Known under the acronym VAT, Decree Law No. 825 is the text that regulates this tax, which to date has become one of the most important sources of tax revenue. Conceptually, the Value Added Tax aims to tax the value that each of the economic agents that participates in the production, distribution and marketing process of a good adds to the sale price of a certain good or service.
In this way, it seeks to avoid the application of tax on tax, which is one of the characteristics of sales taxes that are applied at each stage from producer to consumer, generating the so-called “cascade” effect. The use of the sales tax calculator is important there.
The Right System
In our system, the tax under analysis involves quantifying the difference between sales and purchases made by each of the economic agents involved in the production to marketing process. A Tax Debit is then noticed, which is only the sum of the taxes that are charged by the taxpayer in the tax period (month) and the Tax Credit, which is only the sum of the taxes borne by the same taxpayer in the tax period (month). The difference between both concepts results in the Value Added Tax to be paid.
- Notwithstanding the foregoing, if the chain of producers to consumers is carefully analyzed, the tax enshrined in DL No. 825, is not properly such a tribute that taxes the added value, but simply and tax sales of products and the provision of services, avoiding the appearance of the so-called “cascade” effect, which involves the application of tax on tax. Indeed, in the case of the Title II tax of DL No. 825, called VAT, the current rate of 19% is not specifically applied to the added value of a product, but rather to the total value of the same, which in short, it prevents precisely determining the value added as a tax base.
- The tax to be paid to the Treasury is determined by the difference between the debit and the tax credit that are duly supported by vouchers and recorded in the taxpayers’ accounts. The tax debit is determined by applying the tax rate on the net price of the total sales taxed for the corresponding month, which includes the selective consumption tax or any other tax, when the goods in question are affected by them.
The tax credit is subtracted from the resulting amount, resulting in the tax payable or balance in favor:
If the taxpayer is affiliated with the debit or credit card payment system, he must reduce from the previous result, the withholdings made by the processors of these payments, which constitute payments on account of this tax.
Natural or legal persons, in law or in fact, public or private, who make sales or provide services on a regular basis. Likewise, people of any nature, who import or intervene goods, in accordance with the provisions of article 13 of the General Sales Tax Law, No. 6826 of November 8, 1982 and its reforms.
Likewise, all exporters, taxpayers or not, are required to file returns.
The fiscal period is monthly.
The tax credit is established by adding the tax actually paid by the taxpayer on purchases, imports, or international purchases made during the corresponding month; as well as the tax paid for the acquisition of raw materials; supplies, containers, packaging materials including their raw materials, packaging, packaging and labeling; machinery, equipment and its parts and spare parts; electric power; and other goods that are used within the production, marketing and distribution process of the goods that the taxpayer destines for sale, are taxed or exempt, or that are destined for export; in commercial, agricultural and industrial, main and related activities; for insurance premiums that protect goods, machinery and supplies, and on equipment and materials used in the work of waste treatment and quality control of its products.