Argentina enacts tax amnesty provisions and other significant tax changes
The Argentine government enacted Law 27,260 (the Law) with special incentives for Argentine taxpayers to report previously unreported assets.
The Law also includes modifications to various tax provisions. The primary objective of the Law is to raise tax revenue to reduce the government's outstanding pension debt.
The amnesty intends to encourage Argentine businesses and individuals to unreported foreign and domestic assets. To benefit from the amnesty, taxpayers must report such assets by March 31 2017.
Assets reported may be subject to a reduced tax rate ranging from 5% to 15%, depending on the type of asset, the asset's total value, and whether the reporting is done during 2016 or in the first three months of 2017. A 0% rate may apply if the reported assets are invested in specific Argentine sovereign bonds or local mutual funds that focus on local development projects such as renewable energies or infrastructure.
The Law also allows taxpayers to settle any unpaid tax liability (including social security contributions and import/export duties), offering a partial exemption on accrued interest and no penalties. It also allows outstanding tax to be paid using an instalment plan.
The Law also contains other significant tax reforms, including:
Repealing the 10% withholding tax on dividend distributions introduced in 2013. However, the so-called equalisation tax – a 35% withholding tax on amounts distributed in excess of accumulated tax earnings – remains in effect;
Reducing wealth tax rates. The 0.5% rate levied on net equity held by foreign shareholders or Argentine individuals will be reduced to 0.25%. Taxpayers who can demonstrate full compliance with tax duties during fiscal years 2014 and 2015 are able to enjoy a temporary exemption from this tax for years 2016 to 2018; and
Repealing the minimum notional income tax of 1% on taxable assets. The tax, which applies only if the amount exceeds the company's income tax liability, will no longer apply from January 1 2019.
In addition, the Law also creates a Parliamentary Commission for analysing and evaluating the tax reform proposals to be sent by the Executive Branch within the next year. The planned changes intend to reduce the overall tax burden and make the tax structure simpler and more progressive.
Multinationals enterprises with operations or investments in Argentina should consider how these new measures may affect them. In particular, elimination of the 10% withholding tax on dividends may affect repatriation decisions and related modelling exercises. Also, they should monitor how the envisioned tax reform proposals expected to be sent to the Congress impact their local operations.
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