July 1st was the effective date for the application of new version of VAT taxes known as ITBMS (Impuesto de Transferencia de Bienes Muebles y Servicios). There was a wide confusion on the application of the ITBMS tax on cellphone electronic cards. Numerous stores and street vendors were charging a ITMBS tax of twelve (12) percent instead of seven (7) percent. People were so angry, that the Director of Internal Revenue, Luis Cucalón, had to organize a press conference to clarify the correct application of the new tax.
He explained. The new legislation introduced two taxes: the first one is a 5 percent tax based on the value of the phone card and should be paid by the commercial distributor of the cards. This tax known as ISC (Impuesto Selectivo de Consumo). By no means, should this tax be transferred to the end user of the card. The second tax is the 7 percent ITBMS tax based on the value of the card and must be paid by the end consumer. For example, if you buy a prepaid cellphone card of $5.00, the ITBMS tax should be $0.35 and not $0.60. Many stores were incorrectly charging $0.60.
Mr. Cucalón warned that those stores charging the incorrect additional 5 percent ISC to the end users would be fined or incarcerated for committing fraud.
Caveat emptor my dear reader. Don’t be ripped off and pay more than what you have to. Only pay seven percent ITBMS tax on your telephone electronic cards. It’s the law of the land.
Lingua Franca 