Public emergency law – Tax measures

In December 2019, Law 27.541 declared a public emergency in economic, financial, fiscal, administrative, social security, tariff, energy, health and social matters, and delegated powers to the Argentine Executive to make changes in all those areas.

The main changes from a fiscal point of view are:

The application of the 25% income tax rate for companies is suspended until fiscal years starting from 1 January 2021, thus keeping in force the rate of 30%. Consequently, for dividend distributions arising from earnings originating in the relevant fiscal years, the tax rate on the profits will be 7%.
The positive or negative inflation adjustment, corresponding to the first and second fiscal year started from 1 January 2019, calculated under the Income Tax Law, must be charged 1/6 in that fiscal period and the remaining 5/6, in equal parts, in the next 5 immediate fiscal periods.

Income Tax exemptions have been reestablished for individuals on returns from government bonds and other financial instruments, in the case of Argentine issuers and the existence of a public offer.
A 30% tax (Tax for an Inclusive and Solidarity Argentina – PAIS Tax) is established, applicable to individuals and legal entities that perform the following operations:
- Purchase of foreign currency for savings purposes
- Acquisition of goods or services performed abroad, and services rendered by non-resident subjects paid through the use of credit, purchase or debit cards; among others.

The tax does not apply to specifically provided operations, such as the payment for importations. The rate will be 8% for so-called digital services.

In relation to Net Wealth Tax:
The tax rates on the total assets of individuals domiciled in the country are increased.
A differential rate is established for assets abroad, which may reach 2.25%, subject to an exception for those subjects that repatriated financial assets as of March 31 of the year following the fiscal period, for – at least - 5% of the total value of the assets located abroad.
The tax rate to be paid by subjects domiciled abroad increases from 0.25% to 0.5% for assets located in the country.
The tax rate to be paid by companies governed by the General Corporate Law corresponding to the shares or interests held by the owners, individuals and/or subjects domiciled abroad increases from 0.25% to 0.5%.
Finally, the concept of "residence" and not "domicile" will be considered to determine who should pay the tax.

Alberto Fabián Mastandrea
amastandrea@bdoargentina.com

Guillermo Jaime Poch
gpoch@bdoargentina.com