AFIP Resolution Provides for Taxable Brackets for Employees

Income Tax Law No. 20,628, as amended ("ITL"), establishes a federal tax on the worldwide income obtained by individuals, legal entities domiciled in Argentina and Argentine branches of foreign entities. For corporate entities (like a Limited Liability Company), the tax rate applicable in Argentina upon their net income is thirty-five percent (35%). However, Income Tax is considered to be a progressive tax for individuals because tax rates increase with higher income levels. Thus, the income of individuals is subject to tax upon a sliding scale which begins at the rate of 9%, increasing to 35% depending on his or her taxable income.

For example, if a person renders personal services and receives a salary in consideration (i.e. salaries from public or private employment, professional fees, pension income and salaries paid to partner/manager of partnerships), the tax is withheld by the employer, who must submit an informative tax return annually. Resident individuals may deduct from net income certain allowances for husband or wife, children, etc.

In order to determine the applicable tax, we must take into account the ITL. Since Income Tax is withheld by the employer, General Resolution No. 3008 issued by the Federal Tax Authority (AFIP by its Spanish Acronym) must be taken into account. In practice, the latter prevails to calculate the withholding.

The ITL provides for a table but, for the purposes of the withholding that the employer has to practice, General Resolution No. 3008 provides the following tables. Please note that they are summarized, so depending on each case the full version should be read. Directive No. 1/2001 of the AFIP may also be applicable, and (if applicable) other deductions as allowed by Law.