- December 19, 2019
- Posted by: saenicsa
- Category: Tax
As the year 2019 draws to a close there are various year-end tasks that need to kept in mind and taken care of so as to not be penalized by the Nicaraguan Tax Authority.
One of these obligations has to do with reporting inventory amounts as of December 31st .
Who has to report?
A considerable majority of businesses that have this obligation are typically commercial businesses, but there are some business such as restaurants and bars that also have to remember to intake the amounts in inventory as of closing time December 31st of each calendar year. Also, businesses that provide services, but are constantly have a left over of supplies that were used for a client project, if the materials are to be used again later on, then this would constitute as inventory. This is common with installation type businesses.
It is important to keep in mind that inventory is an asset that is intended to be sold in the ordinary course of business. Inventory may not be immediately ready for sale. Inventory items can fall into one of the following three categories:
- Held for sale in the ordinary course of business; or
- That is in the process of being produced for sale; or
- The materials or supplies intended for consumption in the production process.
When does this have to be reported?
This report is necessary to send within the initial 30 calendar days of each calendar year, so the report for the year 2019 needs to be reported by January 2020. To prepare the report, once the business has closed on the final day that it will operate during the year (31st of December, for example), a count must be done of all the physical items that make up the inventory on hand that particular day.
This count must then be costed and a report must be elaborated that reflects and shows the amounts per item and as a whole of what was in existence in inventory.
Beware of the fines and penalties!
The year-end inventory report is one of the manners in which the DGI controls and monitors businesses, without necessarily having to physically audit them. This is due to the fact that, as a general rule, in businesses where there is an important amount of inventory there should also be an important amount of sales that correspond what is being reported.
To not report inventory within the initial 30 calendar days of each new year this will result in fines and even undue scrutiny on behalf of the DGI. If you have a business that has to manage inventory, we encourage you to comply with this regulation and avoid unnecessary problems or inconveniences. Should you need any assistance or help with either accounting, taxes, audit or payroll services in Nicaragua we would be glad to assist you, feel free to contact us HERE.