Written by: Jean Paul Aguirre
After the tax reforms that came into force in 2019, the obligation to update taxpayer data in the Taxpayer Registry (RUC) every two years was established, under penalty of fines. The General Revenue Office has an inspection plan to verify compliance with this obligation, therefore, taxpayers are notified of Tax Information Requirements (RIT) through which they order to update the general data of the company, shareholding structure and board of directors, for which a period of 10 business days is granted. Among some of the general data of the company are the reforms to the articles of incorporation, tax address, information to receive physical and digital notifications, data on its economic activity, subsidiaries, and capital stock, etc.
It is important that taxpayers are clear about these data update procedures, since, in practice, many companies register their RUC and do not update their information again with the General Revenue Office. In turn, it is very common that in practice the validity of the Tax ID is confused with the updating of taxpayer data, since even though some RUC cards issued by the Tax Administration do not have an expiration date (Plastic Tax ID), the obligation to update taxpayer data at least every 2 years persists.
In accordance with the Tax Code of the Republic of Nicaragua and its reforms, the taxpayer who does not provide the necessary data or timely communicate its modifications will incur an administrative infraction that will be sanctioned with a fine of 30 to a maximum of 50 units for each month of delay or outdated. Taking into consideration that each fine unit is equivalent to 25 Cordobas, the pecuniary sanction will be from 750 to 1,250 Córdobas each month of delay or out of date. For such purposes, it is important to consider that changes in the taxpayer’s data must be informed and updated before the General Revenue Office (DGI) within a maximum period of 30 days after said modification.
Additionally, we have observed some discretionary practices in the processes of updating taxpayer data, specifically, regarding updating the shareholding structure in the Sole Taxpayer Registry. When updating the share structure before the General Directorate of Revenue, the tax authority conducts a review of the share transfers to determine if this transaction generated a capital gain and if this was duly declared and notified to the Tax Administration, however, some of these reviews are made on share transfer transactions that are outside the tax limitation period. Despite the foregoing, the tax authority sometimes takes advantage of the taxpayer’s need to update their data and notifies Tax Information Requirements for prescribed periods, among which it requires:
- Public Deed of Incorporation of the company and its bylaws, despite the fact that it has already been supplied when the taxpayer registered for the first time.
- Public Deed of Incorporation of the company and its updated bylaws where the company’s partners appear, which usually refers to the Amendments to the Articles of Incorporation approved by Judicial Sentence.
- Contract for the 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 for the sale of shares and/or shareholding .
- Proof of payment corresponding to the sale of shares.
- Proof of definitive withholdings made for the sale of shares.
- Definitive monthly withholding statement where the withholding was supposedly made for the sale of shares.
- Financial Statements (Balance Sheet, Income Statement and Trial Balance) for the period in which the sale of the shares took place.
Note that this notification is under the warning that by not providing the required information within a period of 10 business days, the taxpayer will be subject to tax sanctions (fines that could be for infraction and / or tax violation) in accordance with the provisions in the current Tax Code and, where appropriate, an alleged determination of tax obligation in accordance with the provisions of article 160, where the methods of determination of the obligation are established, among these are observed, the presumed basis or the application of the transfer pricing rules. This type of scenario violates the rights of taxpayers and exposes them to fiscal contingencies.
With this type of process, a considerable delay has been caused to conclude with a formal procedure, which in principle should be carried out immediately, however, until the review of the transfer of shares is completed, nor is the required information received , or where appropriate, any presumed determination of tax obligation vanishes, 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 blocks to other institutions through cross-information systems.
By virtue of the foregoing, we recommend that taxpayers keep their information duly updated in the Sole Taxpayer Registry and that this procedure be carried out each time there is a substantial change in their data or at least every 2 years. Likewise, it is important that, when considering carrying out any share transfer, the tax effects of said transaction are analyzed, to minimize the contingencies in the event of a possible review derived from an update procedure before the General Revenue Office.
In those cases, in which a Tax Information Requirement has been notified, we recommend reviewing the required documentation and recording the information provided by the taxpayer within a period of 10 business days. We warn that the Tax Administration has the power to verify said information with other Public Registries through cross-information systems and even sign International Information Agreements with other Tax Administrations abroad that allow strengthening the inspection action of the Institution, therefore, it must be certain that the information to be provided is correct and conforms to the information declared/updated in other public records.
It is important to consider that this type of procedure may have effects on other institutions, such as the case of the Municipalities that through cross-information require the registration of taxpayers registered with the DGI, therefore, it is important to have updated all the information on the company before all the corresponding public institutions.