On December 3, the Congress Joint Economic Committees passed a report on the Economic Growth Bill. The legislators gave the green light to all the articles included in the committee’s report without introducing any changes. The vote took place in two blocks: one of 68 articles that did not include proposals for modifications, and another of 67 articles which did. The reforms proposed by the committee legislators were denied in the latter instance but will be up for discussion during the debate on the House and Senate Floors. The regulations must be issued before January 1, 2020 in order to replace the Financing Law, declared unconstitutional by the Constitutional Court.

The new reform maintains the same tax exemptions proposed by the 2018 law. Regarding tax exemptions for medicines, the regulations are keeping pharmaceutical products free of VAT. As for the orange economy, the tax incentive for the development of technological value-added industries and creative activities will be applicable for 7 years. There is also a periodic temporary exemption from VAT three days a year starting in 2020, which will have a maximum amount per person and apply to items such as clothing, footwear, supplies and electronics. The VAT compensation mechanisms have been created to offset the burden of this transactional tax which particularly impacts on the more vulnerable population. 

The regulation also proposes modifying Article 70 of the bill which in turn modifies Article 188 of the Tax Statute so as to reduce the presumptive income percentage for the taxable year 2020 from 1.5% to 0.5%. It also re-establishes the surcharge levied on financial institutions in an extraordinary way for 2020, 2021 and 2022 regarding income tax. By 2020, financial institutions will pay 36% income tax, which drops to 34% in 2021 and 33% in 2022.