Following the tax reforms that came into effect in 2019, the obligation to update the taxpayers’ data in the Single Taxpayers’ Registry (RUC) every two years was established, under penalty of fines. The General Revenue Directorate has an inspection plan to verify compliance with this obligation, therefore, taxpayers are notified Tax Information Requirements (RIT) by means of which they are ordered to update the general data of the company, shareholder composition and board of directors, for which a term of 10 business days is granted. Among some of the general data of the company are the amendments to the articles of incorporation, tax domicile, information to receive physical and digital notifications, data on its economic activity, branches and capital stock, etc.
It is important for taxpayers to be clear about these procedures for updating data, since in practice many companies register their RUC and do not update their information again before the General Revenue Directorate. At the same time, it is very common that in practice the validity of the RUC card is confused with the updating of the taxpayer’s data, since, despite the fact that some RUC cards issued by the Tax Administration do not have an expiration date (PVC RUC cards), the obligation to update the taxpayer’s data at least every 2 years persists.
In accordance with the Tax Code of the Republic of Nicaragua and its amendments, the taxpayer who fails to provide the necessary data or to timely communicate its modifications will incur in an administrative infraction that will be sanctioned with 30 to a maximum of 50 fine units for each month of delay or out-of-date. Taking into consideration that each fine unit is equivalent to Cordobas 25, the pecuniary sanction will be from Cordobas 750 to Cordobas 1,250 for each month of delay or failure to update. For such purposes, it is important to consider that changes in the taxpayer’s data must be reported and updated before the General Revenue Directorate (DGI) within a maximum period of 30 days after such modification.
Additionally, we have observed some discretionary practices in the process of updating taxpayers’ data, specifically, with respect to the update of the shareholder composition in the Single Taxpayers Registry. At the time of updating the shareholding composition before the General Directorate of Income, the tax authority reviews the shareholding transfers in order to determine if this transaction generated a capital gain and if this was duly declared and reported to the Tax Administration; however, some of these reviews are performed on share transfer transactions that are outside the tax statute of limitations period. In spite of the above, the tax authority sometimes takes advantage of the taxpayer’s need to update its data and notifies Tax Information Requests of prescribed periods, among which it requires:
- Public Deed of Incorporation of the corporation and its bylaws, even though it has already been provided when the taxpayer was first registered.
- Public Deed of Incorporation of the company and its bylaws updated where the partners of the company appear, which usually refers to the Amendments to the Articles of Incorporation approved by a Court Judgment.
- Contract of purchase and sale of shares and / or shareholding.
- Minutes of the Board of Directors that approves and authorizes the sale of shares.
- Public Deed of the Contract of sale of shares and/or stock participation.
- Proof of payment corresponding to the purchase and sale of shares.
- Proof of definitive withholdings made for the purchase and sale of shares.
- Monthly statement of definitive withholdings where the withholding for the sale of shares was supposedly made.
- Financial Statements (Balance Sheet, Income Statements and Trial Balance) for the period where the sale of the shares took place.
Note that this notification is under the warning that by not providing the required information within 10 business days, the taxpayer will be subject to tax penalties (fines that could be for tax infringement and/or contravention) in accordance with the provisions of the Tax Code in force and, where appropriate, an alleged determination of tax liability as provided in Article 160 CT, which establishes the methods for determining the obligation, among these are observed, the presumptive basis or the application of transfer pricing rules. These types of scenarios violate the rights of taxpayers and expose them to tax contingencies.
This type of process has caused a considerable delay in concluding a formal procedure, which in principle should be carried out immediately, however, as long as the review of the transfer of shares is not completed, nor the required information is received, or, if applicable, any presumed determination of tax liability is not resolved, the Tax Administration does not allow the taxpayer to update any other data, such as changes of legal representatives, board of directors, etc., which may generate a contingency due to outdated data and also possible arbitrary blocking before other institutions through cross information systems.
In view of the above, we recommend that taxpayers keep their information duly updated in the Single Taxpayers’ Registry and that this procedure be carried out every time there is a substantial change in their data or at least every 2 years. It is also important that, at the time of considering any share transfer, the tax effects of such transaction are analyzed, in order to minimize the contingencies before a possible revision derived from an update procedure before the General Revenue Directorate.
In those cases in which a Tax Information Request has been notified, we recommend reviewing the required documentation and recording the information provided by the taxpayer within 10 business days. We warn that the Tax Administration is empowered to verify such information with other Public Registries by means of cross information systems and even to sign International Information Agreements with other Tax Administrations abroad that allow strengthening the auditing action of the Institution, therefore, it must be certain that the information to be provided is correct and adjusts to the information declared/updated in other public registries.
It is important to consider that this type of procedures may have effects in other institutions, as is the case of the Municipal Mayors’ Offices that through crossed information require the registration of taxpayers registered in the DGI, therefore, it is important to have updated all the information of the company before all the corresponding public institutions.