Regulations related to installment agreement for tax obligations and declaration of currency and assets

The Federal Tax Authority (AFIP) issued General Resolution No 2537 (the “Resolution”) regulating and establishing the conditions to enter the tax regularization regime, an employment promotion scheme with priority for PYMES (Small and Medium-sized Enterprises) and declaration and repatriation of capitals as stated in Law No 26,476 (see “Congress passes a new bill providing for an installment agreement for tax obligations among other important topics” in Marval News # 79 for comment on Law No 26,476 as a draft bill, December, 23 2008)

1.    Tax and social security contributions regularization regime

a.    Adherence to the regime shall be made as of March, 1, 2009 and until August, 31 2009. Although the Resolution sets forth that there is only one chance to adhere, it is possible to cancel the plan and submit a new one within the period above stated, in case of errors or omissions.

b.    The regimen applies to tax obligations and social security contributions corresponding to fiscal years ended on or before December, 31 2007.

c.    The software used to adhere to the regime will automatically apply the discharge of fines and interest provided by law. In case the plan is cancelled and a new one is submitted, the discharge of interest shall compute as of the time of the new submission.

d.    The regime allows including debts being administratively or judicially contested and debts spontaneously declared. In the latter case, the taxpayer shall submit the tax or social security contributions return corresponding to the concept and period being regularized or amended.

e.    Among other important matters, the Resolution broadens the range of obligations that are excluded from the regime, such as those related to customs obligations, advance payments (anticipos), and interest and fines related thereto.

f.     Furthermore, it establishes the conditions to be complied by debtors involved in bankruptcy proceedings but who carry on their activities in order to cancel their debts.

g.    In order to adhere to the Regime, the tax payer must desist from continuing contesting the liability. In the case of discharge of fines, the Tax Authority must ex officio request the archive of the file.

h.    Bank attachments (embargos) related to debts included in the regime shall be released. Nevertheless, if the taxpayer cancels the debt through an installment payment plan, any other measure shall remain in full force and effect, although they could be replaced by another one.

i.      Taxpayers joining the regime will have to afford the AFIP’s lawyer’s fees, except in those cases in which fines are discharged ex-officio. These fees may be paid up-front or in installments, regardless of the regularization of the tax liability itself.

j.      It is worth mentioning that the plan’s expiration causes are flexible (i.e., after a consecutive series of payment failures). The number of payment failures to cause the expiration increases progressively with the number of installments agreed in the plan. Once expired, there is only one chance to restore the plan, by cancelling the balance. If the plan expires, the statute of limitations term is reinstated.

k.     Finally, the Resolution allows the refinancing of plans currently in force, rejected or expired.

2.    Regime to declare the holding of national and foreign currency and assets in Argentina or abroad

a.    In the same period of time, tax payers will be allowed to declare the holding of national and foreign currency and other assets –in Argentina or abroad– submitting a special return.

b.    Bank transfers from abroad shall correspond to holdings as of December, 31, 2007 and be originated in foreign entities settled in countries following international regulations aimed to prevent money laundering and financing terrorism. Incoming funds shall be liquidated in the local exchange market and credited in special accounts pursuant to the BCRA (Central Bank of Argentina) regulations.

c.     In the case of foreign currency holdings in Argentina, the funds shall also be credited in special accounts pursuant to BCRA regulations.

d.     Foreign currency appraisal –that should refer to December, 31 2007– should be considering the exchange rate (tipo comprador) set by Banco de la Nación Argentina. Goods should be appraised pursuant to the Personal Assets Tax Law (Ley del Impuesto sobre los Bienes Personales) or the Minimum Presumed Income Tax Law (Ley del Impuesto a la Ganancia Mínima Presunta), as the case may be.

e.    The special tax resulting form the declaration shall be cancelled by a bank electronic payment before the 10^th day of the following month immediately after the submission of the return. Failure to pay on time entitles the Tax Authority to assess and require payment of the tax itself, plus interest and fines.

f.     Furthermore, the Resolution sets forth how to compute the two-year holding period for the investments with lower rates (i.e., real estate, infrastructure, public debt, etc.) and how this should be reported to the tax authority.

3.    General terms

a.    The Resolution establishes that the one year suspension of the statute of limitations for the AFIP to assess and demand tax liabilities and apply sanctions applies to all taxpayers, regardless of any adherence to the regime. This one year suspension shall be computed as of December 24, 2008.

b.    The Resolution sets forth that the requirement to maintain the payroll for two years applies only to tax payers adhering to the benefits contemplated in the “Regularization of Employment Regime” set forth in the Law.

It is expected that the AFIP will issue at least one more General Resolution, complementing these regulations