Regularization Regime regarding Tax, Social Security and Customs Liabilities

Title IV of Law 27,541 includes a regime for the regularization of tax and customs debts and for social security resources that includes the pardoning of fines and interest exclusively for those taxpayers that are registered as Micro, Small or Medium-Sized Enterprises (“MiPyME,” after its Spanish acronym), according to the terms of article 2 of Law No. 24,467 and its amendments and other complementary regulations (the “Regime”).

The main aspects of the Regime are as follows:

Liabilities that can be enrolled: The taxpayers can enroll into the Regime taxes and social security resources applied, collected and audited by the Argentine Tax Authority (the “AFIP”, after its Spanish acronym), expired as of November 30, 2019 inclusive or infringements related to such obligations. Refinancing of current payment plans and emerging debts of expired plans may also be included. The obligations corresponding to the Fund for Cooperative Education and Promotion established by Law No. 23,427 and its amendments, as well as the additional charges for export or import taxes, the settlements of the aforementioned taxes included in the procedure for the infractions in accordance with the provisions of Law No. 22.415 (Customs Code) and its amendments and the amounts that as export incentives should be returned to the AFIP. Obligations or infractions related to promotional regimes that granted tax benefits are not affected by the Regime.

Requirements for taxpayers to adhere to the Regime:  Those taxpayers that are registered as MiPyME according to the terms of article 2 of Law No. 24,467, its amendments and other complementary norms may adhere to the Regime. To this end, they must prove their registration with the MiPyME Certificate, valid at the time of submission to the Regime. Those MiPyMEs that do not have the Certificate may adhere conditionally, provided that they process it and obtain it before April 30, 2020. Non-profit civil entities may also adhere to the Regime.

Exclusions: The Regime excludes Debts arising from: (i) installments destined to the “work risk regime” and contributions to medical insurance; (ii) taxes on liquid fuels and carbon dioxide established by Title III of Law No. 23,966 (1998) and its amendments; the natural gas tax replaced by Law No. 27,430; the tax on diesel and liquefied gas provided by Law No. 26.028 and its amendments and the Water Infrastructure Fund regulated by Law No. 26.181 and its amendments, both repealed by article 147 of Law No. 27,430; (iii) the specific tax on placing bets, established by Law No. 27,346 and its modification.

Deadline: Submission to the Regimen may be made between the first month after the publication of the Regime regulations in the Official Gazette and until April 30, 2020, inclusively.

Liabilities under discussion: Liabilities that are in the course of administrative discussion or are subject to administrative or judicial proceedings can also be regulated, as long as the defendant unconditionally pays for the regularized obligations and, when appropriate, desists and waives any action and right, including that of reimbursement, assuming the payment of the legal fees and other expenses. The acceptance of the tax criteria and / or, the withdrawal, may be total or partial and proceeds at any stage or administrative or judicial instance.

Effects of the regularization: The adhesion to the Regimen produces the suspension of tax and customs criminal actions in progress and the interruption of the criminal statute of limitation. This occurs even if the criminal complaint has not been filed at that moment,  whatever the stage  the case is at as long as it has no  final ruling.

Effects of the total cancellation of the debt: The total cancellation of the debt under the conditions provided in the Regime, by compensation, cash or through a payment facility plan, will result in the extinction of the tax or customs criminal action, as long as there is no final ruling on the date of cancellation. In the case of customs infringements, the total cancellation will result in the elimination of the customs criminal action under the terms of articles 930 and 932 of Law No. 22.415, to the extent that there is no final ruling at the date of placement.

Payment Plan Expiration effects: The expiration of the payment plan will imply the resumption of the criminal action or will enable the promotion by the AFIP of the corresponding criminal complaint, in those cases in which the acceptance has been given prior to the filing. Likewise, it implies that the deadlines of the statute of limitation of the criminal action will restart.

Applicable exemptions or pardon: The taxpayers that adhere to the Regimen while complying with the expected payments, will have the following exemptions and / or pardoning: (i) fines and other penalties provided in law No. 11.683 (1998) and its amendments, in Law No. 17,250 and its amendments, in Law No. 22,161 and its amendments and in Law No. 22,415 and its amendments, that do not have a final ruling at the date of adhesion to the Regimen; (ii) one hundred percent (100%) of the compensatory and / or punitive interest provided in articles 37 and 52 of law No. 11,683 (1998) and its amendments, of the principal owed and adhered to the Regime corresponding to the contribution provided in article 10, subsection c), of law No. 24.241 and its amendments, of self-employed workers included in article 2, subsection b), of the aforementioned legal rule; (iii) of the compensatory and / or punitive interests provided in articles 37, 52 and 168 of Law No. 11,683 (1998) and its amendments, the compensatory and / or punitive interests on fines and customs taxes (including amounts that in concept of export incentives should be returned to the AFIP) provided in articles 794, 797, 845 and 924 of Law No. 22,415 in the amount that for the total interest exceeds the percentage that for each case is established as follows:

• Fiscal period 2018 and monthly obligations due as of November 30, 2019: ten percent (10%) of the principal owed.
• Fiscal periods 2016 and 2017: twenty-five percent (25%) of the principal owed.
• Fiscal periods 2014 and 2015: fifty percent (50%) of the principal owed.

• Fiscal periods 2013 and prior years: seventy-five percent (75%) of the principal owed.

Conditions for the benefits to apply: The aforementioned benefits apply if the taxpayers comply, with respect to the principal, with fines with final ruling and unpardoned interest, some of the following conditions: (i) set off of the aforementioned debt, whatever its origin is, with free availability balances, reimbursements, refunds or similar to which they are entitled by the AFIP; (ii) cancellation by cash payment until the adhesion date. A reduction of fifteen percent (15%) of the consolidated debt would be applicable in these cases; (iii) total cancellation through any payment facility plan that the AFIP has, which must comply with the following conditions:

They will have a maximum term of:

- Sixty (60) installments for personal contributions to the Unified System of Social Security and for tax withholdings or collections and social security resources.

- One hundred and twenty (120) fees for the remaining obligations.

The first installment will expire no longer than on July 16, 2020 according to the type of taxpayer, debt and payment plan. The interest rate will be fixed and of a monthly three percent (3%) with respect to the first twelve (12) months and then it will be the variable rate equivalent to BADLAR usable by private banks.

Payment Plan Expiration reasons: Payment facility plans will expire: (i) for non-payment of up to six (6) installments; (ii) serious breach of tax duties; (iii) invalidity of the balance of free availability used to offset the debt; (iv) the lack of obtaining the MiPyME Certificate.

Withholding and collection Agents: Withholding and Collection Agents are released from fines and any other sanctions that have not a final judgment when they declare and pay, under the terms of the Regime, the amount that they had omitted to withhold or collect. They are also released on the amount that, having been withheld or collected, they would not have to make deposits, after expiration of the term to do it. If the Agent did not collect or withhold the amounts, they will be exempt from liability if it can be proved that the tax was paid by the person subject to withholding.

Reimbursement of the amounts previously paid: The sums that, prior to the effective date of the law, had been paid as compensation and / or punitive interest and / or fines are not subject to reimbursement. This reimbursement can neither be required regarding the interest provided in article 168 of Law No. 11,683 (1998) for the obligations included in the Regime.