Argentina: Argentine Tax Authorities accepts Supreme Court jurisprudence against Minimum Notional Income Tax constitutionality
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Argentina: Argentine Tax Authorities accepts Supreme Court jurisprudence against Minimum Notional Income Tax constitutionality

intl-updates-small.jpg
rodriguez.jpg

Ignacio Rodríguez

The Minimum Notional Income Tax (MNIT) is a sort of alternative minimum income tax and is payable by, among others, companies, partnerships and other business entities organised or established in Argentina (including branches of foreign companies, certain trusts, closed mutual funds, and so on).

The 1% tax is imposed annually on the assessed valuation for tax purposes of the assets at the end of each fiscal year, when it exceeds ARS$200,000 ($12,500). Banks and insurance companies are taxed only on 20% of such assets. Shares and other equity interests in companies or partnerships subject to MNIT are not included among the taxable assets, nor is the value corresponding to new depreciable movable assets other than motorcars during their first two years, or building constructions or improvements.

The income tax corresponding to the same fiscal year may be recognised as a payment on account of the MNIT, up to an amount which matches the latter. If a MNIT balance remains and has to be paid after subtracting the income tax, this excess may be carried forward and counted as a payment on account of the income tax exceeding the MNIT liability for any of the following 10 fiscal years.

As part of the tax reform executed by the new Argentine government in 2016, the MNIT is abolished as of 2019.

Back in February 2014, the Argentine Supreme Court of Justice issued an opinion in case law Editorial Perfil against the constitutionality of the Argentine Minimum Notional Income Tax (MNIT) due to the lack of taxable contributing capability where no gain has been determined regardless of whether the assets of the taxpayer have the potential and future ability of generating income, even when this latter criteria had also been raised in another ruling in 2010 (Hermitage).

This conclusion was based on the understanding that the MNIT consists of a notional taxable income not allowing proof to the contrary while when it can be duly sustained that there were no gains and rather losses – as in the case under analysis – that assumption of having capability to generate taxable income based on the size of the assets becomes invalid.

Thus, if the lack of taxable income is duly demonstrated the tax would become non-constitutional, according to the court's opinion.

The Argentine tax authorities just formally confirmed and accepted this opinion on May 18 2017 through the General Instruction No. 2 by stating that, in those cases where it can be proven that the taxpayer obtained losses (for both accounting and tax purposes), no notional income would exist for MNIT purposes. The Argentine tax authorities must also follow the General Instruction in those cases that are currently under discussion at an administrative or court level.

Moreover, Argentine taxpayers are able to obtain tax refunds of the amounts paid in those fiscal years not barred by statute of limitations (five years) where they obtained both accounting and tax losses. In order to obtain such refund, the taxpayer must formally start a refund process.

Ignacio Rodríguez (ignacio.e.rodriguez@ar.pwc.com)

PwC

Tel: +54 11 4850 4651

Website: www.pwc.com/ar

more across site & bottom lb ros

More from across our site

Despite the relief, Brazil’s government has also presented a bill which seeks to re-impose a tax burden on companies’ payroll, one local tax specialist told ITR
Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
Gift this article