The “Bill of Bases and Points of Departure for the Freedom of the Argentines” (the “Bill”) submitted by the Executive Power to Congress on December 27, 2023, includes a special and exceptional to regularize tax, customs, and social security obligations. According to the recitals of the Bill, this regime is intended to promote transparency in the economy and private investment. In addition and regarding tax matters, the Bill proposes modifications in Personal Asset Tax, as well as other internal taxes.
As a complement to our report distributed on January 3, 2024, find below a summary of the most important notes of the Bill with respect to tax matters:
I. ASSET REGULARIZATION REGIME
- Subjects that can apply for the regime: (i) individuals, legal entities, and undivided successions resident in Argentina as of December 31, 2023; (ii) non-resident individuals (of all types) for their assets located in Argentina; and (iii) non-resident individuals who were Argentine tax residents prior to December 31, and who, as of such date, had lost such status. If this option is exercised, it will be considered that these individuals have reacquired their tax residence in the country. For the purposes of the regime, capital gains and assets acquired abroad by the individual after the loss of his/her tax residence in Argentina shall not be considered.
- The interested parties are able to apply for the regime until November 30, 2024. The regime is divided into 3 stages and the applicable rates will be: (i) 5% for the first stage, until March 31, 2024; (ii) 10% for the second stage, until June 30, 2024; and (iii) 15% for the third stage, until September 30, 2024.
- When the total taxable income to be regularized in U.S. Dollars is less than US$ 100,000, a 0% tax rate will be applied.
- All taxpayers who apply for the regime must make an advance payment of not less than 75% of the Special Regularization Tax.
- Regarding the assets that can be declared, the following are included:
(a) Assets in Argentina: national or foreign currency, real estate, shares and other participations (provided that the issuer thereof is a subject resident in Argentina), securities listed or regulated by the CNV, personal property, credits (when the debtor is an Argentine resident), intangible assets (owned by an Argentine resident), among others.
(b) Assets Abroad: the assets mentioned in the previous paragraph, among others, which are located abroad. Cryptocurrencies are included. - The following assets are excluded: holdings of currency or securities abroad that (i) were deposited in financial entities or custody agents based or located in jurisdictions or countries identified by the Financial Action Task Force (“FATF“) as high-risk or non-cooperative or (ii) that being in cash, are physically located in jurisdictions or countries identified by the FATF as high risk or non-cooperative.
- Those who apply the regime will have, among others, the following benefits to the extent of the declared goods: (i) release from any civil action and for tax, exchange, customs, and administrative offenses that would have corresponded to the breach of the obligations related to the origin of the declared goods, (ii) release from the payment of taxes that they had omitted to pay and that originated in the declared goods.
It covers, among others, Income Tax and undocumented outflows, Transfer of Real Estate, VAT, Personal Property Tax, Solidarity, and Extraordinary Contribution to help mitigate the effects of the pandemic.
II. EXCEPTIONAL REGULARIZATION REGIME FOR TAX, CUSTOMS AND SOCIAL SECURITY OBLIGATIONS
- It includes Tax, Customs, and Social Security obligations –with some exceptions–, which have expired up to November 30, 2023, and the infractions committed up to that date, whether or not they are related to such obligations.
- The taxpayers that apply for the regime will enjoy the benefits described below, which vary according to the form of payment and the date of application –in all cases, from the date of entry into force of the regulations to be issued by AFIP–.
The benefits foreseen are: (i) cash payment and adherence within 90 calendar days, remission of 50% of the interest accrued as of the date of adherence; (ii) payment in installment plan and adherence within 90 calendar days, remission of 30% of interest; (iii) payment in installment plan and adherence, as of 91 calendar days, remission of 10% of interest.
In all cases, 100% of the fines applied will be remitted. - The interested parties will be able to apply from the date of entry into force of the regulation to be issued by AFIP, and until the following 150 days.
- Criminal Tax, Customs, and Social Security resources actions in progress will be suspended, and the criminal statute of limitations will be interrupted for those who make use of this system.
The total cancellation of the debt will produce the extinction of the criminal action, to the extent that there is no final judgment as of that date. The expiration of the payment plan will imply the resumption of the actions or will enable AFIP to file a criminal complaint.
III. SPECIAL REGIME FOR PERSONAL ASSET TAX (“REIBP”)
- The REIBP reaches: (i) individuals and undivided estates resident in Argentina; (ii) individuals who, as of December 31, 2023, are not considered residents for Personal Asset Tax (“PAT“) purposes but had been tax residents in Argentina prior to such date; and (iii) substitute taxpayers for their obligations related to PAT due to their performance in such capacity.
- The interested parties are able to apply for the REIBP until March 31, 2024. Those who choose to apply to the REIBP, will be taxed the PAT corresponding to the tax periods 2023, 2024, 2025, 2026 and 2027 in a unified way.
- For the taxable base, the amount will be calculated according to the rules set forth in the Bill. Such amount shall be multiplied by 5. The tax rates will be 0.75% for individuals and undivided successions; 0.5% for substitute taxpayers and 0.75% for taxpayers who have regularized assets under the Asset Regularization Regime and who choose to adhere to the REIBP.
A compensatory interest equivalent to 125% of the interest rate applied by the Banco de la Nación Argentina (Bank of the Argentine Nation) for 30-day fixed terms for the period between January 1, 2024 and the day before the effective payment date must be added to the amount resulting from applying the corresponding rate on the taxable base. - Tax credits, advances and payments on account of the PAT corresponding to the 2023 tax period may be computed.
- Taxpayers that choose to adhere to the REIBP will be excluded from any obligation under the PAT rules from 2023 to 2027 and will enjoy tax stability until 2038 with respect to the PAT and any other national tax that may be created and whose purpose is to tax all or any assets of the taxpayer (with certain particularities described in the regulation).
IV. AMENDMENTS TO THE PAT LAW
- It is planned the staggered reduction of PAT rates: Fiscal period 2023: from 0.50% to 1.50%. Fiscal period 2024: from 0.50% to 1.30%. Tax period 2025: from 0.50% to 1.10%. Fiscal period 2026: from 0.50% to 1%. Tax period 2027: single rate of 0.50%.
- The advance payments and payments on account of PAT for the tax period 2023 that are paid as from July 1, 2024, and until the due date for filing the respective tax return will generate an increase in favor of the taxpayer equivalent to the interest rate applied by the Banco de la Nación Argentina (Bank of the Argentine Nation) for 30-day fixed term, between the day after the date of payment of each of the advance payments and payments on account and the day before the due date for filing the tax return.
The same rate will be applicable to the taxpayer’s credit balances from the due date of the tax return until the date on which it could be offset with other taxes or with advances or payments on account (whether or not the taxpayer makes use of such offsetting). - The amount resulting from subtracting the tax determined for the 2023 tax period minus the amounts paid as advance payments and payments on account for the 2023 tax period that were paid up to December 31, 2023, will generate a compensatory interest in favor of the National Treasury equivalent to the interest rate applied by the Banco de la Nación Argentina (Bank of the Argentine Nation) for 30-day fixed term, between January 1, 2024 and the day before the due date for filing the tax return.