The Federal Supreme Court Declared Services Rendered by the Horserace Booking Agencies to Be Exempted from the Value Added Tax

In the "Asociación Gremial de Profesionales del Turf vs. Argentine Tax Authority”  case the matter under discussion was the applicability of the tax exemption set forth by Section 7, Subsection h), appendix 15, of the VAT Law to the activity carried out by the booking agencies of horserace performed in the racecourses of La Plata, San Isidro and Palermo. For the booking activity, the taxpayer charged an additional 10% over the betting amounts, which was considered under the above mentioned tax exemption.

Value Added Tax Law levies the provision of services. The abovementioned tax exemption establishes that the following would not be subject to VAT “The intermediation services rendered by lottery agencies and other gambling games carried out by the National, Provincial or Municipal Government or by institutions depending of such governmental authorities, for the selling of tickets granting the right to participate in such games”.

The National Tax Authority considered that the exemption was not applicable to the taxpayer due to the fact that the requirements set forth in the law had not been fulfilled (development of the activity by the National, Provincial or Municipal Government, or by institutions depending of such governmental authorities) due to the fact that the commercial developments of the racetracks of San Isidro, La Plata and Palermo were conceded by the National Government and the Province of Buenos Aires to private entities (Asociación Civil Jockey Club de Buenos Aires, Empresa Hípica Argentina S.A. and Hipódromo Argentino de Palermo S.A.). Hence, the Tax Authority concluded that the activities under analysis were not “public races” due to the fact that they were been developed by private entities, which also conceded the development of the booking agencies to Asociación Gremial de Profesionales del Turf, which provide an independent service, not included under the analyzed tax exemption.

In its ruling, dated September 27, 2011, the Federal Supreme Court pointed out that the first source of interpretation of a law is wording, which shall be interpreted by its true meaning, that is to say the common meaning of the word, and that the interpreter of the law shall not distinguish when the law does not do so (“ubi lex non distinguit, nec distinguere debemos”).

Based on the abovementioned considerations, the Supreme Court concluded that the exemption requires only for the activity to be performed by the National, Provincial or Municipal Government, without distinguishing if the activity shall be carried out directly or indirectly by them. Consequently, if the concessions are a legitimate way for the government to develop certain activities, like horseraces, the exemption under analysis cannot be ruled out if its text does not say so.