Increase of FX Control

When selling foreign currency, all the entities authorized to carry out foreign currency transactions shall consult its validity and register the transaction through the new FCTC system. In tandem, the AFIP will immediately decide whether the transaction is valid or shows inconsistencies, on the basis of the potential buyer’s fiscal, economic and financial situation, according to the information contained in the AFIP’s databases.

The new regulation seeks to optimize the AFIP’s supervision and control over tax obligations.

The FCTC system includes all sales of foreign currency, regardless of the purpose for which the transaction is carried out or the allocation that will be given to the acquired foreign currency.

Due to tax purposes, the entities authorized to carry out foreign exchange transactions shall register the transaction as it is performed. The consultation and registration shall be processed by the “Exchange of Information System”, through a web service or by the FCTC system (available at the AFIP’s website). When using these systems, the entities shall comply with certain guidelines contained in a user’s guide available at the AFIP’s website.

The entity carrying out the foreign currency transaction shall enter the buyer’s identification, what type of currency is involved, its allocation, the transaction’s amount in Argentine Pesos and the applicable exchange rate.

The AFIP will immediately analyze the submitted information and give one of the following answers based on the information provided by its records: 1 “Validated” 2 or “With Inconsistencies”. 3

If the answer is “With Inconsistencies,” the buyer may request further explanations at the corresponding AFIP office.

According to General Resolution No. 3212 of the AFIP, effective as from November 9, 2011, the “Inconsistencies” may be rectified by taking the actions that may apply depending on each case. In order to rectify the inconsistencies due to “insufficient economic or financial capacity,” the resolution specifies that the person shall submit a note together with a printout of the AFIP’s answer and all documents that prove the origin and amount of funds that will be used for the purchase of foreign currency. Thereafter, AFIP will review the documents and decide on the request, although the regulation does not provide a term for the decision.

Moreover, the potential buyer may find out beforehand what the AFIP’s answer will be by consulting through the website. To this purpose, a Fiscal Key is required.

The AFIP will control that the entities authorized to carry out foreign currency transactions comply with the provisions of the GR AFIP 3210. Therefore, the AFIP will issue daily reports on the transactions registered in its system and will verify that all the transactions informed by the Argentine Central Bank have an assigned transaction number. The AFIP will also audit the consultations made by buyers who have obtained the answer “With Inconsistencies” and, mainly, the foreign currency transactions that the system has reported “With Inconsistencies” and that are still carried out after the AFIP’s intervention.

Communication “A” 5245 of the Central Bank, 4 effective as from November 11, 2011, provides that transactions for sale of foreign currency for the formation by residents of foreign assets with no obligation to give them a specific allocation 5 (commonly referred to as “atesoramiento” or “investment for treasury purposes”) shall only have access to the foreign exchange market when validated through the COC system.

On the other hand, the Communication states that the following foreign currency transactions do not require a prior tax validation with the COC system:

1. Purchases carried out by international organizations and institutions that act as official export credit agencies, 6 diplomatic and consular representations and diplomatic staff accredited in the country, representations in the country of courts, authorities or offices, special missions, commissions or bilateral institutions established by treaties or international conventions, in which Argentina is part.
2. Those performed by local governments.
3. Those made by individuals to pay for a property that has been subject to a mortgage loan in Argentine Pesos extended by a local financial entity for the purchase of a dwelling. 7
4. Purchase of foreign bills by individuals, within 30 running days as from October 31, 2011 included, with social security (retirement and pension) funds received from abroad.

Also, in the case of sale of foreign currency for any concept rather than “investment for treasury purposes,” the validation requirement for the performance of the transaction does not need to be fulfilled. However, the authorized entities shall always verify that the rest of the applicable foreign exchange regulations are fulfilled.

To sum up, in these cases, although the system says that the operation shows “Inconsistencies”, the purchase may still be completed, even though the AFIP will pay close attention to audit these operations.

Any violation to the obligations set by the GR AFIP 3210 will be subject to the corresponding sanctions in accordance with Law No. 11,683 (as supplemented), and Law No. 24,769 (as supplemented).

These laws provide various sanctions within the framework of the fiscal proceedings and criminal tax regimes.

Also, in the event that irregularities reached by the criminal foreign exchange regulations or related to money laundering are detected, the AFIP will report them to the Financial Information Unit (Unidad de Información Financiera), dependent on the Justice and Human Rights National Department.

The GR AFIP 3210 has already generated a judicial precedent in which the constitutionality of the resolution was challenged: “Ruperez Justa vs. AFIP and others”, First Instance Federal Court of Quilmes, November 3, 2011.

The plaintiff filed an amparo (type of legal injunction) against the AFIP and a bank to obtain the declaration of unconstitutionality and inapplicability of the GR AFIP 3210 and Communication “A” 5239 of the Central Bank (currently, Communication “A” 5245). The plaintiff wanted to buy US$ 1,700 just for savings, but the transaction was rejected under the new regulations. Therefore, she claimed that the restriction affected her constitutional rights and guarantees, mainly in terms of private property.

Moreover, the plaintiff requested an interim measure to reverse the status quo of the situation to the existing one prior to the enactment of the mentioned resolution. However, the Court held that the facts did not show that the defendant’s actions were manifestly arbitrary or illegal. Nor did the Court find enough reasons to justify a preventive measure.

Lastly, the judge required the AFIP, the bank and the Central Bank to provide a detailed report on the precedents and reasons why the transaction was rejected.

The new requirements set by the AFIP to access the exchange market imply an important amendment to the regulations in force during recent years.

The measure, which was enforced almost overnight, generated certain operative difficulties to the banks, mainly to do with problems in adjusting their systems.

Currently, the sale of foreign currency can not be made through automated teller machines, internet banking or telephone banking. These automatic means will be authorized once the banks and the AFIP adjust their systems, but no term for this adjustment has yet been established. For the time being, the only way to purchase foreign currency is directly at the counters in banks and exchange agencies.

In addition, the new controls raise some questions that can not be answered yet. For example, potential buyers shall prove that their financial capacity is in accordance with the amount of foreign currency they want to buy. In this regard, official sources have assured that if the potential buyers’ financial information is compatible with their income, there will be a balance that will allow them to save in Dollars. However, the regulations do not provide a maximum percentage of foreign currency that can be bought by each person based on earnings. In fact, the “compatibility” analyzed by the AFIP to approve the transaction is not clearly determined.

Paradoxically, in some cases, banks have informed their clients that the system did not allow them to buy the requested amount of foreign currency, even though the clients had obtained the authorization beforehand to buy the same amount when consulting through the AFIP’s website.

According to the government, the target of these new measures is not to prevent or stop the purchase of foreign currency, but that foreign currency is only bought by those who have the fiscal capacity to do so or need it for a specific transaction.