Argentine Government Issued Regulatory Decree of Tax Amnesty

1. Introduction

Law No. 27,260 was published in the Official Gazette on July 22. Among other topics, it provides a Tax Amnesty Regime (“Tax Amnesty” or “Regime”) (please see Argentina Has Released a New Tax Amnesty Regime).

In that context, the Government issued Regulatory Decree No. 895/2016 (“Decree” or “Regulation”) by means of which an additional and complementary set of rules was created in order to be incorporated to the Tax Amnesty.

In general terms, the Decree clarifies several aspects of the Regime.

2. Analysis of the Decree

Some of the aspects in which there was some uncertainty were, among others, (i) disclosure of assets  owned by relatives or third parties; (ii) disclosure of assets owned by foreign entities; (iii) regime applicable to bonds; (iv) requirements to adhere to pooled investment funds and; (v) partial disclosure. Despite the fact that not all of these subjects have been exhaustively regulated by the Decree, the first clarifying standards have been established.

(i) In the case of assets owned by relatives or third parties, the Regulation provides that the requirement of Argentina fiscal residence in the terms of the Income Tax Law (“ITL”) is applicable only to the disclosure of assets owned by third parties.

Furthermore, transactions made with the purpose of fulfilling the requirement of transfer of property will be tax free and do not create any obligations to pay any tax or whatsoever.

Although the transfer of property should only have been for tax purposes and not to generate registration proceedings and professional fees, we understand that it is a positive clarification.

(ii) Another clarification of the Decree is that the requirement of transfer of property mentioned in (i) is not be necessary in cases of disclosure of assets owned by foreign entities.

An extensive interpretation of such requirement could have led to the assumption of additional taxes or other related costs which would have made the Tax Amnesty economically inefficient.

However, such assets must be disclosed in further tax returns as long as they remain under the property of the taxpayer.

In the context of those topics pending clarification by the Regulation, questions were made regarding what happens in the case of an irrevocable trust and individuals other than “beneficiaries and owners” referenced by the Law.

It was therefore established that disclosure could be made by any of the following legal figures: settlors, trustees or founders of a trust, a foundation or any other similar entity incorporated abroad.

In addition, the disclosure made by any of these individuals as well as that made by shareholders, heirs or any other individual related with a trust, foundation, association, companies or similar entity incorporated abroad will also be granted with the benefits of the Tax Amnesty.

(iii) Pooled Investment funds requirements will be specifically regulated by the Argentine Securities Commission. However, the Decree provides that open funds will be able to receive those amounts which are temporarily used for the subscription or acquisition of quotas. Such quotas will compose a specific “class” pending issuance.

It should be highlighted that the profits arising from redemption of quotas must be used for the acquisition of quotas of a closed pooled investment fund before March 11 of 2017. Otherwise, the special tax shall be paid over the disclosed amount invested in the open fund or over the total amount of its redemption. The applicable rate will vary depending on whether the redemption was performed before or after December 31 2016.

This alternative could be attractive to those taxpayers who prefer to disclose their assets and analyze the investment in real economy or infrastructure at the same time.

(iv) One expected limitation is related with the issuance of public securities by the Government. The agency responsible for the coordination of the systems which are part of the Financial Administration of the Argentine Public Area will set forth the maximum limit for the issuance of those instruments.

(v) Last but not least, with respect to the partial disclosure, the Decree establishes that the detection of non-disclosed assets does not entail the loss of Tax Amnesty benefits as long as the total amount of such assets does not exceed AR$ 305,000 (including real estate property) or 1% of the disclosed assets.