Possibility of mediation for taxpayers in debt

6 December, 2021
Possibility of mediation for taxpayers in debt

This December 4, the “” website published information about the option for taxpayers with outstanding debts to request mediation. Let’s see: 

1. Mediation procedure

According to the website, the Law of Economic Development and Fiscal Sustainability established as of  November 29, 2021, that taxpayers having tax litigations with the Internal Revenue Service (IRS) may now take advantage of a mediation procedure to solve their legal disputes.

2. Tax proceedings

According to the Judiciary Council, 13,600 tax proceedings are in process under the COGEP (Código Orgánico General de Procesos – General Organic Code of Proceedings) and 8,778 under the previous procedural regulations. However, the IRS only counts 2 662 active tax litigations, of which 1 003 began before 2018. In other words, these lawsuits are still in process. But there are also passive litigations or momentarily stopped. 

3. Faster solution option: Mediation

To solve these controversies in a faster way, the Government proposed a mediation and arbitration system. Taxpayers currently involved in this type of process will have six months to qualify for a reduction in interest and surcharges.

4. Benefits of mediation

According to the regulations, taxpayers who opt for a mediation procedure will be entitled to remission or forgiveness of interest and surcharges in different percentages. These are established according to the time in which they decide on this option, as from the effective date of the Law.

Those who perform it during the first 60 days will be entitled to 100% remission of interest and surcharges. Those requesting it as of February 2022 will be entitled to a 75% remission, and as of March 2022, only 50%.

5. Disadvantages of judicial litigation

While tax lawsuits are in litigation, they still cause interest with a surcharge, which implies that a rate of approximately 8% per annum is generated. In addition, these legal proceedings can last for more than 10 years.

Source: El Comercio 06/12/21