The Supreme Court Defines Important Issues Related to Customs Taxation

On August 23, 2011, the Supreme Court decided in re “Volkswagen Argentina S.A.” that Law No. 23,905 remains in full force and effect when it sets forth that duties and other taxes that apply to import and export transactions are set in US Dollars, even though they can be canceled in Argentine currency at the exchange rate of the payment day.

Law No. 23,905 was enacted in February 1991, only two months prior to the enactment of the so-called “Convertibility Law” No. 23,928. The Convertibility Law abrogated all the norms setting forth any kind of adjustment method for monetary debts, commonly used to protect creditors against the Argentine currency depreciation.

The Court says that the prohibition set forth in the Convertibility Law applies only to monetary debts set in Argentine currency and that therefore it does not apply to customs duties, which are set in US Dollars.

By resolving in this manner, the Court rejects the possibility of interpreting that the Convertibility Law abrogated Law No. 23,905. Some scholars argued this way in the understanding that setting the debt in US Dollars was very much like a mechanism to adjust debt, because it is tied to the evolution of the US Dollar’s exchange rate.

The Supreme Court also rules that Law No. 23,905 abrogated the Customs Code in everything that refers to the assessment of the customs duties in local currency, prior to conversion of the taxable basis to local currency.

Finally, the Court also rules that when Law No. 23,905 sets forth that certain liabilities have to be assessed in US Dollars, it refers to import and export duties and to the other taxes that apply to import and export transactions.

On this point, the Court rules that the Value Added Tax (VAT) applicable to import transactions has to be assessed in US Dollars but that the VAT and Income Tax advance payments that the Customs authority collects from importers have to be assessed in Argentine Pesos.