New arrivals – December 4, 2018
We are close to Closing the fiscal period 2018, and together with the budget preparations for the next year, with this, it is necessary to carry out a review as part of the fiscal planning for the year 2019, of the method of payment of the Income Tax – ISR-, to the Tax Administration, in order to determine if the regime to which the Entity is covered is adequate, according to the current financial situation of the company.
It is important to take into account that Decree 10-2012 and its reforms establish two regimes for the payment of Income Tax for Lucrative Activities, as follows: 1) The Regime on Profits from Lucrative Activities, and 2) The Simplified Optional Regime on Income from Lucrative Activities, better known as the Regime on Utilities and the Regime on Income, respectively.
To determine which is the most convenient method for the entity, it is necessary to carry out an in-depth analysis where the income projections are evaluated, as well as budgets for costs and expenses for the fiscal period for the following year, which must be the most attached to the future reality of the Entity, which is why it must be carried out very meticulously.
Generally, those entities that have and project high levels of utility opt for the Simplified Optional Regime, in which they pay on their total income from lucrative activities, with a tax rate between 5% and 7% according to the ranges indicated by the Law, informing the Tax Administration and paying monthly, in this regime it is not counted with the obligation to pay the Solidarity Tax (ISO), since the Law that regulates it grants exemption to taxpayers who are covered by this Income Tax payment regime.
Moreover the Regime on Profits from Lucrative Activities, in which, as its name implies, taxpayers determine the Income Tax (ISR) on the profits generated in the fiscal period, applying a tax rate of 25%, learning and paying partially quarterly as payments on account of the annual sworn statement of Income Tax, however it is very important to consider that the financial profit does not always coincide with the taxable income for tax purposes, by virtue of the fact that the costs and expenses to be considered as "Deductible Expense", it is It is necessary that they do not exceed the limits that the Law grants them and also that they fulfill legal requirements, the most general of which are: 1) That contribute to the generation of taxable income; 2) That they belong to the line of business; 3) That they have supporting documentation (invoices, credit/debit notes, contracts, import policies, withholding certificates, etc.); 4) That correspond to the fiscal period in which they are included; and 5) That they be issued with the Tax Identification Number (NIT) and Name of the Taxpayer. That is why when carrying out the respective analysis of the two methods of payment of Income Tax (ISR), it is necessary to evaluate not only the amount of income, costs, expenses and profit for the period, but also to take care of the aspects described above.
In addition to this, for this Income Tax Payment Regime (ISR), taxpayers are obliged to submit and pay Solidarity Tax returns -ISO-, also on a quarterly basis, which is applied on the basis that is greater between a quarter of net assets versus a quarter of gross income of the previous fiscal period, applying a tax rate of 1%.
Based on the foregoing, the entity must carry out the appropriate projections and planning, to determine which is the most convenient method, taking into consideration that the tax period for Income Tax - ISR- is annual, therefore the Tax Administration, only allows regime change during only the month of December of each year.