Financial Trusts: Requirements to obtain Income Tax benefits

In Ruling No 77/2006, the Federal Tax Authority (Administración Federal de Ingresos Públicos, “AFIP”) analyzed the scope and the time period within which the public offering requirement must be fulfilled in order to enjoy the tax benefit granted in the Income Tax.

Pursuant to the facts described in the Ruling, the case under analysis consisted of a financial trust that intended to deduct income distributed to its beneficiaries from fiscal year 2005’s return, when at the end of such fiscal year it had only obtained authorization from the Federal Securities Commission (Comisión Nacional de Valores or CNV).

The AFIP concluded that the financial trust could not enjoy the tax benefit in year 2005 because at the end of such fiscal year “recipients were not in a position to accept the offer and acquire the offered securities”.

It could therefore be inferred that for the AFIP, the authorization from the CNV is not enough to comply with the public offering requirement.