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Practical manual for Income Tax 2020.

Phase 2. Compensation of negative items pending from previous years

Negative items from previous years pending compensation

Negative items from previous years pending compensation as of January 1, 2020 may be:

  1. Negative balances of capital gains from 2016, 2017, 2018 and 2019, pending compensation as of January 1, 2020, to be included in the taxable savings base.
  2. Negative balances of capital gains and losses from 2016, 2017, 2018 and 2019, pending compensation as of January 1, 2020, to be included in the taxable savings base

Rules for offsetting negative items from previous years

The above negative balances are offset in the order and manner set out below:

1.  Offsetting the negative items pending from previous years with their respective positive balance of income or profits and losses for the year

  1. The positive balance of capital gains for the year 2020, once said balance has been reduced by the offset of capital losses corresponding to the year 2020, will be offset by the taxpayer with the balance of negative capital gains pending offset from the years 2016, 2017, 2018 and 2019.

    With regard to the latter, you should take into account that it includes all negative capital income pending compensation for the years 2015, 2016, 2017 and 2018, including those derived from subordinated debt or preferred shares, since such income is not subject to the special compensation rule of the Thirty-ninth Additional Provision of the Personal Income Tax Law , but is subject to the general compensation rule of article 49 of the Personal Income Tax Law .

  2. The positive balance of profits and losses for the 2020 financial year, once said balance has been reduced by the offset of the negative balance, if any, of capital gains obtained in the 2020 financial year, will be offset by the taxpayer with the balance of losses pending offset from the 2016, 2017, 2018 and 2019 financial years.

    With regard to the latter, you must take into account that it includes all pending capital losses to be offset for the years 2016, 2017, 2018 and 2019, including those arising from subordinated debt or preferred shares, since such income is not subject to the special offset rule of the Thirty-ninth Additional Provision of the Personal Income Tax Law , but is subject to the general offset rule of article 49 of the Personal Income Tax Law .

In no case will compensation be made outside the four-year period, by accumulating negative net balances or capital losses from subsequent years.

Note: Annex “C” in the declaration model includes, in relation to the integration and compensation of income, information relating to losses and negative capital gains pending compensation in the following years.

2. Offsetting of the remaining negative balances of capital gains and outstanding gains and losses from previous years not offset

If there are negative balances of capital gains from the years 2016, 2017, 2018 and 2019 that have not been offset as indicated above, they will be offset against the remaining positive balance, if any, of capital gains from the year 2020 up to the limit of 25% of the aforementioned positive balance.

This offset, together with the offset of negative balances of capital gains for 2020, may not jointly exceed the limit of 25% of the positive balance of profits and losses for 2020.

The same will occur if there are negative balances of capital gains and losses from the years 2016, 2017, 2018 and 2019 that have not been offset, in which case, they will be offset against the remaining positive balance, if any, of income from movable capital from the year 2020, up to the limit of 25% of the aforementioned positive balance.

This offset, together with the offset of the negative balances of profits and losses for 2020 that are offset against the positive balance of capital gains for 2020, may not jointly exceed the limit of 25% of the positive balance of capital gains for 2020 before offsets.