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Practical manual for Income Tax 2023.

Introduction: capital returns

Regulations:  Art.  21 Law Income Tax

Subject

The following are considered to be full capital returns: " all profits or compensation, whatever their name or nature, monetary or in kind, that come, directly or indirectly, from assets, goods or rights, whose ownership corresponds to the taxpayer and are not related to economic activities carried out by this ".

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

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 an asset, a right of a real or personal nature or a faculty.

  3. The assets, goods or rights from which capital gains are derived must be the property of the taxpayer.

  4. They cannot come from the transfer of ownership of assets, unless under the Personal Income Law itself they are classified as capital gains, as is the case with the transfer, reimbursement, amortization, exchange or conversion of any kind of financial assets (see article of the Tax Law).

    See in this regard the section on " Income from the transfer of equity to third parties " in Chapter 5 of this Manual.

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

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

Classification:

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

  1. Income from real estate capital , which includes income from real estate, both rural and urban, that is not related to economic activities carried out by the taxpayer.

  2. Income from movable capital , which includes income from other assets and rights owned by the taxpayer and which are not related to economic activities carried out by the taxpayer.

This chapter is devoted to the returns on real estate capital, while the following chapter discusses the returns on movable capital.