Presumed Minimum Income: The Argentine Tax Authority Endorses Court Criteria

In the "Hermitage" precedent (Sentence 333: 993), held in 2010, the Argentine Supreme Court of Justice (SCJA) declared the unconstitutionality of the application of the Tax on Presumed Minimum Income in a case where the company proved that its commercial exploitation had produced losses in the analyzed fiscal period.

In the "Diario Perfil" case (Sentence 337: 62), the  SCJA added to its decision that the tax payer did not had to prove that the company assets could not generate the income presumed by the Tax on Presumed Minimum Income law.

While sentencing in the “Diario Perfil” case, the SCJA considered what had occurred in the "Hermitage" case, and concluded that the minimum income presumed by the law had not existed, since the firm had recorded losses in its balance sheets, and also registered a tax loss in its tax return.

The AFIP, through Instruction 2/ 2017, accepting the SCJA’s criteria, indicated that its legal areas must accept the taxpayer's claim in cases where losses are recorded in the balance sheets and, at the same time, there are registered tax losses in the same fiscal period’s tax return.

Consequently, Instruction 2/ 2017 indicates to all the AFIP’s legal areas that they should: 

a) Accept the taxpayer's claims in cases where taxpayers had recorded losses in their balance sheets, and also registered a tax loss in their tax return.

b) Withdraw any claim or lawsuit, totally or partially, or to consent to the judicial judgment, in cases where the AFIP holds different criteria from the one settled by the SCJA in the abovementioned precedents.

c) Request the imposition of the court costs in the order in which they were produced.

It is expected that the AFIP will reimburse the tax already paid on Presumed Minimum Income in those cases where taxpayers had requested it, and where they can prove that the company’s assets could not generate the income presumed by the law.

This line of conduct that the AFIP imposes on its legal areas agents in judicial cases will not necessarily be the same as the one that its agents in charge of tax collection will follow.

This Instruction does not imply, in any way, a lack of validity of the Tax on Presumed Minimum Income, which will be applicable until December 31, 2018. Law No 27,260 (Official Gazette: July 22, 2016) abrogated it for fiscal years that begin from January 1, 2019.