Tax Agreement: Main aspects

On November 16, 2017, all the provincial governors (except for the governor of San Luis), the Mayor of the City of Buenos Aires and the President of Argentina executed an agreement (called “Fiscal Consensus”) with the purpose of establishing a series of guidelines to harmonize the different jurisdictions’ tax structures to promote employment, investment and economic growth and promote uniform policies that enable the achievement of that common purpose.

Likewise, with the execution of the agreement, the government pursues to build consensus to pass a new federal co-participation law and agree on a solution to the judicial disputes between the different Provinces and the Federal State linked to the current Federal Co-participation Regime.

With these purposes in mind, a series of common commitments were agreed on, the main ones are:

• To pass the Tax Responsibility and Good Government Practices Amendment Bill before June 30, 2018 and to pass the Tax and Accounting Revaluation Bill before December 31, 2017.
• To abrogate, as of January 1, 2018, section 104 of the Income Tax Law referring to the destination that should be given to the collected income tax.
• To extend the validity of the Tax on Credits and Debit, with a specific allocation of 100% of its collection to the ANSES, until a new federal tax co-participation law is passed or until December 31, 2022, whichever occurs first.
• To agree on a new federal co-participation law.

Other commitments relate to the social security regime and to the establishment of a compensation mechanism for reciprocal debts and credits between the Provinces and the Federal State.

The Federal State also entered into specific commitments with the Provinces (such as the issuance of a bond in favor of the Provinces and the City of Buenos Aires). Finally, the Provinces and the City of Buenos Aires assume, among others, the following commitments:

Turnover Tax:

• To eliminate differential treatments based on the location of the taxpayer's establishment or the production location of the goods immediately.
• Not to tax the revenue from the provision of services effectively used or exploited abroad.
• To adapt the withholding and collection tax regimes so that they respect the territorial limits and to avoid the generation of inadequate or permanent balances.
• To establish an automatic refund mechanism of the balance in favor generated by withholdings and payments in advance accumulated during a reasonable period, to the taxpayer.

Real Estate Tax

• To adopt valuation procedures and methodologies for the calculation and determination of real estate tax valuations.
• To set Real Estate Tax rates between a range of 0.5% and 2% of the tax value established as provided in the previous paragraph.

Stamp Tax

• Not to increase the Stamp Tax rates corresponding to the assignment of real estate and automotive and hydrocarbon activities and their complementary services.
• To establish, for the rest of activities and contracts, a maximum Stamp Tax rate of 0.75 as of January 1, 2019, 0.5% as of January 1, 2020, and 0.25% as of January 1, 2021 and to eliminate it as of January 1, 2022.

Municipalities

• To promote the adjustments of the applicable municipal taxes in the respective jurisdictions in such a way that they apply to the concrete, effective and individualized provision of a service and their amounts keep a reasonable proportionality with the cost of the latter, in accordance with the provisions of the Argentine Constitution.
• To promote a single liquidation and payment system of municipal taxes applicable to each province and the City of Buenos Aires.

All the commitments made in the Fiscal Consensus should be fulfilled, as agreed therein, before December 31, 2019, unless another compliance term has been established.