The Supreme Court Defines the Sope of VAT Exemption for Periodic Publications

On October 12, 2010, the Supreme Court ruled in re “ATCO I S.A.”, a case initiated due to a challenge made by the Argentine Tax Authority (the “AFIP”) of the Value Added Tax (“VAT”) affidavits of Editorial Atlántida S.A. (a company of the group).

The discussion revolved around the interpretation of the old Article 6 (today’s Article 7) of the VAT Law, which exempted the sales and leases of books, brochures, newspapers and periodic publications, among others, from tax.

Based on this rule, the company had considered exempt from VAT its activity that consisted, as it had been proved before the Federal Tax Court, of selecting and obtaining information for the layout and production of magazines with a majority of advertising content on behalf of cable television companies and supermarkets.

The AFIP understood that the activity should be taxed as printing, binding and bagging services, and that the exemption under Article 6 was not applicable because the magazines mentioned were not “periodic publications” as they targeted a specific audience and not for the masses, and because their content was neither journalistic, informative nor of general interest, which is what the word “periodic” referred to.

In the presence of several judicial precedents in both directions, it was the turn of the Supreme Court to decide on this issue.

The arguments of the AFIP were dismissed as they tried to introduce requirements that the law did not impose. The Court understood that when the law is clear and makes no explicit distinctions it should simply be applied directly. In this regard, it decided that the term “periodic publications” includes any printing that is published within a certain period of time and declared the publishing of magazines with a majority of advertising content exempt from VAT.