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Practical Income Manual 2020.

Introduction: capital returns

Regulations: Art. 21 Law Personal Income Tax

Subject

Full returns on capital are considered to be " the totality of profits or considerations, whatever their denomination or nature, monetary or in kind, that come, directly or indirectly, from assets, assets or rights, whose ownership corresponds to the taxpayer and are not affected by economic activities carried out by him ".

However, the income derived from the transfer of ownership of the assets, even when there is a retention of title agreement, will be taxed as capital gains or losses, unless pursuant to the Personal Income Tax Law are classified as returns on capital.

According to the transcribed legal definition, capital returns are characterized by the following notes :

  1. They include all compensation or profits, whatever their name or nature, whether monetary or in kind.
  2. They must derive, directly or indirectly, from patrimonial elements, whether it is an asset, a right of a real or personal nature, or a power.
  3. The assets from which the capital returns are derived must be the property of the taxpayer.

  4. They cannot come from the transfer of ownership of the assets, unless by the Personal Income Tax Law they are classified as capital gains, as occurs in the case of transfer, reimbursement, amortization. , exchange or conversion of any type of financial assets (see article 25.2 Law Personal Income Tax )

    See in this regard the section on " Income from the transfer of own capital to third parties " in chapter 5 of this Manual.

  5. The assets from which they derive cannot be affected by economic activities carried out by the taxpayer.

    The concept of heritage elements assigned to an economic activity is examined in Chapter 6 of this Manual.

Classification:

Depending on the nature of the asset element from which they come, the Personal Income Tax Law classifies capital returns into:

  1. Income from real estate capital , which includes income from real estate, both rural and urban, that is not affected by economic activities carried out by the taxpayer.
  2. Income from movable capital , which includes those that come from the remaining assets and rights of which the taxpayer is the owner and are not affected by economic activities carried out by him.

This chapter is dedicated to the returns on real estate capital, with the next chapter commenting on the returns on movable capital.