The Supreme Court issued a new binding sentence that could bring millionaire implications for taxpayers. The criteria applied since 2013 are changed.
The Supreme Court issued Cassation 6619-2021 as a binding precedent, by which it modified the rules for payments on account corresponding to Income Tax (IR).
The Cassation indicates that late or incomplete disbursement of payments on account generate default interest for the debtor. Likewise, it is established that these payments on account are tax obligations, so their non-compliance also entails a fine.
This resolution changes the way in which payments on account have been treated since 2013, the year in which the Supreme Court established that these were not taxes.
According to Walker Villanueva, a PPU partner, this resolution entails a million-dollar economic impact.
“When a taxpayer does not pay what is owed, a fine of up to 50% of the value of the unpaid amount is imposed. That fine increases over the years and can become an extremely high amount,” says Villanueva.
“Debts due to non-disbursement of the payment on account are canceled at the end of the year when the IR declaration is made, since then everything owed is regulated. However, the fines continue, so this effect is much more detrimental than the one mentioned above, ”he clarifies.
Background on payments on account
At the end of last year, the Supreme Court issued Cassation 27444-2018, through which the Judiciary indicated that the difference between what was disbursed as a payment on account of the IR and what actually had to be paid generated default interest for the entire period in that the full amount owed was not paid.
However, that Cassation did not have the character of a binding precedent, therefore, according to Villanueva, it was only “a drop in a sea of resolutions that said the opposite.”
The Cassation also indicates that the interest generated by late or incomplete disbursement of payments on account cannot be capitalized. In this sense, the sentence is favorable for taxpayers.
According to the Supreme Court, applying interest capitalization in these cases would violate the principles of reasonableness and non-confiscation.
However, this rule is not applicable to contentious tax proceedings that have already concluded or that have the quality of a decided matter. Nor does it apply to contentious administrative or constitutional processes that have a final judicial decision or with the quality of res judicata.