In the case “Exterran Argentina S.R.L. s/ Appeal – Income Tax”, Chamber B of the Argentine Tax Court stated that losses derived from stock exchange dollar or MEP dollar transactions with government securities are deductible from Income Tax.
Decision of the Argentine Tax Court
On April 12, 2022, the Argentine Tax Court in ruling in the case “Exterran Argentina S.R.L. s/ Appeal – Income Tax” rejected the application of Circular 5/2014 and considered valid the deduction of losses generated by the purchase and sale of government securities in the Income Tax.
It should be noted that through Circular 5/2014 the Federal Administration of Public Revenues (hereinafter, the “AFIP”) clarified that losses due to exchange differences derived from dollar exchange or dollar MEP transactions with government securities are not deductible from Income Tax.
This is due to the fact that the transactions are not related to the obtaining, maintenance or conservation of profits taxed by such tax, nor do they comply with the legal requirements to be considered extraordinary losses, since they are not due to situations of force majeure or fortuitous event.
According to AFIP, such losses arise from harmful tax planning whose sole purpose is to generate an accounting and tax loss to avoid the payment of income tax.
However, Chamber B of the Argentine Tax Court considered that the application of Circular 5/2014 would result in an unequal treatment between gains and losses. This is so given that, if the taxpayer were to carry out the inverse operation, i.e.,buy the securities with foreign currency and sell them in pesos, he would obtain a taxable gain. In fact, when he earns, he would pay Income Tax, but when he loses, the loss is not computable.
As a result, the Tax Court of the Nation allowed the reimbursement action filed by the plaintiff.
In short, the decision of the Tax Court of the Nation is encouraging, as it becomes a favorable precedent for other taxpayers in the same situation, since it rationalizes the criterion of the AFIP that equates stock exchange dollar or MEP dollar transactions to harmful tax planning, as set forth in the first paragraph of Circular 5/2014.
