Turnover Tax on agricultural financial assistance

The Province of Buenos Aires Fiscal Code provides that the financial assistance given by the Argentine State to taxpayers is not levied by Turnover Tax.

In report No 126/2007, dated December 5, 2007, the Dirección Técnica Tributaria (Tributary Technical Department, hereinafter “DTT”) analyzed whether the financial assistance given by the Argentine State (through Resolution No 9/2007 of the Ministry of Economy) to agricultural producers has to be included in the taxable base of the Turnover Tax. The purpose of such financial assistance was to compensate the difference between the local selling price and the international selling price.

According to the DTT, there are two types of financial assistance; one given as a “liberalidad” (without any consideration in exchange for the financial assistance given by the State), and the other given to mitigate the loss suffered when the selling price is lower than the market price. The latter is taxable, whereas the former is not.

The DTT concluded that the analyzed financial assistance could not be deemed as a “liberalidad” because it compensated the activity developed by the agricultural producers for profit, and hence, must be levied by the Turnover Tax.

An interesting point of the case under analysis is the interpretation given to the term “subsidio” (financial assistance) which led to the taxation of the Turnover Tax even when it is expressly excluded by the Fiscal Code.