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Regulations for the Obligatory Savings Fund for Housing (FAOV)

On January 30th, 2012, it was published on the Official Gazette Nª 39853, the Decision by the Constitutional Chamber of the Supreme Court on November 28th of 2011 that interprets the regulations for the Obligatory Savings Fund for Housing (FAOV).

In such decision, the Constitutional Chamber of the Supreme Court determines that the contributions to the Obligatory Savings Fund for Housing as part of the lending system for housing and habitat and of the social safety system, do not fit into the concept of parafiscality and hence are not ruled by tax law.

The Constitutional Chamber considers that a breach of the Obligatory Savings Fund for Housing affects directly the rights of workers, individually, by diminishing their capacity for saving and with that the possibility of gaining access to better credits, because the breach of this contribution also diminishes the capacity of the entity in charge of administering the funds of providing the beneficiaries a greater number of spaces for housing and worthy habitats.

At the same time, in accordance with the principle of progressiveness and inalienability of the rights of workers, the principle of the most favorable interpretation for the worker, in light of the state of social justice and law, and taking into consideration the superior interest that is the worker, the Constitutional Chamber establishes its decision that the contributions for the Obligatory Savings Fund for Housing do not elapse.

Due to an erroneous interpretation of tax regulations, regarding the elapsing of fiscal obligation, a company could be insolvent with the fund and the worker would be unable to claim whatever was discounted from their salary and not deposited in the fund; and this insolvency is indirectly limiting their access to a worthy dwelling since being solvent with the fund is an indispensable requisite for the solicitation of financing credits from FAOV.

It indicates that, it would be up to the legislator to determine in which cases the collections done in the social security system have the character of being fiscal or not, to the effects that tax law would be applicable to them in accordance with article 12 of the Tax Code, which points out that the taxes collected in the social security system will be regulated by this tax regulation.