Deductibility of fees paid to managers of limited liability companies - New opinion by the Federal Tax Authority

On September 12, 2008, the Technical Advisory Office of the Federal Tax Authority (“AFIP”) issued Opinion No 46/2008 (the “Opinion”), in which it analyzed the extent of Article 87, paragraph j) of the Income Tax Law.

The abovementioned norm provides for the deduction –subject to certain limitations- of the amounts destined to payment of fees to directors, statutory auditors, members of the supervisory committee and managing partners.

Without entering into other analyzed issues, the AFIP understood that the deduction of the fees paid to a manager of a limited liability company who is not also a partner, is included in the abovementioned norm. The AFIP bases its opinion on the grounds that corporate law equates the manager who is not partner to a director of a corporation, and that managers –as directors- receive fees in relation to earnings of the company. In other words, AFIP finds that the same tax treatment corresponds to managers and directors.

The significance of the Opinion lies in the fact that the criteria of the AFIP does not follow market practice. Notwithstanding the above, the Technical Advisory Office will send the proceedings to the Legal Advisory Office for its opinion on the issue.