The Federal Administrative Litigation Court No. 8 of the City of Buenos Aires ruled in favor of the lawsuit and declared the unconstitutionality of Article 3 of Law 27,605 and Article 2 of Decree 42/2021, insofar as they provided that for the determination of the “Solidarity and Extraordinary Contribution to help mitigate the effects of the pandemic,” contributions made to trusts, fiduciary agreements, and analogous structures had to be included.
In this case, the plaintiff had contributed certain assets to an irrevocable trust established under New Zealand law, clarifying that, due to the nature of this trust, they lost control and ownership of the contributed funds, as acknowledged by AFIP in Opinions DI ASLE 1084/02 and DAT 9/13.
Upon careful examination of the trust’s characteristics, the judge concluded that it was an irrevocable trust, since the contributed assets ceased to be the property of the plaintiff, and the plaintiff had no authority to revoke the trust or retain decision-making powers over the direction of the assets. It is the “protector” of the trust who acts as a supervisor or controller of the fiduciary in the adoption of decisions, which cannot be made without his authorization. Since the trust was established abroad, it is governed by the regulations of the place where it was established.
To reach this decision, the ruling held that “it is a characteristic of both the fiduciary arrangement and the trust that there is a transfer of property rights from the settlor to the trustee, who is a third-party owner. In the trust, there are two forms of ownership over the same asset: the trustee has legal ownership and the beneficiary has equitable ownership. Therefore, the settlor, who has relinquished ownership of their assets once they are out of their control, cannot be considered the taxpayer for the tax in question.”
In this manner, it was established that the assets contributed to an irrevocable trust cannot be subjected to taxation under the taxpayer’s name, as they have ceased to be part of their estate and lack contributory capacity.
