CPA’s Registered in Buenos Aires Province Will Not Have to Comply with Tax Planning Information Regime

The ruling was issued on April 22, 2022 in the case styled “Consejo Profesional de Ciencias Económicas de la Provincia de Buenos Aires v AFIP on Motion to Strike Administrative Act.” In this case, the CPA Association, invoking the collective representation of its members who were designated as information agents in General Resolution 4838/2020 (the “Information Regime” (learn more here), filed a lawsuit against the Argentine Tax Authority (“AFIP” after its acronym in Spanish), which had rejected the administrative claim filed against the Information Regime.

 

The Council based its claim on the opinion that the Information Regime violates rights and principles of varying hierarchy, among them, the rule of law, confidentiality and professional secrecy in the professional practice and the prohibition of retroactivity of the law and self-incrimination. AFIP holds that the regime is consistent with the Law , stating that it is empowered to establish it by section 7 of Decree 618/1997 (which establishes the internal organization of AFIP and its powers) and article 35 of the Tax Procedures Act (which regulates the audit powers of AFIP).

 

After rejecting AFIP's claim of lack of passive legal standing and, consequently, accepting the representation invoked by the Council with respect to its members, and asserting the existence of a “contentious case” as an admissibility condition for the lawsuit, the Federal District Court ruled the regime invalid, pointing out the following fundamental arguments:

 

(i) Section 7, paragraph 6) of Decree 618/1997, which empowers AFIP to create information agents, violates the rule of law, since it allows it to create a public burden that can only be created by the National Congress (section 17 of the Constitution). Furthermore, even considering a possible delegation, for the Judge there is a triple constitutional violation:

 

- The delegation to AFIP was made by the Executive Branch and not by Congress (section 76 of the Constitution).

 

- There is an undue sub-delegation of the Executive Power to AFIP.

 

- The delegation does not contain any time limitation (section 76 of the Constitution).

 

(ii) Section 35 of the Tax Procedures Act does not contain any provision enabling AFIP to create information agents.

 

(iii) Section 107 of the Tax Procedures Act, which establishes that certain agencies and private entities have the obligation to provide AFIP with the information required by an administrative judge under certain conditions, refers to express and specific requests and not to requests of a general and abstract nature such as those provided for in the Information Regime.

 

(iv) Section 11 of said act, which establishes that the determination and collection of taxes shall be made based on tax returns does not include any informative reports of third parties.

 

In view of the foregoing, the Federal District Court allowed the claim and declared the Information Regime and of Section 7, paragraph 6) of Decree 618/1997 unconstitutional. The effects of the ruling encompass all professionals in Economic Sciences practitioners in the Province of Buenos Aires providing tax advice that are registered with the Professional Council of Economic Sciences of the Province of Buenos Aires.

 

Although the ruling was appealed by the Argentine Tax Authority, it is an important precedent that resolves the merits of the issue (unconstitutionality of the Information Regime with respect to the actions imposed on tax advisors) and implies that the professionals involved will not have to comply with the duties imposed by such Regime if the ruling becomes final.

 

The precedent follows several precautionary measures that had been granted by the Courts in different jurisdictions, among them, one requested by the Argentine Federation of Bar Associations before the Federal Courts for the Contentious and Administrative Matters and that we have already commented on previously (learn more here).

 

Finally, it is emphasized that the effects of the ruling applies to the professionals affected by the decision and not the taxpayers themselves, who are also designated as information agents and must comply with their duty if they meet the conditions of the Informative Regime.