"LAW OF REFORMS AND ADDITIONS TO LAW N. 822, TAX CONCILIATION LAW"

On February 28th of this year 2019, Law No. 987, Law on Reforms and Additions to Law No. 822, Tax Conciliation Law (Law No. 987), came into force, which reflected important structural changes to the Nicaraguan tributary system. Among the main changes made to this law, the changes that have impacted the most among the various economic agents and taxpayers, have been the reforms to the Income Tax (IR) and the Value Added Tax (VAT). The initial consideration of this law was the consensus on the part, of the legislative body and the tax administration of the need to increase the tax burden and to give greater importance to IR and VAT as primary sources of fundraising for the State, however since it is such an important change to the Nicaraguan tax system, this reform also brought with it, the need to periodically review, discuss and monitor the changes implemented to evaluate the effectiveness and performance of its entry into force.

It is for the aforementioned, that Law No. 987 in its sixth article, Section IV, establishes that this reform is always subject to its due review by the competent authorities with the purpose of maintaining a constant monitoring, supervision and surveillance of each and every one of the tax measures adopted in the law and its regulations. The importance of this revision is based on the effects produced in the collection and in the performance of the economic and productive activities of the different economic, social, professional and business sectors of the country.

The reviewing period established in the abovementioned law delimited that this would be finished by the end of the first quarter at the latest after the entry into force , that was, at the end of May. However, it was a month after the expiration of this period, on June 27th, that the reviewing process began. The guidelines for the revision of the law are based on the call for a comprehensive review process between government authorities and the private sector as a whole, in order to know and evaluate the results obtained as a result of the application of the reform. Also, it is important to take into account that adjustment measures will be discussed and agreed upon to improve the implementation of the law.

It is expected that with this revision it will be possible to overcome possible difficulties and correct any distortions that could arise when implementing it, with the purpose of promoting the rapid growth of the business productive sector and guaranteeing the strengthening and sustainability of the Nicaraguan tax system.