Daniel Lackey
Tax Senior
Grant Thornton
It is the beginning of a fiscal period and it is always a good time for taxpayers, with positive results in the field of Value Added Tax, to review the reason for the generation of balances in favor, in order to be sure that the they are really the product of the excess of credits with respect to the debits, and not of an improper way of presenting the VAT return.
As a good business and tax practice, it is ideal that we review the nature of the operations that give the right to a tax credit, since, as indicated in article 27 of the Value Added Tax Regulations (hereinfollowing “RIVA”) “The taxpayer only The tax supported on the acquisition of taxable goods and services, which are directly and exclusively linked to their subject and non-exempt operations, may be applied as a tax credit. The foregoing makes it clear that, if due to my nature of sales operations or provision of services it is sold at a rate of 13%, the credit that may be applied will be that derived from the purchases directly linked to that operation, at a rate equal to or less than that rate, that is, 100% of credits for purchases at 13%, 4%, 2% and 1%.
Now, if, for example, a taxpayer sells goods or provides services at a reduced rate that does not entitle him to full credit, only the proportional part of the credit supported in the acquisition of goods or services directly related to his operations may be applied, for example: sales at a rate of 2% and purchase goods and services related to that operation at 13%; In such a case, only 2% might be applied as a tax credit, with the remaining 11% being a deductible cost/expense for Income Tax purposes.
It is clear that the inclusion of reduced rates in the Value Added Tax can be confusing for the taxpayer, since he must know these guidelines for the preparation of his returns and thus avoid that due to ignorance of the operation of the regulations, balances are generated. in favor that are not appropriate, causing it to be taxed less than the corresponding amount.
Due to the foregoing, it is necessary that all these operations be reviewed to avoid surprises in an eventual review by the Tax Administration that may result in charges, fines and interest derived from adjustments due to the misapplication of the established tax credit rules. via law and regulation of value added tax.
