On May 28th, the Constitutional Chamber of the Supreme Court of Justice of El Salvador issued a definitive judgement in the process with reference 96-2014, in which the Chamber declares Unconstitutional the Legislative Decrees No. 762, 763, 764, approved in the Plenary Session of the Legislative Assembly of 31-VII-2014. Through these decrees the Tax on Financial Operations was created and reforms were incorporated into the Tax Code and the Income Tax Law.
This sentence will have impacts on the taxation and the operation of the taxpayer. Among the most important ones can be mentioned:
- The tax on financial transactions which taxes 0.25% of electronic cash transfers and payment by check shall be eliminated;
- The reform to Art. 62-A of the Tax Code, which incorporates the OCDE guidelines as reference for determination of transfer pricing adjustments is void;
- The deadlines of expiration for tax audit are again counted as prior to this reform, that is, without the notification of the self-designation of auditor suspends the expiration count, which can have a significant impact on the PLA Taxation of the tax authority;
- The power of the Tax Authority to publish to the tax debtors and extracts of the resolutions, through which were determined additional taxes and fines to taxpayers is void.
In attention to the fundraising impact of this sentence, the Chamber ordered that the effects of this judicial resolution enter into force until January 1st, 2019.
Undoubtedly, this resolution will have an impact on the operation and taxation of your company, so we are at your service to have a more detailed conversation.
Senior Associate
García & Bodán
El Salvador