One-year exoneration of the payment of Income Tax for Cooperative Associations

One-year exoneration of the payment of Income Tax for Cooperative Associations

Presidential Decree No. 4,695 was published in Official Gazette No. 42,339 of June 15, 2022, exonerating from the payment of Income Tax (IT), the territorial net taxable income obtained by Cooperative Associations. Please find below the most relevant aspects of this Decree:

1. Exoneration. By means of the Decree, the territorial net taxable enrichments obtained by Cooperative Associations, constituted under the Decree with Force of Law on Cooperative Associations are exonerated from the payment of IT (article 1).

2. Update of the Tax Information Registry and the Certificate of Compliance issued by the National Superintendence of Cooperative Associations. To take advantage of the exoneration, the Cooperative Associations must update their Tax Information Registry, for which they must submit their current Certificate of Compliance, issued by the National Superintendence of Cooperatives (article 2).

3. Determination of exempted enrichments. To determine the exonerated enrichments, the rules on income, costs and deductions of taxable enrichments provided in the Decree with Rank, Value and Force of Income Tax shall apply (article 3).

4. IT-taxable activities. If the beneficiary of the exoneration established in the Decree carries out activities taxed with IT and exonerated under this Decree, the common costs and deductions applicable to the income generated by such enrichments will be distributed proportionally (article 4).

5. Annual return of taxed and exempted global net enrichments. The beneficiaries of the exoneration established in this Decree, must file the annual return of taxed and exonerated global net enrichments, as applicable, under the terms and conditions established in the Income Tax Law Regulations (article 5).

6. Imputation of losses resulting from the exempted activity to the enrichments resulting from the activity taxed with IT. During the term of the exoneration benefit provided for in the Decree, the losses resulting from the exempted activity may not be imputed in any fiscal year to the enrichments generated by the activity taxed with IT (article 6).

7. Loss of the benefit of the exoneration. Beneficiaries who do not comply with the requirements and obligations set forth in this Decree and those set forth in the Decree with Rank, Value and Force of Law on Income Tax, its Regulations and other applicable rules will lose the exoneration benefit (article 7).

8. Entry into force and applicability. The Exoneration Decree will be in force for one (1) year from the date of its publication in Official Gazette (June 15, 2022). This period may be extended for an equal period (article 8).

The exoneration will apply to the fiscal years that are in progress when this Decree enters into force (article 8).