Tax Arrangements Are Subject to A New Reporting Regime

The regime applies to both domestic and international tax planning arrangements.

Domestic arrangements are defined by the General Resolution, as: “Any agreement, scheme, plan or any other action through which a taxpayer obtains tax advantages or other tax benefits in Argentina with respect to federal taxes or reporting regimes.” The Resolution states that domestic arrangements are those published on AFIP’s website.

International arrangements include: “Any agreement, scheme, plan or any other action through which a taxpayer obtains tax advantages or other tax benefits involving Argentina and any other jurisdiction.” The Resolution establishes a non-exhaustive list of scenarios that constitute international tax arrangements:

a. The use of legal entities for obtaining benefits provided by treaties to avoid double taxation; strategies adopted to avoid triggering the status of “permanent establishment”; arrangements resulting in double international non-taxation, allocation of taxable profits to one or more foreign jurisdictions, and the intent to avoid compliance with any reporting regime;

b. The involvement of non-cooperative, or nil and low tax jurisdictions according to the provisions of the Income Tax Law and its regulatory decree;

c. The use of asymmetries in regulations of two or more jurisdictions on the tax treatment and/or legal status of an entity, agreement or financial instrument that results in a tax advantage or other tax benefits;

d. A foreign individual, undivided state, legal entity, trust, foundation or any other foreign entity with double tax residency;

e. A taxpayer has rights as beneficiary, grantor, fideicommissary or trustee of a foreign trust, foreign private foundation or other;

f. Any other arrangement to be listed on the AFIP’s Website.  

 

From the Resolution it can be inferred that, in the case of international tax arrangements, not only the abovementioned situations apply but also those that meet the definition established in the legislation.

Under the Resolution, “tax advantage” means any reduction of taxes for the taxpayers, as well as for their related parties, either directly or indirectly. Any breach on the taxpayer’s part of any of the reporting regimes established by the AFIP constitutes a tax advantage. 

 

The regime applies to the following parties:

a. Taxpayers involved in a tax arrangement included in the regime;

b. Tax advisors, individuals or entities, who help, assist, advice or are involved in any activity related to the implementation of a tax planning arrangement, as long as they are directly or indirectly involved in that implementation. 

 

In addition, tax advisors will have to comply with the reporting duty, when other related, associated or connected tax advisors implement a tax arrangement.

All those listed above must comply with the reporting regime. Accordingly, the compliance of one obligor with the regime does not relieve any other obligor from their duty to comply.

Tax advisors may refrain from reporting the information on the grounds of professional secrecy, in which case, they must serve notice to their clients through the Website. The Resolution also authorizes the taxpayer to release the tax advisors from their professional secrecy obligation, for one particular case or on a general basis, also through the Website. Tax advisors (lawyers, accountants, etc.) should analyze regulations related to their professional secrecy to conclude whether serving the notice required by the regime does not imply, per se, a breach of that duty.

Domestic tax arrangements must be reported up to the last day of the month following the month of year-end closure in which the respective arrangement was implemented. On the other hand, international tax planning arrangements must be reported within 10 days from their implementation. The Resolution clarifies that the implementation begins when a tax arrangement-related action occurs.

The Resolution establishes that all the tax planning arrangements implemented from January 1, 2019 up to the date of publication of the Resolution or those implemented before January 1, 2019 but still in effect when the Resolution was published, must be reported up to January 29, 2021. In other words, the reporting obligation applies not only to arrangements implemented as from the date of the publication of the Resolution but also, under certain circumstances, to previously implemented arrangements.

Under the Resolution, obligors must submit all the information regarding the tax arrangement, explaining the tax advantages intended by the parties involved in the arrangement or by third parties. This information must specify every relevant fact, details about the involved parties, and a thorough analysis of the applicable legislation, both national and foreign.

In addition, compliance with the reporting obligation will not lead to acceptance or rejection by the AFIP on the grounds of the legitimacy of the scheme or the applicable tax treatment. The information submitted could be shared with foreign jurisdictions with a standing agreement for the exchange of information with Argentina.

Obligors who do not comply with this regime may be subject to, among other things, the fines set out in the Tax Procedural Law (Law No. 11.683). Any breach of the regime will be considered as an aggravating factor for the purpose of penalization.