The Argentine Executive Puts into Effect a Controversial "Export Duty" on Services

For purposes of the Customs Code, the aforementioned Law included  those services that are performed within the country and whose effective use or exploitation takes place outside Argentine territory (Clause c) of article No. 10 of the Customs Code in the definition of goods.

The transnational route that, in a figurative sense, performs the service from its provision in Argentina to its use outside the country, justifies the application of this so-called “export duty”. However, another possible reason for its application is that, unlike other contributions collected by the Argentine Government, the collection of customs taxes is not shared with the provinces.

Following the usual form of customs taxes, the decree indicates that the export duty on services is 12% of the taxable value resulting from the invoice but, in practice, the "export duty" works as a monthly tax, which must be paid on the aggregate amounts invoiced during the monthly period, subtracting the cancellations, price adjustments, discounts granted and other similar situations.

As a matter of fact, the 12% rate does not necessarily apply to assess the tax liability, since the decree establishes a cap of ARS 4 per dollar of the value subject to the tax.

Taking into account the exchange rate at which the market currently operates, and the announcement by the Argentine Central Bank regarding "flotation band", the tax should always be assessed by applying the fixed amount of ARS 4 per dollar.

The tax established in Decree No. 1201/18 does not follow the usual practices applicable to customs law, since it sets forth that "service exporters" will not need to classify the service according to the tariff code, they should not be included in the register of exporters, they will not have to submit export applications, nor will it be necessary to obtain a license from the customs authorities to "send" the services abroad.

Two additional issues deserve to be commented in relation to the scope of the tax.

The first issue refers to the case in which the service provider manages to increase the price to transfer the tax to the user of the service. In this case, the "export duty" included in the price will increase the basis for calculating the tax.

According to articles 735 and 737 of the Customs Code, export duties must be deducted from the taxable value.

It would be reasonable to expect that the regulations to be issued by the Argentine Tax Authority (AFIP) will be in line with this interpretation, so that the application of a coefficient to reduce the taxable value will be authorized in those cases where there has been an increase due to the incidence of the tax.

The second issue refers to de identification of the services subject to the tax.

Law No. 27,467 amended the Customs Code, referring to "services provided within the country, whose effective use or exploitation takes place abroad".

This definition raises several interpretative issues, since:

• To the extent the "effective use or exploitation abroad" is a relevant condition, it seems reasonable to understand that the service is only considered to be exported when such use or exploitation actually takes place. This circumstance poses a difficulty related to the knowledge or ignorance of such use or exploitation by the provider of the service.
• The provider of the service may have no way of knowing if the service was used or exploited in the country or abroad.
• The service can be provided to be used or exploited in the country, but afterwards the user can choose to use or exploit it abroad.
• It may happen that, after an effective use or exploitation of the service in the country, it is used or exploited effectively abroad, and vice versa.
• Besides being "used" and being "exploited", a service may be subject to an "act of disposition" by the user. This last case is not contemplated in the Customs Code, as amended by Law 27,467.

These and other issues must be analyzed, taking into account the characteristics of the provision of the services involved, the way in which they are provided and sent to the user, the way in which they are used or exploited, the existence of acts of disposition, etc.

Regarding these issues, Decree No. 1201/18 indicates that attention must be given to the provision of services "whose actual use or exploitation is carried out abroad, understanding as such the immediate use or the first act of disposition" by whoever has requested the service.

According to this definition, if the service has a first effective use in Argentina ("immediate use in Argentina"), it will not be subject to the tax, even if it has a subsequent effective use abroad ("mediate use abroad").

Likewise, the use or effective service exploitation in Argentina will not necessarily lead to eliminate the application of the tax, if the first "immediate" use takes place abroad.

The mention of the "first act of disposition by the user" raises reasonable doubts, since it is a case that is not included in the definition of goods introduced in clause c) of article No. 10 of the Customs Code.

Regarding the term of application, Decree 1201/18 sets forth the applicability of the tax until December 31, 2020.

Finally, by implementing this tax, all requirements set forth in the Argentine Constitution have been disregarded, since it is the Argentine Congress, and not the Argentine Executive, that is authorized to set up taxes, including those related to import and export activities.