By: Jaime Guzmán
In El Salvador there are different reports and declarations presented during an annual period, these are taxpayer’s obligations, therefore, the Tax Administration created the Tax Opinion and Report, presented by a third and independent party, with the purpose of avoiding any interest conflict during the information report. This review ends with a document establishing the external auditor’s opinion.
The Tax Administration has modified the Tax Report and Opinion preparation and presentation, adding aspects to facilitate its review, and involving all parties to make it as reliable as possible. To understand this report, it is important to address its meaning and generalities based on its regulations, for which it is worth mentioning that it is prepared under the Tax Code and under the International Services Law.
The meaning is similar for both regulations, establishing the Opinion in a document that reflects the compliance with the tax obligations of the taxpayer, and it will be understood that the document contains a detail of the performed work by the auditor and the obtained results by a Tax Report.
The following conditions establish who is obliged to have a tax report issued:
- Total assets as of December thirty-first of the year immediately preceding the year in question, more than $1,142,857.14.
- To obtain a total income in the previous year of more than $571,428.57.
- The legal entities resulting from the merger or transformation of companies shall comply with this obligation in the fiscal year in which such acts occur and for the following year.
- Companies in liquidation shall have this obligation for each of the tax periods or fiscal years from the date of registration of the dissolution until the date on which the liquidation proceedings are completed and prior to its registration.
- The taxpayer user of parks or service centers contains its registration of the agreement of benefits issued by the Economy Ministry on the bases of the Tax Administration.
The Tax Opinion and Report period is based on each regulation, the Tax Code must correspond to annual periods from January 1 to December 31 of each year. Only in special cases it will be presented when there is a merger companies’ transformation, and when a company enters liquidation it will have the obligation for each tax year, from the registration date of the dissolution until the liquidation procedures end. For the International Services Law, there are three periods, the first one from January 1 to June 30, the second one from July 1 to December 31, and the third one when the company is in the liquidation process.
The presentation deadlines are based on each regulation, for the Tax Code it has until May 31 of the year following the audited period, for the merger case, companies’ liquidation, and dissolution. Two months following the auditor must present the closing of the fiscal year in which the merger, dissolution, or liquidation agreement was taken.
The deadlines vary a little by the International Services Law, remembering that during are submitted two reports. For the first period, the report must be filed no later than October 31 of the current year, for the second period it must be filed no later than five months after the end of the period being reported, which would be May 31, and for those in liquidation, the deadline is two months from the day after the liquidation balance sheet is approved.
Currently, said Tax Opinion and Report presentation process is developed under the teamwork scheme, which is composed of the Taxpayer, Accountant, and External Auditor; this team is created under the taxpayer’s command and sends requests to the other two parties, with the purpose of carrying out a joint work, ending with the Dictum and Tax Report presentation without forgetting that this is Auditor obligation.
Once the request is accepted by the involved parties, the accountant must provide the auditor through the Financial Statements Ministry platform, Notes to the Financial Statements and Tax Annexes duly approved by the taxpayer, which must comply with the Tax Code requirements, International Services Law, and its regulations.
It is important to mention that the Tax Annexes to be used, will be those applicable to the economic activity developed by the taxpayer conformity, therefore, it is not an obligation that all the annexes provided by the tax administration are completed and uploaded to the platform.
The information to be uploaded by the accountant, to be submitted by the Legal Representative or Taxpayer for approval is: the Statement of Financial Position, Income Statement, Cash Flow Statement, Changes in Equity Statement, the financial notes, and the tax annexes number 1 to 4, 6, 7, 9-A, 9-B, 9-C, 9-D, 10, 11, 13 and 14 that is applied to the tax circumstances of the taxpayer, The Tax Auditor must upload to the module of the Ministry of Finance the Tax Opinion and Report, as well as the Tax Annexes 5, 8 and 12 as applicable, mentioning the formal and substantive noncompliance detected, even if they have been corrected, regardless of their amount.
If there is a substantial change in the Tax Opinion and Report, it may be modified by a written document means prepared by the Tax Auditor addressed to the General Directorate of Internal Taxes, indicating the aspects to be modified, the request must comply with the requirements established in art. 34 of the Tax Code and be signed by the Tax Auditor or his representative, whose signature must be legalized by a Public Notary.
Once the working group completes the whole process of uploading and validation, the F-455 form, Tax Opinion, and Report Submission Letter according to the Tax Code or Service Law, will be automatically generated.
Another important aspect to consider is non-compliance fines or penalties, these are detailed in art. 248 of the Tax Code, which has been established in seven aspects, each one depending on the non-compliance level.
Finally, it is worth mentioning that all this process can be found in the manuals and instructions provided by the Ministry of Finance now for entering the Tax Report module, as well as the forms to be filled out to load the platform, establishing different recommendations for the said form that they do not generate any type of error now of loading.
Legal Basis
Tax Code Art. 129 to 138 and 149-C.
Regulation of the Tax Code Art. 64 to 70
International Services Law Art. 47 Lit. f)
Regulation of the International Services Law Art. 57 to 59