After several amendments, the new Tax Reform Bill, issued by the Senate on January 15^th, will allow taxpayers to opt for a 30% substitute tax in replacement of final taxes (Global Complementary Tax or Withholding Tax).

This alternative will be available with respect to taxable profits accumulated to date, but only as long as they were generated until December 31^st, 2016.

There will be several opportunities to benefit from this regime:

– Until December 30th, 2020; regarding the accumulated taxable profits that are maintained as of December 31^st, 2019;

– Until December 30th, 2021; regarding the accumulated taxable profits that are maintained as of December 31^st, 2020; or

– Finally, until the last business day of April 2022; regarding the accumulated taxable profits that are determined as of December 31^st, 2021.

Against this Substitute Tax will be creditable the entire Corporate Income Tax, reducing the maximum tax burden from 44.45% to 30%.

Different formulas will be used to calculate the accumulated profits and the available credit, depending on the tax regime of the taxpayer, and the year in which he exercises this option. What the aforementioned formulas seek is to recompose as much as possible the accumulated profits up to December 31^st, 2016, that the taxpayer accumulated to the date of exercising this option.

The profits that pay this Substitute Tax will not be considered as withdrawn, distributed or remitted by the taxpayer, but will be incorporated in the Exempt Income Registry (REX), and their taxation will be deemed to have been fulfilled.

However, once the Substitute Tax paid on them, the profits could be withdrawn at any time deemed convenient, with preference to any other sum and without considering the imputation order established by the income tax law.

If these profits are distributed to a Corporate Income Tax taxpayer, they will maintain their status of Exempt Income, and the possibility of withdrawing them at any time.