Argentine Binding Consultation Regime: New Regulation

 

1. The Binding Consultation Regime

 

The Binding Consultation Regime (the “Regime”) was incorporated as Section 4.1 of Federal Tax Procedure Law No. 11,683 by Law No. 26,044 (Official Gazette No. 30,689 - 7/6/2005).  It was then regulated by General Resolution No. 1948/2005 and its amendment the General Resolution No. 4123-E enacted on 2017.

 

The purpose of this mechanism is to provide legal certainty to taxpayers and other obligors. Accordingly, the Regime allows the Argentine Tax Authority (the “AFIP” after its Spanish acronym) to establish its criterion for the assessment of federal taxes and/or social security contributions.

 

General Resolution No. 1948/2005 and its amendment were abrogated by General Resolution No. 4497/2019 (the “Resolution”). This new Resolution maintains the majority of the crucial aspects that were previously regulated and also introduces new amendments that we will refer to in this report.

 

In first place, it is important to recall that any consultation should be made prior to the occurrence of the taxable event concerned or within the deadline for filing the respective tax return. Furthermore, the AFIP has 90 days to issue a ruling. Once the consultation is resolved, its conclusions are mandatory both for the consultant and for the AFIP, as long as the facts and circumstances grounding the consultation remain the same.

 

Additional aspects that had been regulated by the General Resolution No. 1948/2005 and its amendment were included in the new Resolution. These aspects are: situations excluded from the Regime, requirements for the admission of the consultation, means of notifications and communications. Moreover, the Resolution maintains the rule that this mechanism does not prevent the consultant from complying with deadlines related to formal and/or material obligations, and sets forth the kind of appeals that can be filed against the ruling issued by the AFIP as well as the means for the publication and diffusion of such rulings.

 

2. Main changes included in the new Resolution

 

The main changes that the Resolution included in comparison with its predecessor are analyzed below.

 

A) New admissibility requirements for certain cases

 

From the recitals of the Resolution, it can be inferred that the main amendment introduced to the Regime is grounded on the commitments that Argentina assumed –as a member of the “Group of 20”- in the Project “Base Erosion and Profit Shifting” of the OECD.

 

In particular, “Action 5” has the purpose of countering harmful tax practices more effectively. In such context, this action set forth the exchange -spontaneous and mandatory- of information regarding the agreements or commitments assumed by the tax authorities of each jurisdiction with taxpayers and other obligors or a group of them.

 

For this reason, the AFIP considered it appropriate to regulate the exchange of rulings issued under the Regime -about certain topics that are mentioned below- with those countries or jurisdictions with which Argentina has signed bilateral or multilateral agreements including clauses allowing  information exchange.

 

The Resolution establishes in article 5.1, second paragraph, additional requirements for the admissibility of the consultation in cases in which it is filed by a non-resident or it refers to certain topics (the “Special Topics”) and the resident consultant has one or more related parties abroad. Such “Specials Topics” are: preferential tax regimes, transfer pricing regulations, downward adjustments, permanent establishments and conduit companies. The definition of these concepts is detailed in section “A” of the Resolution Annex. In these cases, additional information should be provided (detailed in section “B” of the Resolution Annex.

 

Two parties are considered to be related when one of them has, directly or indirectly, at least twenty-five percent (25%) of participation in the stock or in the rights to vote in the shareholder meetings of the other. Also when a third person -directly or indirectly- has at least twenty-five percent (25%) of participation in the stock or in the rights to vote in the shareholders’ meetings of the first two parties.

 

B) Situations excluded from the Binding Consultation Regime

 

Section 3, subsection c) of the Resolution maintains the situations excluded from the Regime in the sense that it is not possible for a taxpayer or obligor to file the consultation regarding taxable events or situations when an audit is already in course, or when the consultation is related to an assessment made by the AFIP, or when a judicial or administrative appeal has already been filed and a ruling is pending, or when an administrative or judicial decision of any instance is final. Now, this exclusion is applicable not only when mentioned circumstances are verified with respect to the taxpayer or the obligor but also with respect to related persons of the consultant when the consultation refers to the Special Topics.

 

Also, subsection (d) of the Resolution adds another situation excluded from the Regime: it will not be possible to carry out consultations regarding taxable events or situations included in the “Joint Determinations of Prices of International Operations Regime” (in Spanish “Regimen de Determinaciones Conjuntas de Precios de Operaciones Internacionales”) set forth in Section 217 of Federal Tax Procedural Law No. 11,683.

 

C) Consequences of the coming into force of any new treaty for the avoidance of double taxation when the resolution of the consultation is pending

 

Consultations about topics that imply the interpretation of a treaty for the avoidance of double taxation entered by Argentina are not allowed under the Regime.

 

Accordingly, Section 6 of the Resolution establishes that when one of these treaties comes into force and the articles of such treaty have to be interpreted to resolve the consultation, then the consultant should report this circumstance to the agency where the consultation was filed. We understand that when such agency becomes aware that the treaty has to be interpreted for the resolution of the consultation, it should submit the consultation to National Tax Directorate.

 

Finally, we highlight that the Resolution entered into force on May 30, 2019 and will be applicable for consultations filed on the fifth business day after its validity.