Income tax return: Loss offset

In the income tax returns for the taxable year 2018 of resident individuals, only tax losses within the capital and non-labor income categories may be offset. However, such compensation will be subject to special calculations, depending on the year in which the loss was formed.

“in the preparation of the 2018 taxable year income tax return of resident individuals, tax losses of 2017 and prior years may be offset, but following several special rules”

According to the version that Article 330 of the ET had until December 31, 2018, and taking into account the regulation contained in Article 1.2.1.1.20.6 of DUT 1625 of 2016 after being amended with Decree 2250 of December 2017, in the preparation of the income tax return taxable year 2018 of resident individuals tax losses of 2017 and previous years may be offset, but following several special rules, namely:

a. Offsets may only be made within the capital income tax return and/or within the non-labor income tax return.

b. In the case of tax losses obtained in 2016 and prior years, the special calculations that were mentioned in the transitory paragraph of article 330 of the ET, and within article 1.2.1.1.20.6, will have to be made first. These rules indicate that such losses cannot be fiscally readjusted and that additionally they will have to be distributed proportionally between the capital income and non-labor income categories (proportion that will be calculated according to the gross income that is declared first within each category). This type of losses have no time limit to be offset.

c. In the case of losses derived from the 2017 fiscal year, 100% may be offset (only within the following 12 years), but doing so only within the same type of cédula in which such loss was originally obtained. In addition, the aforementioned losses cannot be affected by tax readjustments either.

d. The values carried up to the value of line 52 within the capital income schedule cannot exceed the value that first appears in line 50 (which implies that it may become necessary to limit some of the values for losses that were intended to be carried up to line 52, and in that case the taxpayer could decide whether to limit the values that corresponded to losses of 2016 and previous years, or whether to limit the values of the loss of the 2017 fiscal year).

e. The values carried up to the value of line 64 within the capital income schedule cannot exceed the value that first appears in line 62 (which implies that it may become necessary to limit some of the values for losses that were intended to be carried up to line 64, and in that case the taxpayer could decide whether to limit the values that corresponded to losses of the years 2016 and previous years, or the values of the loss of the 2017 fiscal year).

All the above calculations and their respective comments were included within the Excel files (fully editable, as they do not include any macros) that Dr. Guevara (research leader at Actualícese) prepared for the 2018 taxable year income tax returns of resident individuals. If you purchase his webinar on this topic (recorded on June 11, 2019), you will be able to access two special Excel versions of Form 210 (one adapted to resident individuals who do not keep accounts, and another in which Form 210 was integrated with Form 2517 for resident individuals who do keep accounts). You will also be able to access two other special Excel files (fully editable, as they do not include any type of macros) with form 110 and format 2517, adapted to the cases of non-resident individuals (obliged or not to keep accounting records). In addition, the first purchasers of the webinar will be able to participate with their questions in a special virtual consultation to be held on Saturday, July 27, 2019.

Source: Actualícese