27 de Abril del 2015


The Supreme Court of Justice through the Constitutional Chamber, declared the unconstitutionality of article 77 of the Income Tax Law, which established the obligation of a minimum payment of 1% of income tax based on net assets, alleging infringement of the principle of tax equity in its manifestation of economic capacity, established in article 131 number 6 of the Constitution.

The provision declared unconstitutional established the manner in which net assets would be calculated, without there being the possibility of deduction of costs and expenses needed for the production of the income and the conservation of its source.

The Chamber established that the net assets to which the minimum payment quota applies (1%), has been established without considering in any way the costs of production invested or the operation expenses made to generate that  income. Therefore, the taxable base of the mentioned tax does not recognize the conservation of the productive capacity of taxpayers, as a logical budget for the practice of the taxing power of the State.  The law has not taken into consideration a revealing index of economic capacity to determine the effective wealth of the taxpayer, therefore article 77 of the Income Tax Law was declared unconstitutional.

One of the principles that the Chamber addresses in its ruling is that of economic capacity, which it says is projected in two planes: The vertical and the horizontal. In the vertical plane, this principle relates to the right to property and economic freedom, as a means of protection in the face of undue or excessive taxes. This is to say that, from that perspective, the percentage of the income of the taxpayers that can be legitimately affected by a tax must not be excessive with regard to the wealth objectively available.As to the horizontal plane, economic capacity supposes that the accumulation of taxes that affect a taxpayer must have a “system” authentically ruled by indicators or indicia that reflect the taxpaying capacity of the taxpayer. Therefore, cases in which, without sufficient justification the same wealth is taxed two or more times, are contrary to economic capacity or, more so when a wealth is exempted from any assessment.  

As an effect of the ruling of unconstitutionality it was established that the statements presented and the amounts paid as minimum payment of income tax, will be taken as consolidated juridical situations, which cannot be revised by constitutional or ordinary jurisdiction, or by the Tax Administration. In addition, those procedures that are related to minimum payment of tax must be resolved by the Tax Administration in strict adherence to the Constitution, to that expressed in the ruling of unconstitutionality and to the law.

It was only in November of 2013 that the Supreme Court of Justice declared unconstitutional the same Art. 77 of the Income Tax law, but the Legislative Assembly introduced it again into the juridical system, as part of a package of tax reforms approved in July 2014, together with other taxes as the one on financial operations.

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