Congress Passes New Amendment to the Personal Assets Tax Law

On December 31, 2021, Law No. 27,667 (the “Tax Reform”) was published in the Official Gazette. The Tax Reform established important amendments to the Personal Assets Tax Law (the “PAT Law”).

First, the Tax Reform increased the amount of the tax allowance provided by article 24, first paragraph of the PAT Law, applicable to taxable assets in general (except households and shares in Argentine corporations) from ARS 2,000,000 to ARS 6,000,000 (around USD 57,000 at the exchange rate in force on December 31). Consequently, the appraisal of these assets in any amount that does not exceed ARS 6,000,000 is not taxable.

Likewise, the Tax Reform raised the tax allowance established by article 24, second paragraph of the PAT Law, applicable to households of taxpayers or of the deceased in undivided estates, from ARS 18,000,000 to ARS 30,000,000 (around USD 286,000). 

The increase in these tax allowances was necessary because of inflation, as they had last been updated per inflation in 2019. Percentage increases vary for each tax allowance. 

Second, the Tax Reform established the applicable scales and rates for assets located in the country and abroad, as detailed below.
In the case of assets located in the country, the tax for Argentine residents will be assessed by applying the following rates on the overall value of the taxable assets––except for those subject to the aggravated rate for assets abroad and shares in Argentine corporations– that exceed the detailed tax allowance. 

Total value of the assets that exceed the minimum tax exemption		Will pay AR$	Plus, the %	Over the exemption AR$
Above AR$	Up to AR$
0	up to and including 3,000,000	0	0.50%	0
3,000,000	up to and including 6,500,000	15,000	0.75%	3,000,000
6,500,000	up to and including 18,000,000	41,250	1.00%	6,500,000
18,000,000	up to and including 100,000,000	156,250	1.25%	18,000,000
100,000,000	up to and including 300,000,000	1,181,250	1.50%	100,000,000
300,000,000	And above	4,181,250	1.75%	300,000,000

 

 

 

 

 

 

 

 

 

 

 

In the case of assets located abroad, belonging to Argentine residents, the tax will be assessed by applying the following rates to the overall value of the assets located abroad that exceed the minimum tax allowance in the proportion that was not absorbed by assets located in the country:

Total value of the goods in the country and abroad		Will pay the %
Above AR$	Up to AR$
0	up to and including 3,000,000	0.70%
3,000,000	up to and including 6,500,000	1.20%
6,500,000	up to and including 18,000,000	1.80%
18,000,000	And above	2.25%

 

 

 

 

 

 

 

 

 

 

 

Law No. 27,541, published in the Official Gazette on December 23, 2019, had empowered the Executive Branch to establish aggravated rates for assets located abroad for the 2019 and 2020 tax periods; and this power was executed through the issuance of Decree No 99/2019, which regulates that law. Although this increase was not applicable in the event of repatriation of financial assets under certain conditions, it was criticized by various sectors for considering that it implied an unreasonable discrimination of taxpayers who own assets abroad.

Since the delegation in Law 27,541 was effective until the 2020 fiscal period, the Executive Branch included the aggravated rates in the Federal Budget Bill for the 2022 fiscal year, but with effect as of 2021 for Personal Assets Tax purposes. However, the bill was rejected by the House of Representatives. As a result, the law aggravating rates for 2021 was not enacted.

Consequently, the aggravated tax rates for assets located abroad were included in the Tax Reform.

Although the Tax Reform is recent, the aggravated rates have been subject to some constitutional questioning by legal scholars based on the legislative process surrounding the law’s enactment (regarding the house proposing the bill, the required quorum and the treatment of an issue already included in the Federal Budget Bill, rejected that same year).

Third, the Tax Reform established that the tax allowances we mentioned above, and the respective scales, will be adjusted annually by applying the General Level Consumer Price Index (the “IPC,” after its acronym in Spanish) which will enable their automatic adjustment in an inflationary context.

Fourth, through the Tax Reform, Congress delegated to the Executive Branch the power to reduce the rates applicable to assets located abroad in case of repatriation of funds or financial assets located abroad. Through Decree 912/2021, the Executive Branch defined “repatriation” as bringing to Argentina, up to December 31 of each year, (i) foreign currency from abroad and (ii) amounts derived from the sale of certain financial assets representing at least 5% of the overall amount of assets located abroad. Funds subject to repatriation must be kept in bank accounts with Argentine financial institutions up to and including December 31 of the calendar year when the repatriation is carried out. The taxpayer is entitled, once the funds are brought to Argentina, to use them for certain investments outlined in Section 3 of Decree 912/2021.

Fifth, the Tax Reform amended article 25, fourth paragraph of the PAT Law, and established that the tax credit for similar taxes paid abroad will be computed first against the tax resulting from the application of the rate for assets located in Argentina; then, their balance will be computed against the tax resulting from the aggravated rates.

Finally, in relation to Income Tax, the Tax Reform empowered the Executive Branch to increase, during the 2022 fiscal year, the amounts corresponding to the so-called “special deduction” for personal work and for the remuneration up to which the yearly bonus collected by employees will not be taxable. This power had already been used by the Executive Branch during the 2021 fiscal year.