Understanding Taxable Events and Obligations

Posted on Nov 17, 2024 in Economy

Taxable Events and Obligations

According to the General Tax Law (GLT), a taxable event is fixed by law and triggers a tax obligation.

Features:

1. Defines the economic nature of the tax.
2. Determines the tax obligation.

Structure:

1. Material or Objective Element: Reflects the manifestation of wealth subject to taxation.
2. Subjective Element: The relationship between the subject and the taxable event.
3. Space Element: The territory where the tax applies (global or real obligation).

Waivers

Waivers prevent a tax action and can be:

• Objective Exemption: Acts on the material element.
• Subjective Exemption: Acts on the subjective element (taxpayer).

Taxation Rule

The rule dictates the obligation to pay tax.

Exemption Rule

Prevents the tax obligation from arising.

Subject Does Not

The absence of a standard defining a tax assessment prevents the tax obligation.

Taxpayers

Taxpayers are obligated to fulfill tax obligations, either as taxpayers or substitutes.

Taxpayer Taxable Obligations = Materials + Formal (replacement)

Taxpayers can be individuals, legal persons, or entities without legal personality.

Replacement of the Taxpayer

The substitute fulfills the tax obligations on behalf of the taxpayer.

Tax Base

The tax base is the magnitude of the measurement or assessment of the taxable event.

There are three systems to determine the tax base:

1. Direct Estimation Method
2. Objective Estimation Method
3. Indirect Estimation Method

Direct Estimation Method

Income – Expenses +/- Adjustments = Taxable Base

Objective Estimation Method

Applies to individuals using modules specified in each tax.

Indirect Estimation Method

Used when the administration cannot determine the tax base directly.

Net Tax Base

The net tax base is the result of applying reductions to the tax base.

Tax Rate

Tax Rate is the coefficient or percentage applied to the net tax base to obtain the tax quota.

Classes of Tax Rates

Ad Valorem:

Percentage rates applied to bases expressed in money.

Specific:

Rates applied to bases not expressed in money (e.g., area, number of workers).

Based on Tax Base Amount:

• Proportional: Rate remains constant regardless of the base.
• Progressive: Rate increases as the tax base increases (classes or steps).

• Regressive: Rate decreases as the tax base increases.

Fixed and Discretionary Rates:

• Discretionary: Legislator sets a maximum and minimum rate.
• Fixed: Legislator sets a specific amount.