Artículos en Inglés
Translated by: Vivian Melara
In a previous article we wrote about a person’s’ need to acquire a Taxpayer Identification Number (NIT) and an Individual Taxpayer Registry Number in order to carry out the fiscal obligations imposed by the law. Among the obligations generally referred to as taxes, are the following: the Tax on Property Transfer, Service tax and the Income Tax Return. These concepts harbor a wide range of topics, subtopics, consequences, implications, problems and exceptions, which is why it is a fairly difficult task to summarize and generalize them. We will try our best and we apologize in advance if our explanation is oversimplified. The study of fiscal topics, without exaggeration, can last a whole life.
The Tax on Property Transfer and the Provision of Services is a tax that contains the added value of the production processes and the provision of services. This is why it is referred to as value added tax or IVA in Spanish. The IVA Law, in article 1, establishes that the tax will be applied to the transfer, importation, internment, exportation and consumption of the movable goods; and to the lending, importation, internment, exportation and the consumption of services.
For example, if my job is to sell food, hamburgers specifically, when I sell a hamburger I will charge a dollar for it plus the corresponding tax percentage. In El Salvador, this is 13%, which is why I’ll charge thirteen additional cents. To be able to sell the hamburger, there is a necessary process where many entities became involved so the final product existed. The farmer who planted the lettuce and the tomato, the agronomist who sold the seeds, the baker who prepared the bread, the company that produced the ketchup and the mayonnaise, etc., intervened. Each one of these entities contributed “something” additional to the making of each part of the hamburger. Even I, the last link in the chain, contributed my knowledge, my special sauce, my brand, my publicity so the product could be sold. This additional “something”, the added value, is what the IVA taxes.
Consistently with what has been mentioned it’s important to pay attention to the fact that the added value of sold products and the provided services and the tax this generates, must be recognized by someone. In this way, articles 4 and 16 of the Law imply certain effort in the selling of products and the provision of services, meaning, in other words, the sale of product or service is being done to generate a profit and under certain regulations.
This “recognition”, the payment for the effort, the payment for the added value and the payment of the tax that it generates must be done by a specific individual, a person that takes advantage of the good or product. This person is the final consumer. As a hamburger salesman, I should not pay the IVA for the meat, the lettuce and tomato, or the IVA for the cheese. Despite this, when I acquire these products, the seller is obligated to charge them. This generates a consequence we will explain in future articles such as a Fiscal Credit and the respective receipt, like issuing an invoice.
In their curriculum, American universities number introductory courses as 101. We have added the legend “101” to this article’s title. I hope this is the beginning of an introduction to the fiscal system that applies to societies.