Private or public works will generate capital gain tax

The Government intends to charge a tax of 75% to “extraordinary gains” related to that gain. The capital gain is the increased market value of a property or land. But the draft Reformatory Law to the Code of Organization sent Monday to the Assembly by the Executive branch does not distinguish between capital gains generated by public works or private initiative as the opening of a shopping center, a residential area, etc.

Assemblyman of the ruling party Richard Calderon, head of the Commission for Autonomous Governments, explained that extra profits will be charged mainly to other than the “own effort”; ie “when it is about an external, public and private effort.”

President Correa said last Sunday that the tax is for speculators who benefit from “illegitimate gain.”

The current Organic Code of Territorial Organization (COOTAD) already sets a tax on capital gain of up to 10%, which is charged to the difference between the municipal valuation of the property and its market value. This is paid at the moment of selling the good.

Calderon explained that the new tax will apply for the second sale. The first will keep paying 10%. While the payment of capital gains rises to 75% for the second sale, he explains that this will be made after recognizing and ordinary income to the owner and an exempt amount of 24 salaries (USD 8 496).