 of the Sales and Services Tax Law.
- That it does not maintain a tax debt, except for those taxpayers who are in compliance with agreements with the General Treasury of the Republic.
The refund may be requested only once.
C. Instantaneous depreciation of 100% until December 31, 2022:
Those taxpayers who declare their first category taxes on effective income determined according to complete accounting and who acquire new or imported fixed assets in the period between 1 June 2020 and 31 December 2022, may depreciate those assets instantly and integrate, in the same business year in which they are acquired, those that will be valued in one peso.
Taxpayers who file a first category effective income tax return and who acquire, during the period from June 1, 2020 to December 31, 2022, intangible assets intended for the interest, development or maintenance of the company or business, may depreciate such assets instantly and fully, in the business year in which they are acquired, which will be valued at one peso.
D. Allocation of tax resources for the regional contribution of 1% for projects initiated up to 2021
In addition to the above-mentioned new measures contained in the said draft law, on 3 July 2020, Ministry of Finance Decree No. 1.043 was published in the Official Gazette, amending Supreme Decree No. 420, incorporating new tax measures to support families, workers and micro, small and medium-sized enterprises in the difficulties generated by the current health crisis. The amendments made are as follows:
- Extension of the deadlines for payment of the taxes referred to in Article 64 of the VAT law, to be declared in July, August and September 2020.
The deadline for payment is extended for those taxpayers whose average operations declared before the Internal Revenue Service in the months of April, May and June 2020, have experienced a decrease of at least 30%, compared to the average of their operations declared in the same period 2019 and operates as follows:
- Taxpayers under the Pro-SME regime, the start date for payment of the total deferred tax will be October 2020 and as of that month, it must be paid in 12 monthly installments, equal and readjusted.
- For those taxpayers whose income exceeds the income limit for the Pro-SME regime, but whose annual income does not exceed 350,000 Unidades de Fomento, the start date for payment of the deferred tax will be October 2020, and as of that month the tax will be paid in 6 equal and adjusted monthly installments.
- Monthly Provisional Payments (MPP) are to be paid in the months of July, August and September 2020.
For those taxpayers whose amounts of the taxable bases of the provisional monthly payments of first category, declared in the months of January to May have decreased by at least 30% in relation to the same amount declared with respect to the months of January to May of the year 2019.
In all that is not modified, Supreme Decree No. 420 of March 30, No. 553 of April 9, 2020, and No. 842 of May 29, all of 2020, of the Ministry of Finance remain in full force.
This document does not represent a legal opinion or recommendation and is for information purposes only. The draft law reported may be adjusted or modified during the process.