By Law 189 of December 17, 2020, published in Official Gazette # 29179-B of the same day, several important modifications are made to art 699-A and art 700-A is added, which applies to the income tax table of Micro, Small and Medium Enterprises (MPM - Gross income up to B/.200 thousand) and Natural Person Merchant (PNC) respectively.
The most important thing you should know is that, to benefit from these changes to the Income Tax, you must register with the AMPYME Business Registry. Additionally, since this law is retroactive, it also applies to 2020 income tax returns.
We would like to emphasize that it is not clear whether, in order to apply for the new 2020 income tax return table, it is necessary to register with AMPYME before the end of 2020.
We suggest registering both your MPM company and the PNC before the end of the year to avoid surprises.
New table for Micro, Small, and Medium-Sized Enterprises (MSMEs) as outlined in the amended Article 699-A.
To be considered an MPM, your company must meet the following requirements:
The new income tax rate or table for MPMs is as follows:
Previously, a small business with gross income of more than B/.200 lost this benefit, and the applicable rate was that of Article 699, or 25%. However, previously, a small business with gross income of up to B/.100 and a net taxable income of up to B/.11 did not pay income tax. Now, that same company with the same figures will pay a 15% rate on the same profit of B/.11, or B/.1,650 in income tax.
Indeed, under certain circumstances, with the new rate, some MPM companies will pay more than before, but the truth is that any company with income exceeding $100 and up to B/.500 could end up paying less income tax than before.
Remember that without AMPYME registration, you won't be able to apply for this table, so the rate in Article 699, or 25% income tax, would apply.
New table for Natural Persons Merchants (PNC)
An addition to Article 700-A applies to Natural Person Merchants. To qualify for this new rate or table, you must meet the following requirements:
The new rate for Natural Persons Merchants is as follows:
If you do not register with AMPYME, the regular rate of Article 699, which is 25% income tax, would apply.
Please note that if you filed as a natural person, but your income came from a PNC, you will no longer be able to use the table in Article 700 for natural persons.
Let's say you own real estate as a personal property and rent it out. Your total annual gross income was B/. 50, and after expenses, you earned a net profit of B/. 11. Using the table in Article 700 for natural persons, your income tax would have been B/. 0.00. However, you will now be prohibited from using that table and must apply the table in Article 700-A. Therefore, the income tax payable would be B/. 1,100, plus estimated income tax.
Using the same previous example, with gross income of B/.50 thousand, but this time with a net profit of B/.40 thousand, the tax to be paid according to the new table of art 700-A, would be B/.4,000, however with the natural person table that you could use, with that same example you would have had to pay B/.4,350.
Those Who Cannot Register in AMPYME
Those who, individually or through civil partnerships, practice liberal professions, as long as they are not considered commercial acts, for example, accounting firms or law firms.
What rate does the natural person pay?
The personal income tax table has not been modified. That is, all salaried employees and independent professionals (accountants, lawyers, architects, doctors, etc.) will continue to pay their taxes based on their Net Taxable Income, or their earnings for the year, regardless of their income.
Please note that the tables in Article 700-A of the PNC are based on the individual's gross income and not on net taxable income, as is the case for natural persons.
The table in Article 700 of the Natural Person Act is as follows:
Up to B/.11 thousand = 0%
from B/.11 thousand to B/.50 thousand = 15%
from B/.50 thousand onwards 25%.
Can we help you?
At the firm, we can help you register with the AMPYME Business Registry so you can benefit from the aforementioned benefits.
Candanedo y Candanedo also has four lawyers through the associated firm Candanedo Correa SC. The partner in charge of the corporate practice is Mr. Oliver Candanedo. www.ccabogadoss.com
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