DGT-R-38-2020 - Declaration of Inactive Corporations

Tax Treatment - Income Tax Declaration

Through resolution DGT-R-38-2020 issued on November 5 and published in the official gazette, La Gaceta, the Ministry of Treasure modified the content of resolution DGT-R-75-2019 and DGT-R-012- 2018, the foregoing means a consolidation of the accounting and tax processes for those Legal Persons (Corporations) that do not carry out lucrative activities and that are not subject to income tax, allowing greater control over the real estate or movable property that is guarded under this type of entities, in previous years it was common for Corporations and LLC to be constituted to transfer the home, buildings, or vehicles away from the direct control of the natural person, who in most cases was the legal representative.

Transcendentally we have been observing how the Tax Administration through the approval of Law 9635, requires this group of taxpayers to order the book value of the assets it controls and that affect the assets of the legal entity

Among the most important considerations we must mention:
  • Each company and its composition of assets must be analyzed individually.

  • Determine that the equity registered to the company is justified since if there is a lack of accounting evidence, the presumption of income on said capital would mean a 30% tax to be paid plus the penalties determined by the audit procedure. 

  • As established by the Commercial Code, from the constitution companies must keep an accounting according to current regulations, information that is the support for the declaration indicated by resolution DGT-R-38-2020 and the justification of the assets.

  • The dissolution of the company is not recommended a priori, since the foregoing would mean for the legal representative to assume the commitments as joint and several.

What happens if I transfer the assets of the company personally?

We must remember that as of July 1, 2019, capital gains are taxed at 15%, and in the case of real estate, there is the exception that real estate registered before July 1, 2019, allows paying the tax on a 2.25%, based on the above, if the company has real estate and transfers it personally, the cost-benefit of the capital gains tax must be analyzed, as well as the amount of the transfer tax, except that the transfer of the asset is subject to to the Exceptions of article 28 bis.

Obligations from January 1, 2021 to INACTIVE Corporations
  • File the D101 with the Balance Sheet, using the information of your assets, liabilities and capital stock as established by the International Financial Reporting Standards (IFRS) and resolution DGT-R-029-2018.

  • Pay the Stamp Tax on Education and Culture.

  • Pay the Corporation Tax

  • Keeping the accounting in accordance with the Commercial Code and International Financial Reporting Standards (IFRS).

Limitations for INACTIVE companies
  • When the corporation is classified as an INACTIVE legal person, it is classified under the activity "960113 Legally constituted Legal Person", it cannot be deregistered in the single tax registry until it is: Liquidated, closed, canceled ex officio before the entity where it was incorporated.

  • Neither will you be able to opt for patents or licenses as established by the Code of Tax Standards and Procedures. 

As mentioned, it is very important to analyze each case individually, although we knew that we had to present the declaration for legal entities at the end of December 2020 according to the company's accounting information, one of the most significant changes with this resolution is the way in which information and limitations are stated.