Individual - Significant developments

Last reviewed - 28 February 2024

In December 2022, Law 2277 was approved, introducing the following significant changes to individuals' income taxation:

  • Two tax systems have been maintained for residents, ordinary and presumptive.
  • The presumptive income system remains at 0% since 2021.
  • The ordinary system is made up of three baskets of income. Nevertheless, the sum of all three baskets (dividends included) will determine the applicable tax rate for tax residents.
  • New tax reliefs have been introduced for individuals, such as 1% of purchases, up to 240 tax units (TU), made through the year, regardless of its connection with the individual’s activity.
  • Exempt income and deductions combined maintain a threshold of 40% of the net income. Nevertheless, said threshold cannot exceed TU 1,340 annually (the prior cap was TU 5,040 annually).
  • 35% remains as the tax rate for individuals qualified as non-tax residents.
  • Independent workers can choose to be treated as employees for income tax withholding proposes (procedure and tax reliefs).
  • Cost and deductions applicable for independent workers shall be deemed 60% of their gross income.
  • Foreign pension income is exempt from taxation up to TU 1,000.
  • Occasional/capital gain tax rate was increased to 15% (previously 10%).
  • Equity/wealth tax was introduced as a permanent tax for those equities exceeding TU 72,000. Said taxable base must consider the result of subtracting all debts from the individual's gross equity as of 1 January of each year.