In a context in which there will be an automatic exchange of information with other countries, on May 31, the Executive Branch filed a bill of law including a "Tax Amnesty Regime" before the House of Representatives. Among other provisions it included a "Voluntary and extraordinary disclosure regime of national and foreign currency holding and other assets, within Argentina and abroad" ("Tax Amnesty"). The bill of law was recently approved by the Congress, so the expectation is that it will be passed into Law next week.
Disclosure of assets
The "tax amnesty" regime is an amnesty for taxpayers who disclose undeclared assets, within Argentina and abroad, without the need to repatriate them to Argentina.
The deadline to file the statement adhering to the regime is up to March 31, 2017.
Individuals, undivided state and companies domiciled and residents within Argentina, will be able to adhere to the regime. They can only include within their statements assets that have been existent before the date of enactment of the Law or, for companies, assets that have been existent before the closing date of financial statements before January 1, 2016.
The Tax Amnesty also provides the disclosure of corporate participations, benefits from trusts and any other right subject to an economic value.
The taxpayer adhering to the Tax Amnesty can disclose assets even those in possession registered or deposited under the name of the spouse, certain relatives or even third parties. Regulations shall clarify this alternative in order to avoid misunderstandings in further tax returns.
October 31, 2016 is an important date because it is the cut-off date to disclose cash currency holding within Argentina by depositing such funds on a bank account or financial institution in Argentina. The funds must remain deposited and registered in the owner's name until March 31, 2017, or at least, six months, whatever is longer. There will be exceptions regarding funds destined to special tax payment, bond subscription or acquisition of registered property.
Taxpayers adhering to the regime must file a statement individualizing every owned asset and including, among other provisions, a bank account statement for the local and foreign accounts to support the disclosure.
Taxpayers not adhering to the regime must file a statement of data confirmation. This may be understood as a benefit for those who are not adhering to the Tax Amnesty towards past situations.
The disclosure of the assets shall be total and there is no possibility of making a partial declaration.
If the AFIP discovers undeclared assets, the taxpayer will lose all the benefits granted by the tax amnesty. The taxpayer adhering to the Tax Amnesty shall not be forced to provide the AFIP with any additional information other than that requested at the time of disclosure.
Adhering to the "tax amnesty" regime involves the application of a special tax rate which varies according to the following scheme:
- Zero: 0% for those assets not exceeding AR$ 305,000;
- Five: 5% for real estate and for those assets that do not exceed AR$ 800;
- Ten: 10% for goods, exceeding the sum of AR$ 800,000 submitted until December 31, 2016 (except for real estate);
- Fifteen: 15% for goods, exceeding the sum of AR$800,000 submitted until March 2017 (except for real estate)
In these last two cases payment of the special tax can be replaced by granting public authorities with BONAR 17 or GLOBAL 17 securities, and in this case the applicable rate is 10% and may be carried out until March 2017.
The disclosure of assets will be exempt from the special tax if the funds are used to subscribe public securities. These are public securities in dollars, non-transferable and non-negotiable.
Another exemption of the special tax will apply if the funds are used to subscribe or purchase quotas of investment funds which will be specially regulated by the Argentine Securities Commission that will be investing in the real economy. Quotas may only be transferred 5 years after subscription.
Benefits of the Tax Amnesty
Like any other tax amnesty, the benefit for the taxpayer is to include undeclared assets to their disclosed property, without having to face tax, criminal or foreign exchange issues, regarding those taxes that should have been paid due to those assets (such as VAT, Income Tax, and Personal Asset Tax).
The taxpayer will be also be released from any potential claim or penalty, including criminal tax law, criminal foreign exchange law, criminal and custom law and also administrative infringement that may correspond for failure to fulfill legal obligations related to the non-disclosed assets and their profit.
However, the tax amnesty does not include a pardon for money-laundering legislation. Furthermore, the origin of the disclosed assets could be subject to further investigation in order to establish if they are, in any way, related to criminal activities, except for those included in criminal tax law and foreign exchange law, which are covered by the benefits of the tax amnesty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.