Tax Secrecy and Suspicious Operations Reports

Introduction

On November 4, 2016, General Resolution 3952/2016 ("Resolution") was published in the Official Gazette, by which the Argentine Tax Authority ("AFIP") provides that those subjects listed in Section 20 of Law No. 25,246, as amended, must refrain from requiring their clients’ affidavits pertaining to national taxes filed with the Tax Authority.

This regulation was passed within the framework of Section 101 of Law No. 11,683 ("Tax Procedure Law"), which provides for the secrecy of the affidavits, statements and reports that taxpayers, responsible parties and even third parties file with this Agency.

It is worth mentioning that the institute of tax secrecy is based on the constitutional guarantees established in Sections 18 and 19 of the Argentine Constitution that provide for the inviolability and privacy of private consecrated papers, with the purpose of creating a confidentiality and security context regarding the legal tax relationship to assist the taxpayer to correctly declare their tax situation to the Tax Authority.

The Resolution

The Resolution applies to those subjects obliged to issue Suspicious Operations Reports ("SOR") to the Financial Information Unit.

Although there are several subjects, such as credit card operators, notaries public,  agents and brokerage firms, property public registries, etc. within the scope of this regulation, this measure is aimed at financial entities.

The legislation was issued in the context of Law No. 27,260 ("Tax Amnesty") whereby a large number of taxpayers will disclose a given estate on their affidavits for the first time, leading to greater exposure to the Tax Authority.

If those documents are also requested by the several entities obligated under the Money Laundering Law, the confidentiality provided for in the Tax Procedure Law and also in the Tax Amnesty would be at least partially lost, which could cause not only a negative effect on the current amnesty program in the short term but also certain difficulties to keep such information under tax secrecy in the long term.

In conclusion, the measure taken by the Tax Authority seeks to reinforce what was already established in the tax laws but which, due to the evolution of the obligations regarding the fight against money laundering, had been partially set aside.