New Regulation of the Law of Tax on Gratuitous Transfer of Assets: the Impact on the Insurance Business
In recent years, the legislature of the Province of Buenos Aires introduced modifications to the provincial tax code, among which the inclusion of the Tax on Gratuitous Transfer of Assets (the “Tax”) stood out.
This Tax aims to levy any increase in wealth gratuitously obtained. Acts levied, among others, are as follows: inheritances, bequests, donations, inheritances in advance and “any other transfer which may imply an increase in wealth gratuitously obtained”
The taxpayers are: (a) individuals or entities who are beneficiaries of a free transmission of goods when they are domiciled within the territory of the Province of Buenos Aires; and (b) persons domiciled outside the province of Buenos Aires, when receiving a gratuitous transfer of assets, provided those assets are located within the territory of the Province of Buenos Aires. In this case, only the amount of increase in wealth gratuitously caused by the transmission of the assets located within the territory of the province will be levied.
On June 25, 2013, Resolution No 22/2013 (the “Resolution”) was published in the Official Gazette of the Province of Buenos Aires, issued by the tax authority of the Province of Buenos Aires (hereinafter, "ARBA"), which abrogated Resolution No. 18/11 and Resolution No. 91/10 (in the latter case, only the sections concerning the Tax).
Resolution No 18/11 set compulsory requirements for insurance companies, mainly consisting of the obligation of requiring certain documentation prior to the payment of insurances under the scope of the Tax (see Insurance News N° 3 – “Impact of Tax on the Gratuitous Transfer of Assets on the Insurance Industry”). Although Resolution maintains these obligations, incorporates new responsibilities that deserve to be outlined.
Broadly speaking, the Resolution has an impact on the insurance business in the following way: a) increasing obligations of insurance entities in the case of payments of insurances under the scope of the Tax; and b) incorporating obligations for insurance entities when involved in gratuitous disposition of assets. The following are the points mentioned:
a) Insurance Payments under the Scope of the Tax
Resolution No 18/11 provided that insurance entities must require the taxpayer the proof of the Tax affidavit sending. Pursuant the new Resolution, insurance entities must also require the proof of the payment of the Tax and, when appropriate, its interest. From a different standpoint, in contrast with the provisions of the Resolution No 18/11, now the insurance entities themselves must control the payment of the Tax in a first stage. However, ARBA will be able to exercise its control, verification and auditing faculties.
The Resolution also increased the control to be carried out by insurance entities of data contained in the Tax affidavit: now they must not only check that the data matches with the arising from the relevant transaction (as Resolution No 18/11 provided), but they also that the data matches with that arising from their entities’ own records.
In the event that the taxpayer does not comply with any or all charges above, the respective insurance company shall inform the breach to ARBA in writing, and this entity will file the corresponding administrative proceedings. However, it is worth noting that any breach by the taxpayer will not prevent the corresponding payment or clearance.
b) Acts of Disposition of Assets that have Integrated Enrichment Gratuitously under the Scope of the Tax
Section No 10 of the Resolution incorporates specific obligations for the insurance entities when participating in acts of disposition of assets that have integrated increase in wealth gratuitously obtained under the scope of the Tax.
Mainly, the obligations are the same as for those provided for the insurance payment under the scope of the Tax (requirement of the proof of the Tax affidavit sending and its payment and checking of the data contained in the Tax affidavit against the arisen from the relevant operation and the insurance entities records).
The mentioned Section also establishes a similar regime to the one described in the previous section in the event that the taxpayer does not comply with the obligations in charge. Similarly, any breach by the taxpayer in any case will not prevent the corresponding asset disposition.
In both cases, the formal duties that must be carried out by insurance entities will be required even if the payment of the Tax is not appropriate because the amount of the increase in wealth gratuitously obtained does not exceed the exempted minimum amount provided by the second paragraph of Section No 306 of the tax code of the Province of Buenos Aires.
As an exception, the resolution establishes that formal requirements –in both cases analyzed– will not be enforceable as regards cases exempt from the Tax because of intervening specific persons or goods, in accordance with the provisions of the Section No 320 of the Tax Code of the Province of Buenos Aires.
If the insurance entities do not comply with the obligations regulated by the Resolution, they will be liable for the penalties provided by the Tax Code.
Finally, for the purposes of calculating the Tax, the Resolution maintains as an ARBA duty the provision from its web site (www.arba.gov.ar) tools to simulate the calculation of the amount of tribute that may be applicable.
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