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What fiscal withholdings apply in public contracts?

Contract Execution

Well, look, the issue of fiscal withholdings in public contracts is not to take it lightly. If you have a company and throw yourself to public tenders, you better get well on how the matter works, because if you are wrong, the Treasury does not forgive. And yes, each country brings its roll, so there is no universal recipe.

In general, there are two things that will retain you or yes: the Income Tax (the famous IR) and the VAT. The public entity does not go with Rodeos: they pay you, but before you discount what touches and send it directly to the Treasury. Thus, one.

With going, the joke is that every time they pay you for the services or products you deliver, they take away a piece. How much? It depends, but it is usually between 1% and 2% of the total value. Sometimes less, sometimes more, it depends on the local fiscal law and whether the government woke up generous (spoiler: almost never).

The VAT theme is another ticket. Here it is not only what the service or product costs, but also other extra costs, and above all that goes the VAT percentage. It can be between 10% and 20%, it depends on the country and the type of things you sell. There are places where certain public entities do not even pay VAT, or there are contracts that save these withholdings (research and development things, for example). Because? Because they decided so and now.

Now, if you are the contractor, do not believe that why you retained you. You have to declare that income, add the VAT, pay what touches and carry a decent accounting (no loose leaves or napkins accounts). Basically, IR retention is just an advance of what you are going to have to pay at the end of the year. So you don't get emotions if you see less taxes at the time.

My advice? Don't play it alone. If you are going to enter this, look for a good accountant, one who knows how to move through the fiscal swamp. And keep everything: invoices, receipts, even the emails where they tell you "we pay you tomorrow." Because if something goes wrong, the SAT, the AFIP, the Sunat, or whatever it is called in your country, it will not forgive you.

Anyway, that fiscal withholdings in public contracts are like paella rice: they cannot be missing. If you do not meet them, you get into serious problems. And as the rules change depending on where you are, better ask before with an expert. It is better to prevent walking later, right?

Marta Jiménez

Marta Jiménez

Expert in public procurement • Digital transformation of tenders • Trainer and author at Tendios

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