Within the framework of the fiscal adjustment being discussed in El Salvador in order to sign an agreement with the IMF, local authorities intend to apply VAT, ISR and other specific taxes to companies that sell their products and services online.
At the beginning of March, the Ministry of Finance informed that El Salvador is in talks with the International Monetary Fund (IMF) to obtain a loan of approximately $1.3 billion.
Faced with the health crisis affecting the Salvadoran economy, businessmen from the industrial sector asked the government to postpone income tax declarations until June 2020.
Another of the specific requests of the Salvadoran Association of Industrialists (ASI), is the prompt refund to exporters of Value Added Tax, through Treasury Notes.
Salvadoran exporters claim that the system used by the Ministry of Finance from November to return VAT has put a strain on companies liquidity.
The new mechanism to refund VAT to exporters (which has been in force since November), has caused new problems between the sector and the tax authority of El Salvador.
It has been announced that as of November 17th enterprises must carry out a mandatory exporter VAT self-assessment using a web platform.
The union of exporters is not entirely satisfied with this online system, stating that it has some limitations, such as only allowing "... cross matching withholding of exporter VAT with importer VAT to recover the money.
In El Salvador exporters will be allowed to deduct from the total to be paid for withholding tax for VAT, the amount that has been paid for the same concept for raw material purchases abroad.
From a statement issued by the Legislative Assembly of El Salvador:
The export sector is pushing for the Ministry of Finance to accelerate the delivery of credit notes for tax refunds.
The Corporation of Exporters of El Salvador (Coexport) estimates that the amount owed exceeds $50 million, and is insisting that the government remove the obstacles that prevent accelerating tax refunds to exporters.
Exporters claim that the Ministry of Finance takes up to 10 months to give credit notes for tax refunds, accumulating a debt of $70 million.
To date the Ministry of Finance has issued $41 million in Treasury credit notes (NCTP) to pay off part of the debt. However, representatives from the Corporation of Exporters of El Salvador (Coexport) state that this type of payment represents a loss for exporters, as NCTP's can be sold but wat a discount of up to 5%.
In El Salvador the export sector claims that delays of up to nine months are being reported on tax refunds due from the Treasury, which should take no more than 30 days.
Seven months ago the Exporters Corporation of El Salvador (Coexport) submitted to the Ministry of Finance a proposal for self-assessment of Value Added Tax (VAT) with the aim of reducing the time it takes to receive tax refunds. To date they have not yet received a reply from the authorities and, according to the entrepreneurs themselves, the State owes approximately $50 million in this category.
The productive sectors have indicated that the state budget approved for 2015 is underfinanced and will force the government to raise taxes or issue more debt in order to comply with it.
The approved general budget for the nation is $4.824 billion an amount which according to the private sector can not be covered by current tax revenues, therefore in order to raise this amount there must be either be cuts made to services such as subsidies or social programs, increases or creation of more taxes, or more debt taken on.
A proposal has been made for a self-assessment system which aims for the government to quickly provide refunds of the 13% VAT to exporters.
Elsalvador.com reports that "in light of the government's failure to repay on time the 13% Value Added Tax (VAT) to export companies, the same companies, unionized under the Corporation of Exporters of El Salvador (Coexport ), have decided to create their own proposal in order to quickly get back the funds which belong to them. "
A Nicaraguan business leader announced that its government will maintain equal tax treatment for products imported from countries in the region.
The affected Central American employers expect the Nicaraguan government to sign the rectifying documents as soon as possible so that the Directorate General of Customs can stop collecting the tax from today.
Last year, the Stock Exchange of El Salvador negotiated credit notes for $120 million, and so far in 2012, $37 million has been negotiated.
From a press release of the Exporters Corporation of El Salvador:
So far in 2012, the Stock Exchange of El Salvador (BVES) has negotiated $37 million in Public Treasury Credit Notes (PTCN) issued by the Government through the Ministry of Finance.
Deloitte Panama published a complete tax guide comparing the most relevant fiscal matters between Ibero-American nations.
The document includes the following topics:
0. Comparative Summary
1. Tax on company profits
2. Tax on income from employment, economic activities, capital assets, real estate, and capital gains of individuals.
3. Income Tax for Non-Residents
Sales to inbound passengers in free shop stores at the airport must now include the Value Added Tax.
The tax authority has notified store owners that they must include the 13% VAT tax plus the corresponding income tax, when selling to inbound passengers. This will not apply to passengers leaving the country.
2010 will be a difficult year for the region's Treasuries, and tax reforms will be one of the weapons used by governments to fight this crisis.
Nicaragua has recently passed a highly controversial fiscal reform. Panama approved tax hikes for companies in the Colón Free Zone, as well as tobacco, casinos and insurance companies.
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