The taxpayer requested guidance on transforming a capital company into a sole proprietorship. They specifically asked about whether they could keep records using the basic accounting method, when their obligation to submit Ba-Bs forms would end, and their obligations under VAT and income tax laws. The response clarifies that the transformation of the limited liability company into a sole proprietorship would not be considered a “transfer” under corporate tax law. As a result, any gains from this transformation would be subject to tax. The company would need to be liquidated, and the sole proprietorship must undergo a new establishment process. The VAT implications include calculating and reporting VAT on assets transferred during the conversion. The taxpayer is also allowed to keep records using the basic accounting method upon starting the new sole proprietorship. Finally, the company must issue invoices for transferred assets based on fair market value, and the Ba-Bs reporting obligations will no longer apply once the sole proprietorship starts keeping records using the basic method.
Source: Revenue Administration
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