Tax Bulletin

August 2016

Tax Information


Current Base Salary


Current Interest Rate
(March 1st, 2016)


Late payment penalty rate
(month or part month)


Reference Exchange rate BCCR
(Ago 2, 2016)





Would you like it packed or canned?

If we were asked while making our purchases at the supermarket, butcher, famers market or any other business if we would like to receive the products packaged or canned, our natural reaction would probably be to ask the seller for its opinion. The answer received from different vendors would probably be drastically different because everyone will interpret these terms according to their better understanding.

The vast majority of goods have some type of packaging that ranges from the simplest bag to the more elaborated box in order to prepare it for retail, to ensure the food safety and quality or even to facilitate transportation. For tax purposes, it is of relevant importance to be clear what is meant by the Administration regarding packed and canned products, as this directly affects our position as contributors of the General Sales Tax (IGSV) as well as the consumer’s pocket.

The General Sales Tax (IGSV) is a tax levied on the value added in the sale of goods and the provision of some services, and regulated thru Law No. 6826 of November 8, 1982, its amendments and its Regulations. Article 1 of such law includes the definitions of terms used in the regulatory framework, and it used to include "packaged" and "canned" definitions, referring to those products in sealed tin or glass containers. This definition has an impact the tax treatment as the IGSV law exempts from the payment of the tax those defined in Article 9 and detailed in Article 5 of the Regulation; which includes goods presentation when they are packaged or canned. A good example of this are sausages, which are exempt, with the exception of those that are specifically packaged or canned.

However, in the last reform of the Law regulations, published on July 6th, 2016, under decree 39732-H, there were changes to the definitions contained in Article 1, including the elimination of the definition of packaged and canned. This omission represents a huge legal uncertainty for taxpayers, since in the absence of ruling, the tax authorities could give a different and wider interpretation than the one included in the preceded version of the regulations, which would clearly affects the interests of the taxpayer. This also has a direct impact on imports, since there are codes in the customs tariff for exempted products and specific codes responding precisely to the exceptions to packaged and canned products; before this, there is an imminent risk that during the immediate and post customs controls, the administration officials can proceed with changes in the products codes considering that the products are packaged as they come in bags or boxes, in order to preserve the product for transportation. This will also involve an analysis of the subsequent tax treatment should the products receive in all the sales chain.

Given this scenario, it is advisable to take advantage of existing tools that may allow us to obtain rulings from the Tax Administration in order to avoid contingencies that can lead us to adjustments and penalties that may have a negative impact for businesses.

Jaime Morales
Tax & Legal

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