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Argentina: Tax amnesty and developments sent to Congress

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Andrés Edelstein

Ignacio Rodríguez

After several unsuccessful attempts to launch a tax amnesty under the previous administration, the Executive Branch that took office last December has drafted and sent to the Congress a tax amnesty programme.

The programme is aimed at encouraging Argentine taxpayers to reach a secure position with respect to their tax compliance, that may have been affected due to the, as-yet unmitigated, huge tax burden combined with the tough exchange control environment that prevailed until last December 17 2015.

The underlying goal is also to finance certain regularisation of the government's outstanding debt with retired people.

Together with an installment plan for regularising potential tax omitted at a much lower cost (including social security contributions and import/export duties) in as many as 60 monthly installments with full or partial exemption of accrued interest and fines forgiveness, as part of the same tax package, tax incentives are envisioned at encouraging Argentine companies and/or individuals to repatriate/report their foreign (or local) previously-unreported earnings.

Instead of paying 35% income tax, among other taxes, plus interest and penalties, these incentives provide companies and/or individuals with various flat tax rates ranging from 5% to 15%, depending on the type of asset in which the funds are invested or the time frame for doing so (no later than March 31 2017). It is unclear whether taxpayers will be required to actually repatriate the funds if they are abroad. Also, a 0% rate may apply in certain cases if the funds are invested in specific Argentine sovereign bonds or in local mutual funds addressed to, inter alia, infrastructure works, renewable energies, SMEs, etc.

Although some formal requirements and restrictions apply, taxpayers who elect to pay the special tax do not have to report the source of their assets and will not be criminally charged by the government, except in connection with money laundering, drug and weapons trafficking, and other blacklisted activities.

The bill also includes, among other issues, certain relevant tax measures for foreign investors such as:

  • Repealing the 10% dividend withholding tax introduced in 2013;

  • Wealth tax on Argentine shares held by foreign shareholders or Argentine individuals (0.5% on book net equity) may get full relief for 2016 to 2018 if certain conditions are met (namely, full compliance with tax duties during 2014 and 2015);

  • Minimum notional income tax (1% on taxable assets if the tax exceeds the 35% corporate income tax of the same fiscal year) would also be repealed as from 2019; and

  • Although it is not entirely clear, by expressly exempting from tax the capital gains obtained by Argentine individuals derived from the disposal of Argentine-American depositary receipts (ADRs), the bill may install the approach that Argentine ADRs may be considered as Argentine-sourced.

The final shape of the reform remains to be seen after parliament debates, but due to the social content and macro-economic needs it would cover, multinational corporations (MNCs) operating in Argentina should start consider the impact of these measures.

Andrés Edelstein (andres.m.edelstein@ar.pwc.com) and Ignacio Rodríguez (ignacio.e.rodriguez@ar.pwc.com), Buenos Aires

PwC

Tel: +54 11 4850 4651

Website: www.pwc.com/ar

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