The tax regime is the set of institutions and rules that regulate the tax situation of a legal or natural person.
The tax regime is the set of rules and institutions that govern the tax situation of a natural or legal person. It is, therefore, the set of rights and obligations that arise from the development of a specific economic activity.
From the Latin regime , regime is the political and social system that governs a certain region and the set of rules that regulates a thing or an activity. The concept also refers to the historical formation of an era (political regime). Fiscal , for its part, is what belongs to or relates to the treasury . This last term is linked to the public treasury or public organizations that are dedicated to the collection of tributes and taxes.
Characteristics of a tax regime
The tax regime acts as a guide when it comes to the settlement and payment of taxes. At the time of developing an economic activity, people must register in some category to comply with the obligations of the treasury. In general, there are various options, that is, various tax regimes that you can subject to depending on the characteristics of your business.
The tax legislation of each country determines the conditions of the tax regimes. The amount of money to be disbursed, the expiration dates, the declarations and everything related to taxes depend on the regulations in force in the different territories, which may also change over time.
It is possible to change the tax regime if economic activity develops differently than expected and the obligations of the framework no longer adjust to reality.
The tax regime varies by country.
Its impact on natural persons
It is important to define the concept of a natural person : this is any individual who has the capacity to assume obligations and make use of his or her rights. In this specific context, among its characteristics is the possibility of carrying out activities that are within the framework of the law.
For tax purposes, natural persons are grouped into those who provide services; those that carry out commercial activities; and those who work for an employer and receive a salary.
Regardless of the characteristics of each country, taxpayers have the obligation to contribute money for public spending through the payment of taxes and this arises, in turn, from the activities they carry out. Among the many possibilities are the provision of services , the leasing of real estate, employment and commercial activities.
A commercial activity implicitly involves the purchase and sale of items in exchange for profit or profit for the person who carries it out; On the other hand, providing a service consists of working on your own, without depending on an employer. The third possibility, work for a salary, is the provision of a service but in an organization whose hierarchy has roles above the employee.
There are certain special cases, which cannot be included in the aforementioned activities, and which also belong to a specific tax regime:
- The additional remunerations (called emoluments ) received by the board of directors.
- The income of diplomats from foreign embassies and international organizations.
- The income received by the armed forces, federal entities and municipalities.
- Advances received by members of associations and civil societies.
Contributing to public spending is not only an obligation, but represents a very important benefit for a country's economy, since it is one of its main sources of income. The tax regimes to which a natural person can belong are various and depend directly on the type of activity they carry out, as well as their average income.