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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 (ignacio.e.rodriguez@ar.pwc.com)
PwC
Tel: +54 11 4850 4651
Website: www.pwc.com/ar