Internal Taxes clarifies by means of a circular how it will be taxed by AFP transfer

The Internal Revenue Service (SII) proceeded this Thursday to issue a circular to clarify details on how people should pay when they make the second withdrawal of 10% of the AFPs. The Regulatory Deputy Director of the SII, Simón Ramírez, specified that with this “we seek to provide the greatest possible clarity to taxpayers so that they can make an informed decision regarding this second withdrawal.” Thus, this circular details in which cases the withdrawal is subject to tax and in which cases it is not; what amounts should be considered to calculate the tax to pay for this withdrawal, in addition to the terms in which that tax must be declared and paid, among other matters.

1- You must pay taxes when the person making the withdrawal obtains a taxable income greater than 30 UTA ($ 18,370,440) in the year of withdrawal. The term to make the withdrawal is 365 days after the publication of this law in the Official Gazette.

2- To determine taxable income, all gross income taxed with the Complementary Global Tax is considered and all those deductions from the Complementary Global Tax base that are allowed by the tax law are discounted. Income taxed with the IGC includes dividends, withdrawals, fees, allowances, income from movable capital, salaries and pensions, among others.

3- Taxable income is not considered for the calculation of the 30 UTA the non-income income (fiscal contribution to the middle class and the Solidarity Loan of the State granted in 2020, the subsidies for medical leave paid by social security organizations, the first withdrawal of 10% of pension funds and compensation, among others).

4- The AFPs should not carry out withholding taxes at the time of withdrawal.

5- The affiliate himself, when applicable (if he has taxable income over 30 UTA), must incorporate the total amount of the withdrawal of 10% of his AFP in his income statement for the year following the one he made that withdrawal.

6- To calculate the tax to be paid for retirement, whoever has a taxable income greater than 30 UTA must include other taxable income received, in addition to their salary, such as a second remuneration or dividends, among others. All these income must be added to the amount of the retirement of your pension funds, in your annual income statement, in April of the year following the one you make the withdrawal.

7- If the withdrawal is in two installments and you must pay taxes, these rules apply:

a) If the first and second installment of the withdrawal are paid in December 2020, the total amount must be declared in the rental process of April 2021.

b) If the first withdrawal installment is paid in December 2020, and the second in January 2021, the first amount must be declared in April 2021, and the second in April 2022.

c) The fees paid in full in 2021 will be declared in April 2022.

8- The affiliate’s AFP must inform the SII of the amount, in the year that corresponds to the withdrawal made.