On March 6, 2026, the President of Argentina enacted the Labor Modernization Law (the “Reform”), which, among other matters, introduced an amendment to the Income Tax Law concerning the acquisition of Argentine citizenship by naturalization as a result of significant investments and the conditions under which individuals may be considered Argentine tax residents.
What is tax residency?
Tax residency is the criterion used to determine where an individual is taxed on their worldwide income. In Argentina, resident individuals are subject to Income Tax on all income, regardless of whether it is sourced in Argentina or abroad. Conversely, non-resident individuals are taxed only on Argentine-source income.
Accordingly, determining whether an individual qualifies as a tax resident has a direct impact on the scope of Income Tax, the applicable Personal Assets Tax regime, taxpayers’ reporting obligations, and the potential application of double taxation treaties.
When is Argentine tax residency currently acquired?
The Income Tax Law primarily relies on immigration status and physical presence to determine an individual’s tax residency. In this regard, Section 116 of the Income Tax Law (Law No. 20.628) provides that the following individuals are considered tax residents in Argentina:
i. Individuals of Argentine nationality, unless they have lost their tax residency status.
ii. Foreign individuals who obtain permanent residence in Argentina.
iii. Foreign individuals who, without obtaining permanent residence, remain in Argentina for more than twelve months, except for temporary absences.
Regarding item (iii), the same article provides that, notwithstanding the aforementioned period of stay, individuals who have not obtained permanent residence in the country and whose presence in Argentina is due to circumstances that do not imply an intention of habitual residence may provide evidence of the reasons for such stay within the timeframe, and in the manner and under the conditions, established by the applicable regulations.
Changes introduced by the Reform
The Reform adds a new paragraph at the end of Section 116, establishing that foreign individuals who obtain Argentine citizenship by naturalization as a result of making significant investments in the country will not be considered Argentine tax residents solely by virtue of such naturalization.
Furthermore, for the purposes of certain specific provisions of the Income Tax Law, such individuals will continue to be treated as foreign nationals. If, at the time of obtaining citizenship through investment, the individual was already a permanent resident in Argentina, they will continue to be treated as an Argentine tax resident.
Purpose of the amendment
The aim of the reform is to remove a potential tax disincentive for foreign investors, since without this clarification, it could be interpreted that, upon becoming a naturalized Argentine citizen, the individuals would automatically become tax residents and, therefore, be subject to taxation on their worldwide income.
Such interpretation could have produced an unintended outcome, as an investor seeking only to make a strategic investment in Argentina might otherwise have been exposed to a significant expansion of their global tax burden.
The rule applies exclusively to foreign individuals who obtain Argentine citizenship by naturalization as a result of significant investments in the country, in accordance with the Argentine Citizenship Law.
Conclusion
In essence, the amendment introduces a relevant distinction between citizenship and tax residency, aligning the tax framework with the economic realities of international investment. By removing the automatic presumption of tax residency, the Reform provides greater predictability and legal certainty for individuals considering investments in Argentina without altering their global tax position.
