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Income Tax Law allows to activate all expenses incurred in order to start a company such as legal expenses, municipal permits, facilities purchases and other goods that are necessary to start generating income. As these expenses help to generate income in more than one period, the legislator allows them to be activated and amortized in a time lapse between one and six years.

 

It is important to point out that the election of the period of amortization depends exclusively on the taxpayer, with no need to notify the Internal Revenue Service. This is why these concepts, which have to be related to the generation of income subject to First Category Income Tax and must have backup documentation, can be amortized in one, two, three years… up to six.

 

Finally, we can mention that the amortization amount does not need to be even, as the Internal Revenue Service has interpreted that it can be amortized in non-even amounts in whatever time lapse the taxpayer choose.

Germán R. Pinto Perry