Amendments to Personal Assets Tax

Firstly, Law No. 27,541 (the “Law”) amends the criteria for linking taxpayers with the Personal Assets Tax (the “PAT”). In such sense, the Law replaces “domicile” criteria by the “residence” criteria (contained in the Argentine Income Tax Law). This amendment implies choosing as a criteria a condition whose status can be modified by the verification of stricter facts. According to the amendment, Argentine-residents (instead of persons domiciled in Argentina) will be taxed on its assets located in Argentina and abroad, while non-residents (instead of subjects domiciled abroad) will be taxed only on their assets located in Argentina.

In second place, the Law establishes new general rates for the assessment and payment of the PAT, applicable to individuals and undivided states residing in Argentina. New rates are higher than the former ones and have to be applied on the overall value of the taxed assets –except from those which has a special treatment– exceeding the tax allowance (ARS 2,000,000 or ARS 18,000,000 for real estate whose destination is for taxpayer’s residence purpose). The new applicable rates are:

On another level, the Law delegates in the Argentine Executive until December 31, 2020, the faculty of establishing higher rates (up to a 100% of the maximum amount referred to in the chart above) applicable to assets located abroad, and to decrease such rate when, in the case of financial assets located abroad, they are sold and the sums deriving from the sale are brought to Argentina. In the latter case, the Argentine Executive is entitled to establish the amount of any reimbursement that may be made. Moreover, the Law clarifies that, if these differential rates are established, the tax allowance will be firstly consumed by the assets located in Argentina (that would be subject to a lower rate).

The Law also establishes a definition for the concept “financial assets located abroad”, by including a list that comprises, for example: the possession of foreign currency in foreign financial entities or similar, participations in corporations or similar, rights corresponding to the condition of beneficiary or trustee in trusts located abroad, securities, ADRS, bonds, credits and any kind of right, etc. provided that the regulation of the Law could establish other species of assets to be included in the definition. It is also established that the regulation of the Law may designate substitutive obligors for the payment of the tax if elusive or evasive maneuvers are detected.

The Law maintains the possibility of detracting a tax credit for similar taxes paid abroad and clarifies that if the Argentine Executive uses its faculty of establishing higher rates under the circumstances abovementioned, the deduction of the tax credit will proceed, firstly, against the tax resulting from applying the general rate of the tax. The balance that cannot be deducted can be detracted against the tax assessed by application of the differential rates.

In third place, the Law increases the rate applicable for the calculation of the tax corresponding to shares or participations in the capital of companies governed by the Argentine Corporations Law, which owners are non-residents, from the former 0.25% to a 0.50% of the pro-rata equity value. It should be borne in mind that the payment of the tax is up to the company.

Lastly, the Law also increases the former 0.25% rate to a 0.50% rate, according to which certain subjects located in Argentina has to pay the tax when they are co-owners or has the possession, the right to use tenure, custody, management, etc. of taxed assets owned by non-residents.