The Argentine Tax Authority Accepts the “Negri” Precedent

In a ruling dated July 15, 2014, the Argentine Supreme Court of Justice (ASCJ) in the "Negri”[i] case stated that bonuses derived from the termination of the labor relationship by mutual agreement between employee and employer are not levied on Income Tax.

In the above mentioned precedent the ASCJ argued that the amount of money paid to the employee due to the termination of the employment relationship by mutual agreement is not levied on Income Tax, because “bonuses for termination of the employment relationship” do not have the requirements of periodicity and permanence of source that Income Tax Law requires from the individual taxpayer.

In similar situations, the ASCJ ruled in the “Cuevas”[ii] and “De Lorenzo”[iii] cases, and the Argentine Tax Authority issued Regulation No. 3/2012 stating that: “payments made in compensation for stability and union resources (which were analyzed in the first of the mentioned caselaws), likewise dismissal due to pregnancy (…)” (analyzed in the second ruling mentioned) are not affected by Income Tax”.[iv] 

Unlike the mentioned cases, the Argentine Tax Authority refrained from comment on the ASCJ decision settled in the “Negri” case.

In recent cases settled by the Argentine Tax Court, the Argentine Tax Authority agreed to claims filed by taxpayers, accepting the plaintiffs’ claim.[v]

In both cases the plaintiffs claimed the repetition of withholdings held by their former employers in respect of Income Tax derived from the interruption of the employment relationship.

The Argentine Tax Court accepted the ruling made by the Argentine Tax Authority and also imposed litigation costs.[vi]

Finally, due to the acceptance by the Argentine Tax Authority, based on the “Negri” precedent, it is expected that, as stated in Regulation No. 3/2012, the Argentine Tax Authority will recognize that the amount of money paid in concept of bonuses for the termination of the employment relationship by mutual agreement is not levied on Income Tax. In addition, it is expected that the Argentine Tax Authority will admit that the same treatment will apply to any amount of money obtained by individual taxpayers as long as such amount of money does not fulfill the requirements stated by Income Tax Law regarding the condition of having periodicity and a permanence of the source that produces them.

[i] Caselaw N. 204. XLVIII; "Negri, Fernando Horacio c/ AFIP-DGI", July 15, 2014.

[ii] Caselaw 333:2193; "Cuevas, Luis Miguel c/AFIP-DGI s/contencioso administrativo", November 30, 2010.

[iii] Caselaw D. 1148. XLII; "De Lorenzo, Amalia Beatriz c/DGI", June 17, 2009.

[iv] Regarding the penultimate paragraph of the Regulation N° 3/2012 issued on November 29, 2012.

[v] “Trípodi, Juan Pablo s/ recurso de apelación”, Argentine Tax Court, Court Room D, May 19, 2015; and “Lofeudo, Alberto Fernando s/ apelación”, Argentine Tax Court, Court Room A, May 15, 2015.

[vi] Regarding the way litigation costs were imposed, the Argentine Tax Court did not find arguments to exempt the Argentine Tax Authority to bear such costs that its own action caused. Also the Tax Court took into account the delay in the acceptance of the plaintiff’s claim, which was evidenced on the time passed by between the moment the Argentine Tax Authority noticed the “Negri” precedent, and the moment the Argentine Tax Authority accepted the plaintiff’s claim.