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

11 July 2017

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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 (
Tel: +54 11 4850 4651

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