On December 27, 2023, the Executive Power sent to Congress the bill titled “Basis and Starting Points for the Freedom of Argentines” (the “Bill”) which, if approved in extraordinary sessions, aims at introducing several tax provisions, including the implementation of a moratorium regime for the regularization of tax obligations and a tax amnesty regime for the disclosure of assets; as well as a package of amendments to the Personal Assets Tax, import and export duties, and internal taxes.
The following is a summary of the main aspects of the Bill in connection with (i) the tax amnesty regime; (ii) the regime for the regularization of tax, customs and social security obligations; and (iii) amendments to the Personal Assets Tax.
- Tax Amnesty Regime
The Bill includes the creation of a Tax Amnesty Regime, whose essential aspects are the following:
a) Qualified taxpayers and assets. Disclosure date and period of adhesion
The persons covered are individuals, undivided estates and companies that, as of December 31, 2023, are considered Argentine tax residents, whether or not they are registered as taxpayers with AFIP. Non-residents may participate in the disclosure regime, provided that they have assets in Argentina or Argentine sourced income. The regime also includes those persons who maintained their tax residency prior to December 31, 2023 and who have lost such condition as of that date.
Public servants, their spouses, ascendants and descendants are expressly excluded from the regime, as well as those individuals who have been convicted for any crime provided for in the Customs Code or the Criminal Tax Regime.
Qualified taxpayers may disclose any assets owned, possessed or held by them as of December 31, 2023 (disclosure date). They include, among others, national or foreign currency, real estate located in Argentina or abroad, interests in companies or other legal entities, capacity of beneficiary under a local or foreign trust, securities, and credits of any nature.
Qualified taxpayers are also allowed to include assets owned, possessed or held by third parties, as long as such third parties are not excluded from the regime.
Securities or holdings of cash abroad are not eligible for disclosure when deposited in financial entities or custody agents located in countries classified as High Risk or Non-Cooperative by the Financial Action Task Force (FATF).
As regards the term of adhesion to the tax amnesty regime, a maximum date of September 30, 2024 is set, divided into three stages with different tax liability, as detailed in the following section.
b) Special Tax
The regime introduces a special disclosure tax (the “Tax”), whose applicable tax rate will depend both on the period in which the declaration of adhesion to the regime is made and the total value of the declared assets. The Tax will be calculated and paid in U.S. Dollars, except for certain specific exceptions.
The tax amnesty regime provides with no tax to be paid if the total value of the assets to be externalized does not exceed US$ 100,000. Exceeding this amount, the tax rate will be 5%, 10% or 15% depending on the date of adhesion to the regime.
At the moment of adhesion to the regime, 75% of the amount of the Tax is to be paid as an advance, while the remaining Tax (plus compensatory interest) must be paid according to the due dates established in the Bill. Failure to make the advance payment in time will automatically cause the loss of any benefits provided by the tax amnesty regime.
The disclosure regime foresees a particular treatment for the regularization of certain foreign assets, including cash, bank accounts and securities deposited abroad, which could be included in the regime without paying the Tax if certain conditions are met, including the obligation to transfer the declared assets to special accounts, maintaining those assets in said accounts during a specific period of time as set forth by the Bill.
c) Benefits of the regime
In case of adhesion to the regime and compliance with its conditions, the following benefits would be applicable:
- Release from tax, exchange and customs offences and infractions arising from non-compliance with the obligations related to the disclosed assets, which would include income generated by assets reported under the tax amnesty regime, as well as obligations of settlement of foreign currency;
- Taxpayers would be exempted from the payment of taxes related to the assets included in the tax amnesty regime. This includes Income Tax, VAT, Tax on High Net Worth (“Aporte Solidario”), Credits and Debits Tax, Real Estate Transfer Tax, among others.
2. Regularization Regime for Tax, Customs and Social Security Obligations
The Bill foresees the possibility for taxpayers to apply for the moratorium regime, obtaining different benefits according to the modality of adhesion and their tax, customs or social security previous liabilities.
Taxpayers and responsible for tax obligations whose application, collection and control are in charge of the Tax Authority (except for certain expressly excluded obligations) will be eligible for the moratorium for their tax, customs and social security obligations obligations due as of November 30, 2023.
The following are included as obligations subject to regularization through the moratorium: (i) obligations under administrative or contentious-administrative discussion (including the Federal Tax Court); (ii) obligations related to the High Net Worth Tax (Aporte Solidario); (iii) fines for infractions under the Customs Code; (iv) obligations as subjects of withholding or collection; and (v) customs obligations, among others.
a) Benefits according to the form of payment and date of adhesion
For any purposes in connection with the regularization regime, the effective date will be deemed to be the date of publication of the implementing regulations by the Tax Authority.
- Cash payment and adhesion to the regime within the first ninety (90) days from the effective date: forgiveness of fifty percent (50%) of the compensatory and punitive interests accrued as of the date of adhesion to the regime. In case of payment through an installment plan, the forgiveness of compensatory and punitive interests is reduced to thirty percent (30%).
- Payment facilities plan and adhesion to the regime as from ninety-one (91) days from the effective date and until one hundred and twenty (120) days from the effective date: forgiveness of ten percent (10%) of the compensatory and punitive interest accrued as of the date of adhesion to the regime.
In all cases, one hundred percent (100%) of the fines will be remitted.
Additionally, any compensatory and/or punitive interests applicable to tax obligations cancelled prior to November 30, 2023 would be automatically forgiven. The Bill clarifies that such forgiveness would not be subject to additional requirements or conditions established by implementing regulations issued by the Tax Authority.
The payment facilities will vary according to their nature: (i) individuals, undivided estates and medium-sized companies may request up to 60 monthly installments; (ii) micro and small companies may request up to 84 monthly installments; and (iii) remaining taxpayers may request up to 36 monthly installments.
b) Effects:
The adhesion to this regime would result in:
- The suspension of any ongoing criminal tax and customs proceedings and the interruption of the criminal statute of limitations;
- Total payment of any liability under the conditions foreseen in the regime would result in the extinction of the criminal action, to the extent that there is no final decision to the payment date;
- Extinction by operation of law of the criminal action with respect to liabilities paid prior to the effective date;
In the case of the infractions foreseen in the Customs Code, payment of the minimum fine established for those infractions will produce the extinction of any criminal action.
3. Amendments to Personal Assets Tax Law
The Bill includes substantial amendments to the Personal Assets Tax Law (Law No. 23966), modifying the applicable rates for the tax periods comprising 2023 to 2027 and establishing a special payment regime.
a) Modification of the applicable rates for Personal Assets Tax for fiscal years 2023 to 2027
The Bill provides with new tax scales for fiscal years beginning from 2023 to 2027, progressively reducing the maximum tax rate from 1.50% in 2023 to a unified rate of 0.50% by the year 2027.
b) Special Regime for Payment of Personal Assets Tax (“REIBP”)
The Bill introduces a new “Special Regime for Payment of Personal Assets Tax” (“REIBP”, for its Spanish acronym), of voluntary and personal adhesion for individuals, undivided estates, as well as for companies and trustees acting as substitute taxpayers with respect to the Personal Assets Tax. The REIBP also includes foreign residents who own property located in Argentina and pay Personal Assets Tax through a substitute taxpayer.
The taxpayers may adhere to the REIBP until March 31, 2024.
i. Taxable Base
For individuals and undivided estates, the REIBP will consider the assets existing in the taxpayer’s net worth as of December 31, 2023, by application of the rules in force at that time for their valuation, exemptions, deductions, and minimum thresholds. The resulting amount, multiplied fivefold, will constitute the taxable base of the tax to be paid in the REIBP.
In the case of companies and trustees acting as substitute taxpayers, the taxable base will be determined by the last fiscal year closed prior to January 1, 2024, adjusted with a compensatory interest accrued during the period between the closing date of the fiscal year of the company and December 31, 2023. The resulting amount, multiplied fivefold, will constitute the taxable base of the tax to be paid in the REIBP.
With respect to assets located in the country whose owners are non-residents, the taxable basis will be determined considering the rules in force for the valuation of the asset located in the country and multiplied by five times.
ii. Applicable tax rate and payment of tax
In case the taxpayers choose to adhere to the REIBP, the Personal Assets Tax will be paid by applying a fixed rate of 0.75% for individuals and undivided estates, and 0.5% for companies, trustees and other substitute taxpayers.
The tax payment would consist in an initial payment of 75% of the tax prior to March 31, 2024 (date that could be extended by implementing regulations) with the remaining balance to be paid before May 31, 2024. The regulations will establish the mechanism for filing the tax returns and other complimentary filings to be made.
Those taxpayers with a “reduced taxable basis”, i.e., whose taxable basis is less than or equal to ARS 220,000,000 (calculated in accordance with the REIBP provisions), will be subject to payment for a fixed amount of ARS 1,650,000 under the REIBP. These provisions also apply to foreign residents who are taxed through substitute taxpayers for their assets located in the country.
iii. Benefits
The REIBP provides with certain benefits for taxpayers who adhere and comply with its conditions:
- Exclusion from Personal Assets Tax for fiscal years 2023 to 2027, including all aspects of Personal Assets Tax (i.e., advance payments, filing of tax returns, etc.).
- Fiscal stability: for 12 years starting as of January 1, 2028, with respect to the Personal Assets Tax and any other national tax to be created within the 12-year period intended to be levied on the taxpayer’s wealth, expressly prohibiting an increase in the overall tax burden beyond certain limits established in the Bill.
