Tax Rates in Latin America – What You Need to Know04 May, 2021
There’s a lot of external pressure on Latin America when it comes to its tax rates. The US has reformed its tax system in the past and at the same time, the entire region is trying to prevent the economical decay of its countries – noteworthy here are Bolivia and Venezuela.
As such, most of Latin America was pretty much forced to address its tax rates or systems. The main result is that a lot of its countries experienced tax changes, this being the main reason why small business tax attorneys are essential to any new business operating in these regions.
If a business owner or accountant overlooks something, a business may get into trouble before they even know it!
Lower Income Tax
Roughly two years ago, the tax rates of Argentina have been updated, so to speak, so that those companies/individuals that engage in a certain set of activities are subject to a different kind of tax.
As such, the tax on income is lowered to 15% for those that dabble in research, development, and the likes. The only restriction refers to a maximum employee number.
At the same time, this tax change also affects the contributions to social security demanded from employees – and in this case, they have been reduced.
Changes in the Tax System
As some of you might know, Brazil has a pretty complicated system when it comes to taxation. This aspect has been noticed by the authorities as well and steps have been enforced to simplify it. Ultimately, the goal is to make paying tax less of a chore.
- Taxes that are federal in nature are to be replaced with the very common VAT. During this process, things like a variety of contributions and financial taxes will be completely removed from the system.
- At the same time, the tax on corporate income is to be reduced to as low as 20%.
Overall Tax Changes
The country mentioned above, Argentina, as well as a couple of other countries in Latin America have taken steps to reduce their tax on corporate income – mostly to below 30%. On top of that, in some scenarios, it is expected that after the 2020-2021 period, this particular tax will be further decreased and go as low as 25%.
Some tax rate changes can also be noticed when it comes to indirect transfers of shares. From now on, these will be taxed with 15% – or with 30% in cases where the entity is of a foreign nature.
The Bottom Line
Tax rates in this particular region are, usually and depending on the country, quite complex. However, the tax authorities of each country are reportedly taking slow and steady steps to simplify everything related to taxes, rates, and the taxation system.
So far, we see major improvement when it comes to taxes on corporate income – which have been lowered to just 20% in some regions. Given that some countries in this region are regarded as good places to start a business, these changes in the tax rates only make it easier for people to establish lives there – thus helping the economy as well.
Follow Sounds and Colours: Facebook / Twitter / Instagram / Mixcloud / Soundcloud / Bandcamp
Subscribe to the Sounds and Colours Newsletter for regular updates, news and competitions bringing the best of Latin American culture direct to your Inbox.