Last December 29, the Senate of the Nation approved the bill resubmitted for review regarding the amendments to the Personal Property Tax, introducing a new scale of aliquots applicable on assets in the country and abroad, potentially effective for the liquidation of this coming December 31, 2021.
The original bill contemplated the update of the non-taxable minimum -without modifications since December 2018- from $2,000,000 to $6,000,000, and from $18,000,000 to $30,000,000 for the case of real estate intended for home-occupation. During its treatment in the Chamber of Deputies, a new scale of progressive tax rates applicable to the assets located in the country was introduced which, without updating the amounts for the scale brackets, adds two new brackets, bringing the maximum rate to 1.75% for assets exceeding $100,000,000.
Likewise, it definitively incorporated to the text of the tax law, the scale of aggravated tax rates applicable exclusively to assets located abroad, which will go from 0.75% to 2.25%, when the total of the assets -in the country and abroad- exceed $18,000,000.
It should be recalled that the scheme of aggravated tax rates for assets abroad had already been applied since the 2019 tax period, by delegation of powers granted to the National Executive Power temporarily limited until December 31, 2020.
This permanent incorporation to the text of the Personal Property Tax Law will definitively enshrine this new scheme of higher tax burden for those who have part of their assets made up of assets located abroad.
Remaining procedure until its effective application and implementation
Notwithstanding the questions regarding the nullity of the procedure followed in the Senate for the conformation of the quorum necessary for the session, the enacted law must be sent to the National Executive Power, who must enact it by decree and publish it in the Official Gazette before January 1, 2022, so that the changes in the non-taxable minimum and the new tax rate scales become effective and applicable for the tax period 2021.
New tax rate scales
The new scale of rates applicable to property located in the country contains two new scale brackets, with rates of 1.50% and 1.75%, above the 1.25% ceiling currently in force:
| Total value of assets exceeding the non-taxable minimum | They will pay $ | Plus the % | Over the excess of | |
|---|---|---|---|---|
| Over $ to $ | To $ | |||
| 0 | 3.000.000 inclusive | 0 | 0.50% | 0 |
| 3.000.000 | 6.500.000 inclusive | 15.000 | 0.75% | 3.000.000 |
| 6.500.000 | 18.000.000 inclusive | 41.250 | 1.00% | 6.500.000 |
| 18.000.000 | 100.000.000 inclusive | 156.250 | 1.25% | 18.000.000 |
| 100.000.000 | 300.000.000 inclusive | 1.181.250 | 1.50% | 100.000.000 |
| 300.000.000 | onwards | 4.181.250 | 1.75% | 300.000.000 |
On the other hand, the scale applicable to assets located abroad with rates ranging from 0.70% to 2.25% does not contain changes with respect to the one currently in force, but its incorporation to the text of the tax law will imply its permanent and definitive application.
| Total value of assets exceeding the non-taxable minimum | They will pay $ | |
|---|---|---|
| Plus the % | To $ | |
| 0 | 3.000.000 inclusive | 0.70% |
| 3.000.000 | 6.500.000 inclusive | 1.20% |
| 6.500.000 | 18.000.000 inclusive | 1.80% |
| 18.000.000 | onwards | 2.25% |
Questions on the differentiated tax rate scheme
Finally, it is pertinent to point out that it is certainly questionable to establish a scale of aggravated tax rates applicable to assets located abroad.
Considering the principles governing taxes, there is no reasonable and fair criterion to sustain that a certain estate, which in whole or in part is made up of assets located abroad, demonstrates a greater taxable capacity than another estate of similar total value, but made up of assets located in the country.
Thus, the application of a special scale of rates for assets located abroad, and with aggravated rates, results in a clearly discriminatory measure that violates the principles of taxpaying capacity, equality and generality of taxes.
This logic of discrimination with respect to assets located outside the country has already been the object of judicial questioning, both with respect to its application in the Personal Property Tax for the fiscal periods 2019 and 2020, as well as in the case of the Solidarity and Extraordinary Contribution (“Tax on Great Wealth”, created by Law No. 27,605 within the framework of the COVID-19 pandemic) which replicated a similar structure of aggravated tax rates. To date, no pronouncements have been issued in this regard, but the same arguments will be applicable to this reform, if it is successful.
