New Tax for an Inclusive and Solidarity Argentina

Here is a brief summary of the main features of the new emergency Tax for an Inclusive and Solidarity Argentina ( the “PAIS" after its Spanish acronym), which was established by Chapter 6 of the Law 27,541 (the “Law”).

Transactions included: the tax applies within the Argentine territory on the following transactions:

1. Purchase of foreign currency, including traveler’s checks, for saving purposes or without specific destination made by Argentine residents.
2. FX transactions made by financial entities on behalf of the purchaser of goods or the borrower of services, for the purpose of payment of those goods or services acquired abroad, as long as the payment is made through charge, credit or debit card. This provision includes: (a) cash withdrawals and cash advancements with credit cards and ( purchases made through e-commerce websites or other modalities in foreign currency.
3. FX transactions made by financial entities on behalf of an Argentine resident which is borrower of a service rendered by a non-Argentine resident, for the purpose of payment of such service, as long as the payment is made through charge, credit or debit card.
4. Acquisition of services abroad through travel and tourism agencies in Argentina.
5. Acquisition of passenger transportation services (by any means of transport) with an international destination, as long as a FX transaction to acquire the relevant foreign currency to cancel the purchase is required, in accordance with the guidelines that will be provided by impending regulations.

Taxpayers: Argentine residents, whether individuals, undivided estates, legal entities or any other that could be held liable for the payment of taxes as an Argentine resident, who perform the transactions mentioned above, are subject to the tax.

Exemptions: the following transactions are exempt from the tax:

• Transactions made by the Public Sector (including the central administration and the decentralized entities, as provided by the definition of Section 8 subsection a) of Law No. 24,156, as amended) at federal, provincial and municipal level.
• The following transactions:

• Payment f health expenses and purchase of medicines.
• Purchase f books in any format.
• Use f educational web platforms and software for educational purposes
• Payment f expenses associated with research projects carried out by researchers working in the Public Sector.
• Purchase f materials and equipment by the associations of vlunteer firefighters.

Tax Rate and base: the tax rate is 30% and the tax base is the total amount of each transaction subject to tax. In the case of transactions mentioned in section (e) above, the tax rate is the price charged by the transportation company, net of taxes and fees.

In the case of transactions expressed in foreign currency, the conversion to its equivalent in Argentine pesos must be made by applying the seller exchange rate set by the Banco de la Nación Argentina at close of the last business day immediately preceding the date of issuance of the credit card statement, the settlement or the relevant invoice or equivalent document.

Tax payment: although the tax will be the responsibility of the acquirer, purchaser or borrower, a collection mechanism of the tax is established, as follows:

The Argentine Tax Authority will establish the formalities, terms, requirements and other conditions for collecting and paying the tax, as well as the evidence that will be required to invoke an exemption to the tax.

Delegation of faculties in the Argentine Executive: The Argentine Executive has the following faculties: (a) incorporate new transactions subject to tax, as long as those transactions directly or indirectly requires the acquisition of foreign currency, and appoint new collection agents; (b) reduce the tax rate; (c) suspend the application of the tax; (d) establish a reduced rate for certain digital services rendered from abroad that are already subject to VAT; and (e) conduct studies on the social and economic impact of the tax.

Destination of the funds collected through this tax: the proceeds of the tax will be distributed by the Argentine Executive in accordance with the following priorities: (a) financing programs in charge of the Argentine Social Security Agency (the “ANSES” after its Spanish acronym): 70%; and (b) financing social housing, the trust denominated as “Fondo de Integración Socio Urbana” (created by Law 27,453), other works of economic infrastructure and the development of domestic tourism: 30%.

Date of entering into force: the tax will be applicable to all transactions, cards settlements and payments made from the day following the entry into force of the Law, excluding transactions made prior to said date.