Understanding Capital Gains and Investment Returns

1. Returns of Capital

Under Article 21 of the Act, all capital gains or tradeoffs—regardless of their name, nature, or whether they are monetary or in-kind—derived directly or indirectly from assets, liabilities, or rights owned by the taxpayer are considered integrated performance, provided they are not involved in savings activities.

This includes:

• a) Returns from real estate, including rural and urban housing.
• b) Returns from movable capital.

12.1. Real Estate Capital Yields

These are incomes derived from the ownership of rural or urban real estate, or real rights pertaining to them, arising from:

• a) The lease of property or real rights.
• b) The creation or transfer of rights or powers of use or enjoyment of such properties.

Note: This excludes the taxpayer's primary residence.

Calculation of Net Income

• A) Integrated Income: The total amount received from the tenant, purchaser, or assignee of rights, including any property sold with the asset, excluding VAT.
• B) Deductible Expenses: All expenses necessary for income generation and asset maintenance, including state taxes, surcharges, personal services, repairs, insurance premiums, formalization costs, and depreciation.
• C) Net Income: The difference between total income and deductible expenses. Since 2007, this performance can be negative and is calculated based on the taxpayer's entire estate.
• D) Reductions: Once the net return is determined, the following reductions may apply:
  • 50% of net returns for property lessors (can be increased to 100% in specific situations, such as renting to young tenants or meeting specific revenue criteria).
  • 40% for yields generated over a period exceeding two years.

12.2. Movable Capital Yields

These yields originate from movable capital items owned by the taxpayer and are categorized as follows:

1. Integral yield: Capital assets in funds from any entity (e.g., dividends, profit sharing, premiums).
2. Third-party capital: Income from the sale or transfer of capital (e.g., interest).
3. Insurance: Disability and life insurance payouts.
4. Other income: Derivatives of intellectual or industrial property and the transfer of image rights.

Deductible expenses include administration and security deposit fees. The resulting net return is subject to reductions for income generated over periods exceeding two years.