The Assembly’s Special Committee produced a report on the tax reform this week. The document includes the updated version of the bill that increases the Income Tax, considers financial intermediaries as tax withholders and replaces the Sales Tax with the Value Added Tax (VAT). In addition, National Assembly authorized the deputies to re-introduce the modification proposals that were rejected in previous stages. The Committee will discuss the proposed amendments in the upcoming days.
There are 373 intended changes and the members of the committee will have to discuss them again. Among the most important issues are the market basket, the tax benefits to the agricultural sector, the simplified tax systems, the distribution of dividends and the tax credit.
Some of the changes proposed by legislators that are relevant for the sector are:
- Transfers and deposit-taking services from financial entities will not pay Value Added Tax (VAT), although the payable rate for legal persons would initially be 36% and would drop one point per year to 32%.
- Financial intermediaries will withhold 10% large taxpayers’ tax payment.
- The rejection of alternative means of payment (electronic or not) will be illegal and the Ministry of Economy will be able to verify if companies agree not to lower interest rates.
- To eliminate the exemption to capital gains obtained in security transactions and apply a 15% charge to capital gains and rents.
The Superintendencies’ budget and the National Council for Supervision of the Financial System (Conassif) will be entirely covered by the supervised subjects, in addition to incorporating a 5% contribution of the public and private entities’ net profits that are authorized to perform as financial intermediates.
The members of the Committee should meet and begin to analyze the modifications in the upcoming days. Public institutions can introduce amendment proposals to the initiative. Once the comments have been received and the Committee has finished discussing these changes, members of the Assembly will vote on the draft for the first time. Afterwards, they have to discuss the reform for a second time before the Executive enacts it. Legislators could also consult the Constitutional Court during the remaining stages.