Changes in Tax Prescription
Reduction of the Limitation Period
Currently, the general limitation period for determining tax debt is eight years, which may be extended to ten. The proposed reform seeks to reduce this period to four years.
This modification strengthens the principle of legal certainty, ensuring that taxpayers are not indefinitely exposed to audits for extended periods. In practical terms, if the Tax Administration does not exercise its authority within the newly established period, the right to determine the debt would be extinguished.
Prescription of Tax Enforcement
The limitation period for enforcing tax debt, currently five years, would be reduced to two years. This means that once the debt has been determined, the Tax Administration will have a shorter timeframe to initiate and conclude enforcement proceedings.
More importantly, the authority to enforce tax debt would no longer be imprescriptible. This represents a substantial change, introducing a clear time limit to the State’s coercive collection power, aligning domestic tax standards with international principles of reasonableness, particularly regarding the right to effective judicial protection and due process.
Extraordinary Forgiveness of Tax Debts
The reform contemplates the total forgiveness of tax debts or pending obligations generated up to December 31, 2018, for amounts below Bs 10,000,000, including omitted tax, interest, penalties, and inflation adjustment.
The objectives are twofold:
- To clean up the portfolio of uncollectible debts of the National Tax Service.
- To provide financial relief to taxpayers, especially SMEs.
In practice, a company with historical debts accumulated through penalties and interest could have its obligation extinguished if it meets the established requirements. This measure reflects administrative efficiency and fiscal policy criteria aimed at economic reactivation.
Regularization of Taxes Generated Since 2018
For taxes generated from January 1, 2018 onward, the proposal provides for the forgiveness of penalties and interest, requiring the taxpayer to pay only the omitted tax plus inflation adjustment.
Deadline and Payment Modality
- Enrollment period: 120 days from the law’s entry into force.
- Payment method: lump sum or up to 24 installments.
This mechanism encourages voluntary compliance, reduces tax litigation, and strengthens tax culture. For instance, a taxpayer who failed to declare VAT during certain periods could regularize their situation by paying only the updated principal tax, without the additional burden of accumulated sanctions.
Transparent VAT and “Separate” Invoicing
Law 843 currently establishes a nominal rate of 13% for Value Added Tax (VAT). However, in practice, the effective rate reaches approximately 14.94% due to the calculation method embedded in the final price.
The proposal aims to:
- Maintain the nominal rate at 13%.
- Eliminate the implicit effective rate.
- Display VAT separately on the tax invoice.
- Adopt a “separate” VAT invoicing system.
This would enhance transparency for consumers and simplify tax calculation, as the tax would be clearly shown as an additional component to the base price.
RG-SIETE: Special Integrated Transitional System to the General Regime
The new system proposes integrating VAT, IT, and IUE/RC-IVA into a single payment, applying a 5% rate on total sales.
Key Features
- Single payment equivalent to 5% of gross sales.
- Validity period of 3 years.
- Maximum income threshold: Bs 400,000.
- Simplified invoicing without complex administrative burden.
If the taxpayer exceeds the established threshold, migration to the general regime will be mandatory.
This special regime seeks to facilitate the formalization of small taxpayers and simplify tax compliance, promoting inclusion within the formal tax system.
In conclusion, the proposed reforms introduce structural changes regarding prescription, tax enforcement, debt forgiveness, and regularization mechanisms, while also transforming the VAT invoicing system and creating a simplified transitional regime. These measures strengthen legal certainty, promote economic reactivation, and seek to balance the State’s taxing authority with taxpayers’ rights.
If you are facing a situation related to tax debts, enforcement proceedings, or need to apply for a regularization plan, please contact one of our specialized attorneys. We are at your service!
What is tax prescription?
It is the extinction of the Tax Administration’s right to determine or enforce a tax debt once the legal period has elapsed without exercising such authority.
Can tax debt cease to be imprescriptible?
Yes. Under the proposed reform, even enforcement authority would be subject to a defined limitation period, strengthening legal certainty.
Which debts may be extraordinarily forgiven?
Those generated up to December 31, 2018, not exceeding Bs 10,000,000, including taxes, interest, penalties, and inflation adjustment.
What must be paid when regularizing taxes generated since 2018?
Only the omitted tax plus inflation adjustment, with penalties and interest fully forgiven.
What changes under the Transparent VAT system?
VAT will be shown separately on invoices and applied at a 13% rate calculated outside the base price, eliminating the implicit effective rate.
The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.
