Tax Rules Included in Budget Bill

1.         Tax Procedure

1.1       Use of information sent to foreign tax authorities

Section 70 of the Budget Bill (the "Bill") encourages the abrogation of the third paragraph of subsection d) of Law No. 11,683 of Tax Procedure. This rule, which refers to Tax Secrecy, establishes that it does not apply to cases of remission of information abroad in the framework of international cooperation agreements executed between the Argentine Tax Authority (the “AFIP” after its acronym in Spanish) and the foreign tax authorities as long as they undertake to comply with certain guidelines. Among them, the one referred to using the information provided only for the purposes indicated in the previous sections, being able to disclose this information in public court proceedings or in judicial decisions. If the Bill is approved, this guideline would be eliminated.

1.2       Exemptions to Fiscal Secrecy

Section 71 of the Bill encourages the incorporation of subsection g) to Section 101 of Law No. 11,683 of Tax Procedure. If the Bill is approved, the Tax Secrecy would not apply to the Argentine Social Security Administration (the “ANSES” after its acronym in Spanish) provided that the corresponding information is directly linked to the prevention and control of fraud in the granting of benefits or subsidies granted or controlled by that authority, and to define the right to access to a benefit or subsidy by a beneficiary.

1.3       Tax Value Unit

Section 91 of the Bill encourages the extension until September 15, 2019, of the deadline provided in Section 303 of Law No. 27,430 for the Argentine Executive to submit a draft law to determine the Tax Value Unit.

The Tax Value Unit is a unit of measure included in Title XI of Law No. 27,430 and which -once its value is established- would be used to determine the fixed amounts, minimum taxes, scales, penalties and any other monetary parameters included in the tax laws and other obligations whose implementation, collection and control is managed by the AFIP, including the corresponding procedure laws and the monetary parameters of the Criminal Tax Law.

2.         Personal Assets Tax

Section 72 of the Bill encourages the amendment of the last paragraph of subsection b) of Section 22 of Title VI of Law No. 23,966 (Personal Assets Tax), which refers to the minimum valuation of motor vehicles. If the Bill is approved, the reference value table ​​drawn up by the Public Registry of Motor Vehicles and Collateral Credits will be used instead of the list drawn up by the AFIP on December 31 of each year.

3.         Value Added Tax (“VAT”)

Section 76 of the Bill encourages the amendment of Section 50 of the Value Added Tax Law (“VAT Law”), which is referred to the individuals who make the printing of books, pamphlets and similar printed matter, whether in fascicles or loose-leaf, which constitute a complete work or part of a work, included in the exemption of subsection a) of Section 7 of the VAT Law.

If the Bill is approved, the technical VAT balance -generated as of January 1, 2019- that cannot be computed for the purposes of VAT payment, could be credited against other taxes managed by the AFIP, or be returned or transferred to responsible third parties pursuant to the second paragraph of Section 29 of Law No. 11,683 of Tax Procedure, all subject to the regulations established by the AFIP for this purpose.

Section 50 adds, in the wording proposed by Section 76 of the Bill , that the accreditation could not be made against obligations derived from the several liability for debts of third parties, or from the situation of the beneficiary as withholding and collection agents. Nor would it be applicable against taxes destined exclusively to the financing of funds with specific allocation, or to the social security resources.

The limit of the accreditation, refund or transfer will be that which results from the application of the general tax rate (21%) on the amount of sales or locations made in each fiscal period. If there is a surplus, it could be transfer to subsequent fiscal periods.

Section 78 of the Bill encourages the incorporation of the assets’ manufacturers and importers, referred to in the first paragraph of Section 28 subsection e) of the VAT Law, to the refund regime for this tax regarding those tax credits generated as of January 1, 2019.

Section 92 of the Bill encourages the exemption in the VAT for social housing construction. Section 93 of the Bill establishes a mechanism for the implementation and/or return of the generated tax credits -as of January 1, 2019- in charge of the individuals that carry out exempt activities pursuant to the provisions of Section 92. These benefits will be applicable in the provinces that, through a local law, establish exemptions in the Stamp Tax and the Turnover Tax, and invite their municipalities to also establish tax incentives. According to Section 95 of the Bill, Section 92 and 93 will be applicable for projects that start as of January 1, 2019, or those which progress has not exceeded 25%, and provided they are finished by December 31, 2023.

4.         Refund Regimes

4.1       Individuals forced to accept alternative means of payment other than cash

Section 74 of the Bill encourages an amendment to the first paragraph of Section 10 of Law No. 27,253, and in this way expands the universe of individuals forced to accept other means of payment, other than cash (for example, debit cards, non-bank prepaid cards, etc.). If the Bill is approved, the reference to providers of massive consumption services to final consumers would be replaced by service providers. The possibility of calculating as VAT tax credit the cost incurred by the new individuals that are forced to adopt alternative means of  payment, up to the amount authorized by the enforcement authority, is maintained.

4.2       Refunds to final consumers

Section 75 of the Bill encourages the AFIP to establish a refund regime to final consumers (individuals) with the purpose of encouraging behaviors related to the formalization of the economy and tax compliance. The Ministry of Finance will establish the budget allocated for the corresponding refunds.

5.         Income Tax

Section 85 of the Bill encourages the restriction to the scope of the exemptions provided in subsections d) and g) of the Income Tax Law. If the Bill is approved, the results from savings, credit and/or financial activities or insurance and/or reinsurance activities, regardless of the modality in which they are developed – except Labor Risk Insurance Companies (the “ART” after their acronym in Spanish) and those that act as social security funds for their associates- will be taxed by Income Tax. In those cases, the exemption provided in Section 29 of Law No. 20,321 would not be applicable.

In the case of cooperative companies, they could compute as payment on account of the Income Tax the amounts that they had paid as Special Contribution on the Cooperatives Capital. If a non-absorbed surplus arises, it would not give rise to any refund or compensation.

Section 87 of the Bill encourages the abrogation, as of January 1, 2019, of Sections 99 and 100 of the Income Tax Law. On the other hand, Section 86 of the Bill encourages the extension of the calculation basis for the Income Tax in the cases of subsections a), b) and c) of Section 79 of the Income Tax Law.

If the Bill is approved, all those rules would no longer be applicable (decrees, collective labor agreements, or any other lower hierarchical convention or norm), by means of which, directly or indirectly, is established or will be established in the future, totally or partially the exemption or write-off of taxable matter in the Income Tax, in concept of representation expenses, travel expenses, mobility, special bonus, protocol, professional risk, technical ratio, special or functional dedication, hierarchical or functional responsibility, uprooting and any other compensation of a similar nature, whatever the denomination used.

The different concepts that under the name of social benefits and/or fuel vouchers, extension or authorization to use purchase and/or credit cards, housing, leisure or rest trips, payment of education expenses of the family group or other similar concepts, would also be taxed, whether they are granted by the employer or through third parties in favor of their employees, even though they do not have a remunerative nature for the purposes of the Social Security Contributions to the “Sistema Integrado Previsional Argentino” (SIPA) or to similar local regimes.

The provision of work clothes or any other element linked to the work clothing is also kept outside the tax scope, together with the equipment of the worker for exclusive use in the workplace and the granting or payment of training or specialization courses to the extent that these are essential for the performance and development of the career of the employee within the company.

6.         Excise Tax

Section 88 of the Bill encourages the amendment of the last paragraph of Section 39 of the Excise Tax Law (text replaced by Law No. 24,674). If the Bill is approved, the values ​​established in the second and third paragraph of the aforementioned Section 39 would be adjusted on a quarterly basis by the variation of the Consumer Price Index (“CPI”) published by the INDEC.

The Bill maintains the adjustment variable, increasing its periodicity. If the Bill is approved, in April 2019 the values ​​that would be examined in January 2019 would be adjusted again pursuant to current regulations.