The stamp tax and the requirement of an “instrument”

The Argentine Supreme Court of Justice reached a decision on the “Banco Río de la Plata S.A. c/ Provincia de La Pampa y/o quien resulte responsable ” case. The topic under discussion was the applicability of the stamp tax on credit requests submitted by certain clients of the taxpayer, which did not have the requirements stated by the Federal Taxes Coparticipation Law No 23,548 (the “Coparticipation Law”) to be considered “instruments”. However, the tax authorities of the Province of La Pampa had sustained that the stamp tax applied, which was confirmed by the Administrative Court of Appeals and later, by the Superior Court of Justice of the Province of La Pampa.

The Argentine Supreme Court of Justice adhered to the opinion of the Attorney General, and judged the decision of the Superior Court of Justice of the Province of La Pampa as arbitrary. In applying the Tax Code, the provincial court had used the “substance over form” principle and had considered that an “instrumental structure” existed, which allegedly determined the applicability of the tax.

The Supreme Court pointed out that the Tax Code provisions applicable to the periods under discussion (December 1989 to December 1993) determined that the tax was applicable on acts, contracts and transactions “... because of their mere instrumentation or material existence, with abstraction of their validity or efficacy or verification of their effects”. It was however pointed out that according to the Coparticipation Law, provinces that adhered to it could only apply the stamp tax on:

(a) onerous acts, contracts and transactions evidenced in an instrument,

(b) onerous contracts formalized by mail (ordinarily known as “contracts by mail”), and

(c) monetary transactions representing deliveries or receptions of money with accruing interest, performed by financial entities regulated by Law No 21,526 (ordinarily known as “non-instrumented monetary transactions”).

The concept of “instrument” is defined in the Coparticipation Law as “... every deed, paper or document from which the concretion of acts, contracts and transactions emerges (...) so that it shows the external features of a legal title with which the fulfillment of obligations can be demanded without the need of any other document and regardless of the acts actually performed by the taxpayers”.

The province of La Pampa adhered to the Federal Law of Coparticipation through local Law No 1,060, of May 5, 1988, and, consequently, it was obliged to modify its Tax Code to adapt it to the provisions of the Coparticipation Law, and to expressly apply the tax to “non-instrumented monetary transactions”. However, this took place in January 1994. The taxpayer claimed that the interpretation of the provincial court was contrary to the Coparticipation Law and, therefore, in violation of the right to property and the taxation principle of legality, both protected by the Argentine Constitution, because the transactions under discussion were performed prior to the modifications of the Tax Code.

The Supreme Court agreed with the taxpayer’s position. It held that the provincial decision was arbitrary because it did not apply the law relevant to the case, and because it “tried to unacceptably apply retroactively provisions in effect as from 1994 -regarding the taxability of certain monetary transactions regardless of the existence of an instrument-”. Even though the Supreme Court admitted the existence of a loan agreement, it disagreed with how the Superior Court of La Pampa had decided the applicability of the stamp tax.

The Argentine Supreme Court of Justice has confirmed, then, that as from the enactment of the Coparticipation Law and the adhesion of the provinces, beyond the so-called “contracts by mail” and the “non-instrumented money transactions”, the applicability of the stamp tax requires the existence of an “instrument”, according to the definition of “instrument” contained in the Coparticipation Law.