Accounting and Tax Revaluation: Regulation

Through Decree No. 353/2018 (published on the Official Gazette on April 24, 218), the Argentine Executive Branch regulated Title X of Law No. 27,430 that established a tax and accounting revaluation regime that aims -according to the grounds of the Decree- to implement a process of patrimonial normalization through the revaluation of certain assets headed by their holders residing in the country.

Regarding tax matters, Chapter 1 of the aforementioned Title, provides that natural persons, undivided succession residents in the country and the subjects listed in Section 49 of the Income Tax Law (i.e. local companies) may choose to revalue, for one time only, any assets which generated Argentine-source taxable income.

In this scenario, the application of a special tax is provided, which will be applied to the difference between the value of all the revalued assets and their tax value.

The main aspects of the regulation are the following:

- Goods under development or construction. Improvements not completed. The elaborated portion of the amortizable movable property, the constructed part of the assets under construction and the disbursements for unfinished improvements are included, in all cases as of December 30, 2018.

- Goods acquired by leasing. Goods that have been acquired through leasing contracts may be subject to tax revaluation. For these purposes, the date and cost of acquisition applicable to the assessment of the income tax will be considered.

- Real estate condominiums. For the purposes of the tax revaluation, the share of each condominium owner will be considered as a different good, and it is not necessary for all condominium owners to exercise that option with respect to their property.

- Computable cost. The moment to assess the applicable revaluation factor will be at the time of each investment. If that moment cannot be determined, it will be considered that the acquisition or construction occurred at the time of its authorization.

- Amortization of real estate. The amortization of real estate must be made on the cost of the building or construction or on the part of the acquisition value corresponding to them.

- Goods subject to exhaustion. In the case of mines, quarries, forests and similar goods, it will be deducted -to the determined value- the exhaustion produced as a consequence of the consumption of the producing substance by the exploitation of such goods, calculated according to the provisions of the Income Tax Law.

- Recoverable value. The recoverable value of the good is the one that would be obtained in the market in the event of sale of the good, under normal conditions of sale.

- Upgrade. For the purposes of the update, the tax residual value of the asset will be computed at the close of the Option Period.[1]

- Alienation. Transfers of goods produced as a result of tax-free reorganizations will not be within the definition of alienation. In this case, the companies involved in the reorganization must inform the Argentine Tax Authoritiy (AFIP, after its acronym in Spanish) regarding which goods the revaluation option was made for.

- Sale and replacement. When the option of sale and replacement has been exercised, the revaluation factor to be considered must be the one for the date of acquisition, construction or authorization of the replacement asset.

- Deadline for the exercise of the option. The option may be exercised until the last business day of the sixth calendar month immediately following the Option Period. The AFIP may extend this term up to 60 calendar days, in the case of periods that had closed prior to the effective date of the Decree.

- Payment of the special tax. The special tax can be paid in a down payment in up to 4 equal installments, monthly and consecutive, with an interest on the balance established by the AFIP. The amount of installments may be raised up to 9 in the case of micro, small and medium sized enterprisess (MiPyMEs, after their acronym in English) as long as they are registered, at the time of exercising the option, in the Registry of MiPyMEs’ Companies. The payment of the tax will be carried out only through electronic transfer of funds or direct debit if it is decided to be paid in installments. The payment of the tax or the aforementioned down payment, if applicable, must be made up until the date set for the exercise of the option.

The provisions of Decree 353/2018 are already in force.

[1] Pursuant to Section 281 of Law 27,430, "Option Period" refers to the first fiscal period or fiscal year, as the case may be, whose closing occurs after the effective date of said Law (December 30, 2018).