Modifications to the Withholding Regime of Futures Contract

On December 23, 2015, the Tax Authority’s General Resolution N° 3824 was published in the Official Gazette amending the Tax Authority’s General Resolution N° 3818 which, as discussed in Marval News # 157, established a withholding regime on foreign currency futures.

By General Resolution N° 3824 (hereinafter, the “Resolution”), the Tax Authority clarified that the withholding regime for open foreign currency futures will be applied on the gain that results, for both long and short positions, comparing:

i) the original contract price of the transaction or the price resulting from the novation and

ii) the adjustment price used for the "mark to market" of  contracts on December 23, 2015.

It also includes Over-the-Counter (“OTC”) transactions carried out directly by the authorized agents in the withholding regime. For OTC transactions, the Resolution provides that: "in those cases where there were no "mark to market" due to the fact that the operations are not performed in institutionalized markets, the difference subject to withholding will be determined between the original contract price of the transaction and the value resulting from the ask quote for the foreign currency at closing of December 23, 2015".

Regarding positions existing as of December 16, 2015 but which were closed by the closing of operations of December 23, 2015, the withholding will be applied on the difference between: (i) the original price agreed for the operation or the price arising from its novation, and (ii) the price at which each of position was closed.

The resolution adds that the "institutionalized markets that are counterparty and/or their clearing houses authorized by the Argentine Securities Commission" should also act as withholding agents.

On the other hand, it makes it clear that withholding will not apply to payments made to: a) the mutual funds; b) persons exempted from income tax; c) the entities covered by the Financial Institutions Law No. 21,526 and its amendments. The withholding shall not operate in the case of operations resulting from Communication “A” 5852 of the Central Bank of Argentina (transfer of foreign currency position of financial and exchange entities).

The withholding shall be made when the settlement payment is made, but Article 5 provides that:

i) Regarding positions existing as of December 16, 2015 but closed by the closing of operations of December 23, 2015, the withholding will have to be made only if the payment of the settlement had not occurred at the time of the issuance of the Resolution. In such case, withholding will be made at the time the settlement occurs.

ii) In the case of contracts which do not involve the payment of daily differences, the withholding will be made in the first payment after December 23, 2015.

iii) In the case of impossibility of practicing the withholding, the recipient must enter an amount equal to the amounts not withheld.