Argentina Introduces A Large Tax Reform

Author:Canosa Abogados
Profession:Canosa Abogados
 
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On December 29, 2017, Law No. 27340 (the "Law") was enacted, introducing important amendments to the Argentine tax system. The most remarkable amendments are related to national (federal) taxes, social security contributions and the criminal tax regime.

The main amendments to the Argentine tax system introduced by the Law include the following:

INCOME TAX 1.1 Business organizations. Retained earnings from corporations and permanent establishments related to fiscal years initiated on 01/01/2018 will be taxed at 30% and at 25% in relation with fiscal years initiated as from 01/01/2020. This involves a 35% reduction of the previous rate.

The distribution of dividends is subject to an additional tax of 7% for 2018 and 13% as from 2020. However, the Law renders void the equalization tax set forth by the section which follows section 69 of the tax law, and therefore, dividends and earnings resulting from accrued benefits prior to the date the Law becomes effective will be exempted from the additional tax.

The Law also establishes that simplified corporations (SAS) and single-shareholder corporations (SAU) will be subject to the tax.

1.2 Presumed income for disposition of funds and goods. The Law provides for a presumed interest for each currency, which must be duly regulated. With regard to the disposition of goods, the Law establishes that the presumed income will be equivalent to a yearly rate of 8% of the real property's current market value and 20% of the current market value of the rest of the goods per year.

1.3 Transfer price. The Law establishes that the applicable rules must set a minimum limit to the taxpayers´ annual income and a minimum amount of transactions in order to enforce the filing of annual affidavits related to transfer price. Bear in mind that Argentina had already implemented the country-by-country report (http://canosa.com/argentina-implements-new-transfer-price-country-country-report-implementing-action-13-beps/).

1.3.1 Imports and exports. With regard to the import and export of goods with the intervention of foreign intermediaries, the taxpayer must prove that the intermediary´s remuneration is proportional to the risks, functions and assets involved in the operation, provided that the intermediary, the exporter or the importer are linked with the local taxpayer. If the foreign intermediary is linked with the local taxpayer and besides he is located in a non-cooperative jurisdiction or in a low or zero tax jurisdiction, the taxpayer must file the agreement with the Argentine Tax Authorities (AFIP).

1.3.2. Sale of real property. Earnings obtained by individuals from the sale of real property, except when the property involves dwelling, will be taxed at 15%. This tax replaces the tax on transfer of real property for goods sold and acquired as from 01/01/2018.

1.4 Employees' compensation. The amounts arising from the termination of the employment agreement of individuals with directive or executive positions in companies and that exceed the minimum compensatory amounts as established by the Argentine labor laws will be taxed. If the amounts arise from a consensual agreement, said sum of money will be taxed as they exceed the minimum compensatory amount set forth by the applicable labor law for unjustified dismissal.

1.5 Permanent establishment. The Law defines the "permanent establishment" as a fix place of business by which a foreign person performs his activity in whole or in part. Moreover, the Law establishes that permanent establishments include but are not limited to the following: a) a headquarter, b) a branch, c) a factory. In addition, the Law provides that there is no permanent establishment when an individual acts in Argentina on behalf of a foreign human or legal person and: a) has a deposit account in the country where he regularly delivers goods on behalf of the foreign person, b) takes risks on behalf of the foreign person, c) acts following detailed instructions of or under the control of a foreign...

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