It is an extraordinary update that must be made on non-monetary assets and liabilities, the consequence of which is a variation in the amount of Net Equity
LISLR Art. 173 and RLISLR Art. 90
Who is subject to the Initial Adjustment?
- Mandatory taxpayers (keep accounts) Voluntary taxpayers (Non-commercial professions) Occasional taxpayers (natural persons) Deferred taxpayers (In pre-operational stage)
Art. 173, 174 and 177 LISLR and Art. 90 and 100 of the RLISLR
Enrollment in RAR
- Taxpayers must register in the Register of Updated Assets (RAR) The registration causes a tax of 3% calculated on the net adjustment of depreciable fixed assets 3% may be paid in three (3) equal and consecutive portions
Art. 174 LISLR and Art. 106 of the RLISLR
RAR Return (Form 23)
Tax Exclusions
It includes those accounts and amounts that by provision of the Law and Regulations, must be excluded from the taxpayer's assets and liabilities.
Exclusions will accumulate in an equity account called:
Art. 173 LISLR; Art. 97 and 105 of the RLISLR
What are the historical tax exclusions to heritage?
1) Capitalizations and revaluations
2) The assets, debts and obligations applied in their entirety to the production of presumed, exempt, exonerated or not subject enrichments
3) Intangible assets not paid
4) Accounts and bills receivable from shareholders, administrators, affiliates, subsidiaries and other related and / or related companies.
Art. 173 LISLR; Art. 97 and 105 of the RLISLR
Adjusted Amount and Net Adjustment
CPI variation
The Consumer Price Index (CPI) of the Caracas Metropolitan Area (CPI)
Prepared by BCV, it is the instrument to carry out the update provided for in the Income Tax Law.
It will be expressed with five (5) decimal places
(Art. 175 of the Law and 91 of the RLISLR).
CPI Caracas Metropolitan Area.
BCV. Base = Dec. 2007
Monetary items
They are the assets and liabilities that represent, on an accounting closing or settlement date, a certain amount of money. They are the updated or non-adjustable games.
Examples:
Cash, accounts and bills receivable and payable in national currency; credits and debts with readjustment clause; credits and debts in foreign currency; Interest collected or paid in advance or recorded as deferred charges or credits.
Art. 94 of the Regulations.
Non-monetary items
They are those accounts of the Balance Sheet that due to their nature or characteristics do not represent, on the accounting closing or settlement date, a certain amount of money. Are the items not updated or adjustable
Examples:
Inventories, goods in transit, fixed assets, depreciation, construction in progress, permanent investments, investments and obligations convertible into shares, intangible assets, etc.
Second Paragraph Art.173 Law and Art. 93 of the Regulation.
Updated Fiscal Balance Sheet
At the end of each taxable year, the taxpayer must prepare the Updated Fiscal Balance Sheet
It should show:
- Non-monetary assets updated Monetary assets Non-monetary liabilities updated Non-monetary liabilities Equity accounts not updated Equity update accounts Historical Tax Exclusions to Equity
Art. 96 of the RLISLR
Fiscal control
It is the set of activities carried out by the Tax Administration to achieve, through different procedures, compliance with the provisions framed in the Income Tax Law and its Regulations.
Tax Legal Books
The taxpayer must keep in tax legal books:
- Updated Fiscal Balance Sheet Initial inflation adjustments with respective details 3% RAR calculation
Art. 102,105 and 107 of the RLISLR
Steps for Initial Adjustment
1) Identify:
a) Monetary and non-monetary items
b) Historical Tax Exclusions to Heritage
2) Carry out the entries of the Tax Exclusions
3) Determine acquisition dates and update date, the respective CPI and variation of the CPI
4) Calculate, in Worksheets, the respective adjustments
5) Carry out tax entries, as appropriate
6) Prepare the updated Fiscal Balance Sheet
7) Submit the RAR
Initial Adjustment Worksheets
Initial adjustment inventories
Practice
Check for each statement: True or False
- According to the Initial Inflation Adjustment, the ending inventory will not be adjusted, if the taxpayer has no inventory at the beginning of the taxable year:
- True False
- The Updated Fiscal Balance Sheet will serve as the basis for calculating the net worth at the beginning of the year:
- True False
- The Fiscal Additional Book is an instrument of Fiscal Control:
- True False
- All items in the Balance Sheet are subject to the Initial Adjustment:
- True False
Circle the correct answer.
- The effect of the initial adjustment on non-monetary items affects:
to. To the Trial Balance
b. To the Cash Flow Statement
c. To Heritage
d. To the Profit and Loss statement
- Investments in shares not listed on the stock market are adjusted for:
to. Be equity instruments
b. Provision of the Commercial Code
c. Provision of CPS-10
d. None of the above
- The Register of Revalued Assets (RAR) pays a tax on fixed assets:
to. From Bs.3
b. 3%
c. 5%
d. None of the above
- The Historical Tax Exclusions to Heritage is an account:
to. Heritage
b. Of the asset
c. Of the Liabilities
d. From income
a.-Suppose that HACEMOS CA (HACECA) was incorporated and began operations in January 2006 and its accounting closing date is December of each year. In January 2006, the capital stock for Bs. 10,000,000 was subscribed and paid. Likewise, on July 2004, a capital increase was made up to Bs. 16,575,000
b.-The financial statements: Statement of Profit and Loss and Balance Sheet at the end of December 2006 are as follows:
c.-The initial and final inventory at historical costs are indicated in the cost of sales.
d.-Suppose that the Land for Bs. 2,040,000 that appears in the Balance Sheet as of
12-31-2006, was acquired in March 2006.
e.-Suppose (according to accounting records) that the Building was acquired in May 2006 for a value of Bs. 3,825,000 to be depreciated in a straight line for four (4) years.
f.-In August 2006, Furniture was acquired for Bs 1,193,400, depreciable in a straight line for 3 years
g.-Suppose that HACEMOS CA (HACECA), contracted on April 2006, the use of a “Factory Brand” for a cost of Bs.15,300,000 to be amortized over 10 years.
h.-Suppose that the investments in shares not listed on the Stock Market that appear in the Balance Sheet of HACEMOS CA (HACECA), for Bs. 7,650,000 were acquired in July 2006.
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