On July 24,4 2023, the Executive Branch Decree No. 377/2023 was published, incorporating new operations subject to the PAIS Tax (Spanish acronym for “ Por una Argentina Inclusiva y Solidaria”) established in year 2019 by Law No. 27,541. This extension now includes the import of goods and services.
The PAIS Tax was initially implemented with the primary objective of applying to foreign currency purchases for savings, credit and debit card expenses, as well as international tourism and transportation services. Its aim was to indirectly and artificially increase the final exchange rate applicable to these transactions. Subsequently, with the same underlying objective, a withholding tax regime for Income Tax and/or Personal Assets Tax was established by the Federal Tax Authority’s (“AFIP”)General Resolution No. 4815/2020.
New operations subject to “PAIS” TAX
With the modifications introduced by Decree No. 377/2023, the application of the PAIS Tax is now extended to include productive and commercial operations as well. The following cases are subject to the PAIS Tax at the specified rates:
- At a rate of 25%, for the purchase of foreign currency for the acquisition of the following services abroad:
• Maintenance and Repairs
• Postal and Courier Services• Construction Services• Insurance Premiums• Insurance Claims• Auxiliary Insurance Services• Financial Services• Telecommunication Services• Information Technology Services• Information Services• Charges for the use of Intellectual Property• Research and Development Services• Legal, Accounting, and Management Services• Advertising, Market Research, and Public Opinion Polling Services• Architectural, Engineering, and Other Technical Services• Operating Leasing Services• Trade-related Services• Other Business Services• Audiovisual and Related Services - At a tax rate of 7.5%, for the purchase of foreign for the acquisition of freight and other transportationservices related to the import or export of goods, or their acquisition within the country when provided by non-residents;
- At a tax rate of 7.5%, for the purchase of foreign currency for the import of goods classified under the Common Nomenclature of MERCOSUR, with the exception of:
• Specific products related to hydrocarbons;• Supplies and intermediate goods linked to the basic food basket; and• Goods related to energy generation.
Application of the “Additional Tax” withholding of General Resolution No. 4815 and new advance payment for “PAIS” Tax
Through General Resolution AFIP No. 5393, the additional withholding on account of Income Tax and/or Personal Assets Tax, as established by General Resolution No. 4815/2020, was excluded from the newly incorporated operations. Therefore, onlysome luxury goods imports, as foreseen in subsection b) of article 13 bis of Decree No. 99/2019, will remain subject to the 45% withholding.
Furthermore, Decree No. 377/2023/2023 includes an authorization to AFIP to establish an advance payment for the “PAIS” Tax of up to 95% for importation of goods. This new advance payment of the “PAIS” Tax, regulated by General Resolution AFIP No. 5393, will be applicable only to import operations and will be the responsibility of the importers. These will be required to pay this advance payment at the time of declaring the import destination, along with any duties, fees, and other taxes applicable to the import..
Entry into force and further regulations
Decree No. 377/2023 provides that it will be applicable to all foreign currency purchases made from the date of its publication (i.e., July 24, 2023).
However, considering the need for collection agents to adapt their systems, it is expected that the regulatory authority will issue further regulations with details on the implementation of the new measures and determining the means of tax payment for all transactions carried out during this period..
Likewise, it will be essential for the regulations to provide clarity on the scope of the services imports included within the concept of “Other Business Services” given the vagueness of such wording.
