Tax Exemption, Base Calculation, and Tax Liability

Tax Exemption and No Liability

We have established that a taxable event gives rise to a tax. However, in cases of no liability, the taxable event is not completed, and therefore, no tax liability arises. This means that if no taxable event occurs, there is no liability.

An exemption occurs when a taxable event takes place, but the legislature has provided a factual assumption that prevents the tax liability from arising. Article 22 of the LGT defines exemption as follows:

"Exemptions are those assumptions that, despite being taxable, the law exempts from compliance with the principal tax liability."

Methods of Determining the Tax Base

The taxable amount is the monetary value resulting from the measurement and valuation of the taxable event.

There are three systems for determining the tax base:

1. Direct Estimate

This system measures the exact amount of income and expenditure. (IG)

2. Objective Estimation or Modules

In this system, the tax base is not determined directly but by using signs, indices, or modules established by the Ministry of Economy and Finance based on the activity taking place.

3. Estimate Hint

This system is applied as a subsidiary to the other two, and only in the following cases:

• a) Failure to submit statements or submission of incomplete or inaccurate statements.
• b) Resistance, obstruction, or refusal to allow performance inspection.
• c) Material breach of disclosure or registration obligations.
• d) Missing or destruction, even by force majeure, of books, records, or information supporting listed operations.

Tax Fee

In tax law, "tax liability" refers to the amount of money the taxpayer must pay to extinguish the tax debt. There are two ways to determine the amount payable:

1. Fixed Charges

The law establishes the event and a fixed amount to be paid directly, as in fees.

2. Tribute Variables

This value is determined by two elements: the tax base and the tax rate.