Why is the Financial and Economic Capacity System a Potential Obstacle for Taxpayers?

Over the past time several companies are unable to apply for import licenses or pay any services rendered from abroad due to changes in their Financial and Economic Capacity (CEF, for its acronym in Spanish). But what is the Financial and Economic Capacity System and how does it work?

The Financial and Economic Capacity System

In 2018, the Argentine Tax Authority (AFIP, after its acronym in Spanish) established the Financial and Economic Capacity System as a preventive instrument used for risk management on areas such as revenue management, customs and social security revenue (General Resolution No. 4294/2018). The CEF would is calculated based on information provided by taxpayers and/or third parties related to their economic and financial condition and activity.

Further, on the same year, the Secretariat of Commerce and AFIP jointly established a preventive import control procedure, consisting of a prior electronic control of the CEF to approve import licenses applied for by the importer and also to approve payments of services provided from abroad through the “SIMPES” regime (Joint Resolution No. 4364/2018.)

The CEF regime determines monthly a single value which is the actual capacity to carry out some activities, specially, foreign trade activities. To determine this value, AFIP weighs data related to real estate, income, and commercial activities of taxpayers.

The CEF value also determines a cap to access the FX market for taxpayers, thus this also implies a limit for companies that may have their inflow of imports or their ability to pay for services rendered from abroad restricted.

In the case of the previously cited companies, their import operations were hampered by a change in their CEF. But the cause of the CEF value modifications is still unknown, thus companies started to file petitions to have their CEF value recalculated to continue regular operations.

Until it is known in detail how the CEF calculation works and what parameters are used by the Argentine tax authority to determine it, companies that are prevented from carrying out operations may file several appeals before the Public Administration or the Court to have their import licenses authorized so that their production capacity is not affected.