Court Rules Solidarity Contribution Does Not Apply to Contributions to Irrevocable trusts

The Solidarity Contribution—created through Law 27605 and published in the Official Gazette on December 18, 2020—was levied on residents in Argentina for their assets in the country and abroad, and on non-residents for their assets in Argentina, both as of December 18, 2020.

Article 3 of the Law establishes that the tax assessment basis for residents in Argentina "shall be calculated including contributions to trusts or private interest foundations and other similar structures, participation in companies or other entities of any kind without fiscal personality, and direct or indirect participation in companies or other entities of any kind, existing at the date of entry into force of this law."

In turn, article 2 of Decree 42/2021 establishes that “the subjects of article 3 of the law must declare as their own and include in the basis for determining the contribution, the assets contributed to such structures, for a percentage equivalent to their participation in them (...)."
In the case "Volij, Gabriela Veronica c/ EN-AFIP-ley 27605 s/proceso de conocimiento,” Ms. Volij filed a declaratory action of certainty for the courts to decide if the contributions made to irrevocable trusts should be included in the taxable base of the Solidarity Contribution.
Supporting the petition, the taxpayer provided an irrevocable trust agreement entered into under the laws of New Zealand and details of the contributed assets. The taxpayer was only the trustee (the contributor of the assets subject to debt determination).

The ruling highlighted that this was a discretionary trust, for which the trustee lacks decision-making capacity, and that the contributed assets left the taxpayer's domain when entering the trust. Considering these conditions, the Court concluded that the assets contributed to the trust were not in the taxpayer's estate as of December 18, 2020, which meant they were not contributive and, therefore, not taxable. Consequently, article 3 of Law 27605 and article 2 of Decree 42/2021 were declared unconstitutional for this specific case.

The Federal Tax Authority appealed the ruling before the Federal Court of Appeals on Administrative Matters, thus this ruling decision is not yet final.