With the new Law, the fiscal period will match the calendar year, but there will be special cases in which the taxpayers may request the approval of a fiscal period different than the calendar year.
The general rule is that all companies must file the tax return two and a half months after its fiscal closing.
The tax system is one of self-assessment with occasional audits by the Tax Administration.
Payment of tax
Taxpayers are required to make partial payments on account of income tax in each fiscal period, in accordance with the following general rules:
- The basis for calculating instalments is the tax determined in the immediately preceding year, or the arithmetic average of the last three fiscal periods, whichever is greater. In the case of taxpayers who, for any reason, have not declared in the three previous fiscal periods, the basis for calculating the partial payment quotas will be determined using the declarations that they have submitted and, if it is the first, by a well-founded estimate that they must provide to the Tax Administration.
- 75% of the amount of the determined payment on account must be divided into three equal instalments, which must be paid successively no later than the last business day of the months of June, September, and December of each year (considering that the recently modified ordinary fiscal period is equal to the calendar year from January 1 to December 31).
- From the total tax that is paid when submitting the affidavit, the instalments corresponding to that fiscal period must be deducted. The resulting balance must be paid within two months and 15 calendar days following the end of the respective fiscal period.
It should be taken into account that the date of payment for instalments for the fiscal period 2020 may vary considering the recent reform in the law, which changed the fiscal year from 1 October to 30 September to match the calendar year; for that reason, the Regulation to the Law of the Income Tax establishes transitory regulations that establish regulations for different assumptions.
The general rule is that the first instalments must be provided within six months of the authorised fiscal year-end.
Tax audit process
For a tax audit to begin, it is necessary that the Tax Administration send a notification to the taxpayer to be audited. The taxpayer is selected according to one of the selection criteria previously established, and this should be indicated in the communication at the beginning of the tax audit. The Tax Administration must start the audit within two months of the communication to the taxpayer.
Once the audit is completed, the auditors hold a meeting with the company and invite them to correct the issues found.
If the company does not accept the correction, it can start the described procedure and pay the respective tax until that procedure has finished along with the corresponding interest.
Statute of limitations
The action of the Tax Administration to determine a tax liability will be under the statute of limitations of four years. The same term is valid to demand the payment of the tax and its interests.
The aforementioned term is extended to ten years for taxpayers non-registered with the Tax Administration, those that are registered but have filed returns qualified as fraudulent, or those that have failed to file the tax return.
The term of the statute of limitations should be counted as of the first day of the month following the date when the tax should be paid.
Topics of focus for tax authorities
Important topics for tax audits are transfer pricing, sales tax credits, gross margin on sales, employee benefits, and income tax.