Unconstitutionality of minimum payment on Income Tax

Romero Pineda & Asociados informs that on April 17, 2015, The Supreme Court of Justice through the Constitutional Chamber, issued a resolution of unconstitutionality under process 98/2014, declaring the unconstitutionality of Article 77 of the Income Tax Law, which regulates the minimum payment on income tax enacted by the Legislature, through a decree dated July 31, 2014. This declaration of unconstitutionality is based on the fact that such tax amendment did not established the real possibility of the taxpayer to deduct the costs and expenses required for the production of real wealth and the preservation of its source, which is incompatible with tax equity, in its expression of the principle of the ability to pay.

As a consequence of said declaration of unconstitutionality, also Articles 76, 78, 79, 80 and 81 of the Income Tax Law were declared unconstitutional per their connection.

As in previous cases, the Chamber in its decision argued that the Tax returns already filed based on the minimum payment on income tax and amounts paid, shall be deemed as legally conclusive, and shall not be revised either by judicial authorities or by the tax authorities, but any pending proceeding shall be resolved by the Tax Administration in relation to the Constitutional Law.

ROMERO PINEDA & ASOCIADOS / FRANCISCO A. MARTINEZ / fmartinez@romeropineda.com

EDIFICIO AVANTE, SUITE 5-01, BLVD. LUIS POMA, SANTA ELENA, ANTIGUO CUSCATLAN, EL SALVADOR

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