Prescription is the legal means of acquiring a right or being released from an obligation. In this context, the prescription of municipal tax obligations is a fundamental aspect that the relevant administrations must consider to efficiently manage municipal resources. Understanding the time limits and procedures associated with prescription helps ensure that authorities and taxpayers can manage their obligations properly and within the regulatory framework. It also allows taxpayers to protect their rights and minimum guarantees within the audit, administrative, and even judicial processes.
For municipal purposes, the Nicaraguan legal system contemplates two different regulations, which are:
- Executive Decree No. 455: “Municipal Tax Plan” (PAM), which applies to all municipalities in the country except for the Municipality of Managua; and
- Executive Decree No. 10-91: “Tax Plan for the Municipality of Managua” (PAMM), which applies exclusively to the Municipality of Managua.
In this regard, the Tax Plan for the Municipality of Managua provides in its Art. 71 that “all taxes, fees, contributions, and their corresponding fines shall be prescribed after two years from the date they became due and payable by the Municipality”; likewise, the Municipal Tax Plan establishes this same prescription period of two years in its Art. 64.
In light of the above, and according to the applicable legal regulations, the prescription of municipal tax obligations implies the release of the taxpayer’s obligation and the loss of the municipal authority’s ability to collect and audit. Therefore, municipal authorities cannot audit prescribed periods, nor can they attempt to collect prescribed taxes, fees, contributions, or their accessories, provided that such prescription has not been interrupted in a timely and proper manner through a duly notified judicial or extrajudicial collection action.
In summary, it is important to be aware of all applicable legal elements related to the prescription of obligations, as well as to have appropriate legal advice when notified of an audit procedure or during the exercise of the right to appeal in administrative and/or judicial proceedings, to ensure the correct exercise of the rights and guarantees that businesses have as taxpayers in the municipal sphere.