Amendments to the Tax Procedural Law

Law No 25,795, published in the Official Gazette on November 17, 2003, introduced several amendments to the Argentine Tax Procedural Law No 11,683. The following are among the most noteworthy:

(a) Individual and joint and several liability is imposed on: (i) members of joint ventures for the tax obligations of the venture, and (ii) individuals or legal entities receiving fraudulent invoices or equivalent documents if they are liable to verify that the issuer is legally authorized thereto; in this case, they will be liable for the taxes owed by the issuer, arising from the transaction.

(b)  New presumptions are incorporated for purposes of the assessment of taxes made by the tax authorities: (i) the information obtained by means of satellite, (ii) bank deposits for amounts exceeding the amount of sales and/or income reported during the relevant taxable year, and (iii) the salaries paid to unreported personnel or any unreported wage differences. In such cases, it is presumed that an undeclared patrimony arising from undeclared income exists, and its amount plus 10% for non-deductible expenses or spent income is subject to Income Tax. Moreover, such amount is deemed to be sales subject to Value Added Tax and Excise Taxes, if applicable.

(c) Also, funds brought to Argentina from tax havens are considered unjustified patrimonial increases for the receiver, with consequences similar to those mentioned above. However, the presumption will not apply if the taxpayer evidences that the funds arise from activities of the taxpayer or third parties in such tax haven, or from income that was duly reported to the tax authorities.

(d)  Penalties will be imposed for failure to file informative tax returns about the impact in the assessment of the Income Tax of foreign trade transactions between unrelated parties, and of certain transactions entered into between Argentine and foreign parties.

(e)  Penalties will be imposed in the following cases: resistance to tax audits, failure to keep supporting documents evidencing the prices agreed upon in international transactions, and failure to comply with other formal requirements.

(f)  The amendment incorporates new cases in which sanctions consisting of the closure of the establishment will be imposed: (i) failure to keep records of sales or purchases or such records being incomplete or defective; (ii) lack of invoices or equivalent documents supporting the acquisition or holding of any goods and/or services required to develop the taxpayer's activity; (iii) failure to have, to use or to keep in working condition the control devices required for auditing and controlling the fulfillment of the tax obligations.

(g)  Fines will be imposed for unregistered personnel and, depending on the nature of the violation, closure sanctions may also be imposed.

(h) Any omission to pay taxes arising from transactions between Argentine residents and foreign individuals or entities will be sanctioned with a fine of one to four times the omitted tax.

(i) A fine will be imposed to any person reporting tax losses totally or partially higher than those actually incurred to set off against taxable income, either in the same or in any subsequent taxable year.

(j) Legal taxpayers will be allowed to recover indirect taxes only if they provide evidence that such taxes were not added to the price of the goods or services they provide or, even if added, they provide evidence of the restitution of such taxes in such manner as may be established by the tax authorities.

(k) Upon initiating a foreclosure action, mortgagees other than financial institutions must provide evidence of due compliance with tax obligations.