New Regulation on Tax on Gross Income for Electronic Payments

 

•Taxpayer

 

 

Resolution No. 19/2019 was published in the Official Gazette of the Province of Buenos Aires on July 3, 2019 and established a new regulation for all individuals that participate as middlemen in payments using digital platforms regarding the tax on gross income.

 

The main characteristics of this new regulation are listed below:

 

Withholding agents - individuals and transactions subject to this tax

 

In the first place, anyone that facilitate the process, aggregation or aggrupation of payments, whether it is to receive the payment or to make it on behalf of third parties, using digital platforms or any other means of electronic or digital communication, will become a withholding agent of the tax on gross income.

 

On the other hand, taxpayers will be those who carry out sales of movable property, lease of works and/or provision of services where payment is made through any of the means of payment mentioned above. Taxpayers will also be included in a list created by the Province of Buenos Aires Tax Authority (the “ARBA” after its Spanish acronym) that will be available on its official website www.arba.gov.ar (this list has not yet been published).

 

However, some taxpayers will be considered as such even if they are not included in ARBA’s list as long as the following conditions are met:

 

1. They carry out five or more of the transactions mentioned above
2. The total amount of transactions is, either individually or together, equal or superior to ARS 25,000.

Withholding agents will have to evaluate whether these conditions are met or not. They will only have to consider those transactions in which they effectively participated.

 

Lastly, anyone who is correctly registered as a withholding agent will be excluded from being taxed.

 

Tax rate

 

In the first place, the withholding will be done on the total amount of the payment. Due to this, the ARBA will consign the appropriate tax rate for each taxpayer in their list. The ARBA will divide taxpayers into 11 groups and tax rates will vary from between 0% and 3.5%. In those cases of taxpayers who are not included in the list, withholding agents will apply the highest rate (3.5%).

 

The ARBA will use the information on their database to be able to determine which tax rate to use on each taxpayer, for example: the affidavits presented regarding the tax on gross income, the exceptions associated with the taxpayer’s tax identification code number, among others.

 

This list will be updated monthly and will be available to every withholding agent five days before it comes into effect on ARBA’s official website. The list will come into effect on the first day of the month after it is published.

 

Ways to object the withholding tax rate

 

The resolution establishes the possibility to object through ARBA’s website the tax rate that is included in the official list. Taxpayers will be able to justify their objection with only one of the justifications listed on the website.

 

Once the claim is done, ARBA will process the information received and will corroborate it with the one registered in its database. If the claim is accepted, ARBA will issue a “Certificate of Disagreement”. In any case, the rate may be reduced to 0% or 0.2%.

 

The reduction of the tax rate will be done for a maximum period of one month. Only up to three certificates may be requested within the same fiscal period (consecutive or alternative). However, taxpayers will be able to request the amendment to be done definitively.

 

Taxpayers will be also able to request the reduction of tax rates through the mechanism established in ARBA’s Normative Resolution No. 64/10 and its amendments.

 

Opportunity and payment method

 

Withholding agents will practice the withholding when paying the taxpayer the amount collected from the user.  On the other hand, taxpayers will take the amount withheld as a payment in advance of the tax on gross income. If the amount withheld does not cover the amount the taxpayer needs to pay, they  need to pay the difference. On the contrary, if the amount withheld exceeds they will be able to compensate it later.

 

Furthermore, the resolution foresees a mechanism to avoid double taxation under certain circumstances.

 

Withholding agents registration

 

Withholding agents will need to formalize their registration until August 31 and will start acting as such from September 1, 2019. This registration must be done through the mechanism established in ARBA’s Normative Resolution No. 53/10.