Bill to Amend the Capital Markets’ Law - Tax Aspects

November 30, 2016

The bill to amend the Capital Markets Law submitted by the Executive to the Congress amends several tax rules.

The Bill to amend the Capital Markets’ Law No. 26,831 (the “Bill”) -see “Bill to Reform the Capital Markets Law” in this edition of Marval News- amends several tax rules. Below are the main modifications:

Mutual Funds – Equalization Tax

Equalization Tax will not be applicable for mutual funds included in Section 1 of Law No. 24,083 when the income derived from them belongs to quota holders of funds duly authorized by the Argentine Securities Commission.

Mutual Funds – Income Tax

Mutual Funds not included in the first paragraph of Section 1 of Law No. 24,083 will be subject to Income Tax as long as they are not authorized by the Argentine Securities Commission, in the proportion of the investments not carried out in Argentina. In that case and for that proportion, the Tax on Presumed Minimum Income will not be applicable.

For companies, to the extent that the aforementioned funds are authorized by the Argentine Securities Commission and for the proportion of the investments carried out in Argentina, Section 64 of the Income Tax Law (non-computable income) will be applicable for the income distributed deemed non-computable if the investment had not been made through a mutual fund.

For individuals who invest in such mutual funds, Section 46 of the Income Tax Law will be applicable in the proportion of the income deemed exempt, non-computable or not taxable if the investment had not been made through a mutual fund.

Financial Trust – Income Tax

Financial Trust under certain requirements may be able to deduce the sum considered distribution of profits. The profits distribution may be taxed through the investor of the trust.

Individuals –Exemption for transfer of shares

The exemption provided in Subsection w) of Section 20 of the Income Tax Law is applicable if the shares are placed through public offering and the transaction is authorized by the Argentine Securities Commission, under segments that ensure priority of price-time and interference of offers; otherwise, it is necessary to fulfill certain requirements related to the free number of shares.

Foreign beneficiaries – Exemption for transfer of shares and others

The results from sale, exchange, disposition or transfer of shares and other securities obtained by foreign beneficiaries will be subject to Income Tax as long as they are not placed through public offering and/or the transactions are not authorized by the Argentine Securities Commission. However, the foreign beneficiaries will be subject to Income Tax if they do not fulfill the following requirements:

  1. The transactions are authorized by the Argentine Securities Commission, under segments that ensure priority of price-time and interference of offers.
  2. At the date of the transaction, the free number of shares of the listed company must be greater than 40% of the capital.
  3. That in a 12-month period, the subject and its controlling group or group of control, by means of Law No. 26,831 and its amendments, have not carried out accumulated sale transactions for an amount over than 20% of the total number of shares that have been issued, subscribed and integrated of the issuing company in authorized markets by the Argentine Securities Commission, according to the publications on the website of the company
  4. The trading of the shares of the issuing company in the authorized markets must exceed a minimum according to regulations of the Argentine Securities Commission.

Individuals

Individuals and legal entities that subscribe shares of companies authorized by the Argentine Securities Commission may compute up to 30% of the investment made as a payment on account of Income Tax of the fiscal year of the subscription under certain requirements. 

For more information regarding (i) other amendments proposed by the Capital Markets Bill please see “Bill to Reform the Capital Markets Law”, and (ii) the incorporation of regulations of derivatives transactions, please see Repos and Derivatives Transactions in the Capital Markets Reform Bill”, in this edition of Marval News.