Nicolás Procopio

Allende & Brea, Buenos Aires

nprocopio@allende.com

An increase in the personal assets tax rate in Argentina in 2019, and the creation of a new emergency tax levied on Argentine tax residents and certain nationals’ wealth, encouraged many Argentine families and individuals to restructure their assets in a tax-efficient fashion.

A tax on access to the Argentine foreign exchange market (the PAIS Tax) was also created in 2019. A tightening in foreign exchange restrictions, meanwhile, has made companies restructure their investments and transactions in Argentina.

In connection with this, on 20 October 2020, the Argentine Tax Authority (AFIP) published General Resolution No 4838/2021 in the Official Gazette, creating an Information Regime applicable to any local or international tax planning transaction.

Tax planning transactions

The Information Regime applies to both local^[1] and international^[2] tax planning transactions. Local tax planning includes any agreement, outline, plan, and any other action that results in a tax advantage or any other type of benefit in favour of the taxpayer that is carried out in Argentina in relation to any local tax and/or information regime.

International tax planning includes any agreement, outline, plan, and any other action that results in a tax advantage or any other type of benefit in favour of the taxpayer that involves Argentina and one or more foreign jurisdictions. In particular, General Resolution No 4838/2020 includes the following situations:

• The use of legal entities to benefit from double taxation treaties;
• The use of structures to avoid triggering a permanent establishment;
• The involvement of those jurisdictions deemed as non-cooperative or those with nil or low taxation;
• Any subject holding inherent rights as a beneficiary, settlor, or trustee (or similar) of trusts of any type of foreign trusts, or in private interest foundations located abroad or similar structures creating an undivided estate domiciled or located abroad;
• Taking advantage of asymmetries in tax regulations of two or more jurisdictions with respect to the treatment and/or qualification of an entity or contract or a financial instrument, which have the effect of a tax advantage or any other type of benefit;
• Any planning which is specifically referenced on AFIP’s website.

It should be noted that to date, AFIP has not yet implemented this service on its website, hindering the operability of the Regime.

Reporting responsible parties

The reporting regime must be adhered to by (1) tax advisers who, in the ordinary course of their business, help, assist, advise, counsel, or perform any activities related to the implementation of tax planning structures, provided that they participate in such implementation directly or through third parties, and (2) taxpayers when participating in local or international tax planning transactions subject to the reporting regime.

In this sense, General Resolution No 4838/2020 states that the reporting obligation constitutes a separate and individual obligation on each of the responsible parties; indeed both parties are responsible for complying with the reporting regime regardless of compliance by the other party.

Reporting deadlines

There are different reporting deadlines depending on whether the tax planning transactions are local or international. Local tax planning transactions must be reported up to the last day of the month following the end of the fiscal period in which the tax planning transaction was implemented, while international tax planning transactions must be reported within ten days of their implementation. The term ‘implementation’ is defined by General Resolution No 4838/2020 as the first step taken to implement the tax planning structure or transaction.

In addition, the General Resolution provides that existing tax planning structures that were implemented after 1 January 2019 must be reported (and even those implemented before that date if those structures still have effect).

Failure to comply with the information regime

General Resolution No 4838/2020 sets out different sanctions for failing to comply with the Information Regime. The first is that complying with it will be deemed as a legal requirement for taxpayers in order to make certain requests with AFIP, including requests for tax credit certificates and certificates of tax and social security status. The second kind of sanction is the application of fines ranging from ARS 500 to ARS 45,000, as provided by the Tax Procedure Law No 11,683. Lastly, failing to comply with the Information Regime will also result in the inclusion of the individual or entity in a category of taxpayers that are more likely to be audited.

Current status of the information regime

It is worth mentioning that in December 2020, the 24 Argentine Professional Councils of Economic Sciences filed an administrative claim before AFIP requesting the repeal of General Resolution No 4838/2020 and the suspension of the Tax Planning Information Regime, arguing that it would have been desirable for it to have been passed by the Argentine Congress as is the case in several countries that have recently implemented similar regimes.

Subsequently, each of the Councils filed (in its own jurisdiction) a claim before the Federal Justice to obtain a precautionary measure against the Regime’s enforceability. In several jurisdictions, such as Santa Cruz, Tierra del Fuego, San Luis, Jujuy, Córdoba and Chubut, the precautionary measures filed were granted and the application of the Regime has been suspended.

However, in other jurisdictions, the precautionary measure of suspending the Regime was rejected. In the Autonomous City of Buenos Aires, the Administrative Court No 11 rejected the measure since it considered that the existence of an actual or imminent damage requiring immediate protection had not been demonstrated. In view of this situation, on 23 February 2021, the Professional Council filed an appeal in connection with the rejection of the precautionary measure mentioned above.

On 4 February 2021, the AFIP rejected the administrative claim made by Buenos Aires Province’s Professional Council. At this point in time, the matter is under discussion in the Federal Justice and a resolution is still pending.

Income Tax Amendment Bill

The Government has submitted a Bill to the Argentine Congress to increase the corporate income tax rate from the existing rate of 25 per cent.

The Bill establishes a sliding scale of tax rates depending on their accumulated taxable net profit. A 25 per cent rate shall apply if companies have an annual profit of up to ARS 5m, and 30 per cent if the annual profit is between ARS 5m to ARS 20m. Companies with annual profits higher than ARS 20m shall be taxed at a 35 per cent rate.

Under the proposed Bill, permanent establishments will calculate income tax on the same scale as that developed for companies. Also, both capital companies and permanent establishments must enter an additional seven per cent tax applicable on the distribution of dividends to their shareholders.

It should be noted that the amounts provided for on the scale shall be adjusted annually, as from 1 January 2022, taking into account the annual variation in the Consumer Price Index.