Income Tax Law: The Minimum Income for which Registered Workers are Taxed is Increased

On April 21, 2021, Law No. 27,617 was published in the Official Gazette amending Argentina’s Income Tax Law and incorporating significant changes affecting registered employees, retirees, and pensioners.

One of the law’s main changes is an increase in the special income deduction applicable to registered employees, public service employees, retirees, and pensioners. Taxable income now equals zero for those whose monthly gross remuneration is AR$150.000 or less. This means that employers will not withhold income tax from employees with a lower salary. In addition, under the amendment, the mandatory annual bonus for these employees is also Income Tax exempt.

The law enables the Executive Branch to determine the special deduction applicable to individuals whose monthly gross remuneration is between AR$150.001 and $173.000, so as not to exclude them from any benefits.

The amendment also establishes an exemption for performance bonuses, shortfall allowances or similar compensations only if the individual’s monthly remuneration is below AR$300.000. This exemption may not exceed 40% of the individual’s non-taxable income.

For deduction purposes, family dependents include cohabiting life partners even if the couple is not legally married.

Other changes include the following:

• Family dependent deductions for children and stepchildren must be made by the closest relative and those deductions increase for each child or stepchild who is unable to work.
• The specific deduction for public service employees, retirees, and pensioners is increased to 8 minimum wages.
• Travel expenses and similar compensations paid by the employer are deductible in the amount settled in the collective bargaining agreement, when applicable, or in the amount disbursed for up to 40% of the disburser’s nontaxable income.
• This tax does not apply to mandatory work clothes or equipment provided to the employee, necessary employee training courses or education expenses for the employee’s children if any of the above are reimbursed by the employer.

Apart from that, exemptions applicable to payment for services rendered during mandatory shifts (whether active or passive) and overtime are extended until September 30, 2021; as are any other exemptions grounded on the COVID-19 pandemic.

Law No. 27,617 applies to the fiscal period beginning on January 1, 2021. The law must be regulated by the Argentine Tax Authority (AFIP, for its acronym in Spanish) to define certain operational aspects. That regulation is pending.