Global Tax Alert (News from Americas Tax Center) | 9 September 2013

Argentine House of Representatives approves tax reform bill

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On 4 September 2013, the Argentine House of Representatives (Cámara de Diputados), the first of the two chambers of the Congress that must endorse a bill in order to convert it into law, approved the tax reform bill recently proposed by the Executive Power.1

It is important to note that some amendments were introduced to the bill before it was submitted to the House of Representatives, which became part of the latest approved text. Now this bill is expected to be discussed in the Senate during next week (beginning 9 September 2013). Once approved by the Senate, it must be promulgated by the Executive Power and published in the Official Gazette in order to enter into force.

In addition to the inclusion of income derived from the sale of shares, titles, bonds and other securities within the scope of the income tax, the amended bill would incorporate the taxation of the sale of quotas and other corporate participations (this includes also the sale of other participations in capital, such as quotas of SRLs, etc.). As from the entry into force of the reform, these transactions would be subject to income tax at a 15% rate.

The amended bill also would increase the net presumed income applicable on the sale of shares, quotas and other corporate participations, titles, bonds and other securities for foreign beneficiaries from 50% (included in the original project and applicable also in the law to other type of goods) to 90% (applicable in the law for residual income not included in other clauses). This would mean an effective tax rate of 13.5% on the gross sale price (15% new capital gain rate x 90% presumed net income). Alternatively, the amended bill would allow taxpayers to calculate net income by deducting from the sale price the actual costs allowed by Argentine regulations (the way in which this works in practice still remains unclear).

Under the amended bill, if both the seller and the buyer are foreign parties, the buyer will be responsible for the payment of the tax to the Argentine tax authorities.

In relation to the new 10% dividend withholding introduced by the reform, the amended bill would include the remittance of profits by branches within the scope of the dividend taxation. It also would clarify that the tax on dividends would operate as a “sole and definitive tax” (presumably through withholdings to be performed by the distributing company). The tax on dividends would apply to Argentine individuals, as well as to foreign shareholders (this was not expressly clear in the original project).

The recently modified bill retains the same clause regarding its application (for taxable events occurring after the entry into force of the law). Some regulations should be expected through changes to the income tax regulatory decree or new resolutions by the tax authorities.

Endnote

1. Originally described in EY Global Tax Alert, Argentine tax reform submitted to Congress - Significant changes to taxation of dividends and capital gains, dated 29 August 2013.

For additional information with respect to this Alert, please contact the following:

Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires
  • Carlos Casanovas
    +54 11 4318 1737
    carlos.casanovas@ar.ey.com
  • Gustavo Scravaglieri
    +54 11 4510 2224
    gustavo.scravaglieri@ar.ey.com
  • Ariel Becher
    +54 11 4318 1686
    ariel.becher@ar.ey.com
  • Pablo Baroffio
    +54 11 4510 2271
    pablo.baroffio@ar.ey.com
Ernst & Young LLP, Latin American Business Center, New York
  • Alfredo Alvarez
    +1 212 773 5936
    alfredo.alvarez@ey.com
  • Pablo Wejcman
    +1 212 773 5129
    pablo.wejcman@ey.com

EYG no. CM3787