Regulation of the New Tax, Social Security and Customs Moratorium

On August 26, 2020, the Official Gazette published Law No. 27,562, extending the scope of the moratorium (the “Extending Law”), by modifying Law No. 27,541 (the “Solidarity Law”) to extend the scope of the moratorium established by the latter law, mainly regarding the taxpayers which are able to adhere to the benefits of the regime -taxpayers in general- and the deadline for adhering -October 31, 2020- (https://www.marval.com/publicacion/nueva-moratoria-impositiva-13747&lang=en) (the “Extended Moratorium”).

On September 15, the Argentine Tax Authority (the “AFIP”, after its acronym in Spanish) issued Resolution No. 4816/2020, which regulates the Extended Moratorium concerning the applicable procedures to adhere to the regime and other requirements provided by the Extending Law.

Among the many important aspects of the Regulation, we would like to highlight the following, in four main sections.

 

1- Section One: Requirements, conditions and general procedures

(a) The objective exclusions are extended. Thus, in addition to the obligations referred to in the Extending Law (labor risk insurance and contributions to health care) the following obligations are excluded from the regime: (i) contributions to the domestic services and private household employees, (ii) mandatory life insurance fees, (iii) contributions to the National Rural Workers and Employees Regime, (iv) tax advance payments (“anticipos”) with the exceptions mentioned below, (v) fixed amounts corresponding to employees which adhered to the Simplified Self-Employment Regime (“Monotributo”), due until June, 2004, (vi) obligations included in expired instalment facility plans inscribed in the scope of the Extended Moratorium, (vii) obligations corresponding to tax periods which were considered as a condition to obtain the ‘complying taxpayer’ benefits according to the Solidarity Law, except when there was a previous withdrawal, and (viii) compensatory and/or punitive interest, fines and other accessory obligations related to the preceding concepts.

(b) Different parameters are established for breaking down kinds of taxpayers which may adhere to the Extended Moratorium: (i) Micro, Small and Medium-sized Enterprises (MiPyMEs, after its acronym in Spanish) with a valid MiPyME certificate, (ii) conditional MiPyMEs (i.e. those that are waiting for the issuance of the MiPyme certificate; (iii) nonprofit organizations, public good bodies, non-state public entities and others (iv) small taxpayers and (v) other taxpayers (we refer to the latter as “Taxpayers in General”).

(c) A first group of general adhesion requirements is established: (i) submission of the original or amended tax returns reflecting the debt that is being included in the Extended Moratorium, (ii) Reporting of the Bank Account Key (CBU, after its acronym in Spanish) of the account through which payments corresponding to the instalment facility plans will be made and (iii) constitution of the electronic tax domicile, if not yet constituted.

(d) A procedure for taxpayers to request the cancelation of the adhesion in case an error is detected is established. The cancelation can be requested until October 28, 2020.

(e) Procedures and requirements to be complied with to regularize debts which are being discussed at an administrative o judicial stage are established. The adhesion to the Extended Moratorium implies the waiver of any right and actions related to the matters under discussion. In the case of obligations paid before the entry into force of the Extended Moratorium, which are being challenged at administrative or judicial stages, the benefit of the partial pardon of interest will only proceed provided that the taxpayer waives all proceedings and any rights thereof.

(f) Regulations regarding injunctions in tax enforcement proceedings and legal fees of the AFIP’s lawyers, which may be paid in several instalments, are also established.

(g) Pardon of interest related to obligations paid before the entry into force of the Extended Moratorium includes capitalization interests (i.e. interest accrued on interest unpaid after the tax was paid).

(h) Cases in which penalties related to formal and material infringement are pardoned are established. For customs duties, the pardon of penalties related to material infractions will only proceed provided they have an associated custom’s obligation, or they derive from wrongful payments of export incentives, as set forth in articles 954 -paragraph 1, subparagraph a)-, 965, subparagraphs b) and c), 966 -only when the benefit consists in a tax exception-, 970, 971, 973, 985, 986 and 987 of the Customs Code. Goods which are prohibited from being exported and/or imported are excluded from the pardon and, in these cases, the extinction of the criminal action will not proceed.

(i) Interest arising from overdue advance payments until July 31, 2020 may also be pardoned, provided that the corresponding tax return was not filed, or the deadline for its filing has not elapsed, whichever happens later.

(j) The pardon of interests and fines corresponding to obligations paid before the entry into force of the Extending Law will be automatically registered -once all the requirements provided by the Regulation are fulfilled- in the AFIP’s website “Cuentas Tributarias” system as well as in the “CCMA – Cuenta Corriente de Monotributistas y Autónomos” system, as applicable.

(k) The regulation establishes the procedure for the payment of debts adhered to the Extended Moratorium, though setting off with tax balance in favor of the taxpayer and it is set forth the kinds of balances that can be used for the offset, as well as expiration causes, in case the offsets are not considered valid.

(l) The procedure for cash payment is also established, excluding tax advance payments and Value-Added Tax levied on the provision of services rendered from abroad which are effectively used or exploited in Argentina.

(m) The regulation establishes the procedure, requirements and kinds of installments plans to pay the obligations adhered to the Extended Moratorium. The kind of plan and the maximum number of instalments will depend on debt that is being included and the qualification of the taxpayer, according to point (b). The maximum number of instalments may vary between 48 and 120. Likewise, the interest and financing rates and the percentage of the debt that the taxpayer must pay in advance, are established. The first instalment of the facility plans will be due on December 16, 2020 and the following instalments will be due on the 16th day of each month and will be directly deducted from the relevant bank account.

(n) It also established a procedure for anticipated cancellation of the debt owed balance, derived from the instalment facility plans; for refinancing installments plans generated before to the entry into force of the Extended Moratorium and for the amendment of plans included in the Solidarity Law regime, as before its reform by means of the Extending Law.

(o) Expiry scenarios due to lack of payment are established according to the qualification of the taxpayer -as explained in point (b)-, the number of instalments of the plan and the number of unpaid instalments.

(q) Regarding the expiration of instalment facility plans due to dividend or profit distributions by entities which are part of Taxpayers in General (established by the Extending Law), the Regulation provides that such expiration will not proceed if the owners, proprietaries, partners, shareholders, etc. of the relevant entities demonstrate the payment, restitution, reimbursement and/or return of the funds in the 10-working day term starting on the date in which the AFIP required such reimbursement.

(r) The expiry of the plans will be effective as from the occurrence of the event that triggers it, causing the loss of interest and fines’ pardon, proportional to the pending debt upon occurrence. In the case of plans which include customs debts, the “Sistema Informático Malvina” system will automatically suspend the debtor from the Special Customs Registries (“Registros Especiales Aduaneros”).

(s) Once the expiry has occurred -of which the taxpayer will be served notice in its electronic tax domicile-, the AFIP will be entitled to initiate enforcement proceedings to collect the total remaining debt, via the issuance of the corresponding debt bill.

(t) The procedure for the adhesion of debtors currently in restructuring and/or bankruptcy proceedings is established.

(u) The adhesion to the Extended Moratorium implies the acknowledgement of the included debt and the interruption of the statute of limitation regarding the actions and powers of AFIP to determine and collect the relevant taxes and interest, as well as to apply the corresponding fines, even when the adhesion is dismissed or subsequently expires. Each instalment payment will produce the same effects regarding the remaining balances.

 

(v) The regularization of the owed obligations in the terms provided by the Extended Moratorium, as long as all the requirement and conditions established by the current legislation are fulfilled, will allow the responsible taxpayer or debtor to:

(i) Obtain the lift of the suspension in the Special Customs Registries. Such lift is not applicable to suspensions registered for other reasons than the obligations included in the regime.

(ii) Use the Benefit of the reduced social security contributions rates destined to the Integrated Argentine Pension System (“Sistema Integrado Previsional Argentino”), as provided by article 20 of General Resolution (DGI) No. 4,158 and its modifying resolutions.

(iii) Consider the owed amounts as regularized, as provided by article 26 of General Resolution No. 1,566.

(iv) Obtain the deregistration from the Public Registry of Employers with Labor Sanctions (“Registro Público de Empleadores con Sanciones Laborales” -REPSAL, after its acronym in Spanish-), as created by Law No. 26,940 and its modifications.

 

2- Section two: Requirements for the repatriation of financial assets

Regarding the requirement of repatriation provided by the Extending Law, according to which Taxpayers in General that own financial assets located abroad must repatriate at least 30% of the revenue generated by the sale these assets no later than 60 days after the adhesion to the Extended Moratorium, the following terms and conditions are established:

(a) Repatriation must be carried out by individuals or entities, including their partners and shareholders -direct and/or indirect- which have a stake of at least THIRTY PERCENT (30%) of

its equity, and must amount to at least THIRTY PERCENT (30%) of the revenue of the foreign financial assets which are owned at the date of entry into force of the Extending Law.

 

(b) The repatriated funds may: (i) be brought to the country and sold in the Foreign Exchange Market (“Mercado Único y Libre de Cambios”), or (ii) remain deposited in accounts under the name of its owner in Argentine financial institutions, according to as determined by the Argentine Central Bank. In the latter case, the repatriated funds may be used for the following destinations:

i) Acquisition of participation and/or debt certificates in productive investment trusts established by the Investment and Foreign Trade Bank (“Banco de Inversión y Comercio Exterior – “BICE”, after its acronym in Spanish-)

ii) Subscription or acquisition of quotas of existing or future mutual funds, according to Law No. 24,083 and its modifications, which comply with the requirements set by the National Securities Commission (“Comisión Nacional de Valores”).

When the deposited funds are partially destined to the previous operations, the balance must remain deposited in the financial institutions, as explained above.

The investments detailed above must be held in all cases under the relevant taxpayer’s name for at least 24 months, as from August 26, 2020.

 

(c) If the same taxpayer regularizes its debt by means of various instalment facility plans, cash payments and/or compensation, the 60-day term will be counted as from the first adhesion.

(d) Non-compliance with the repatriation under the terms and conditions provided in the Regulation implies the rejection of the adhesion to the Extended Moratorium.

(e) In the case of equity participations and/or equivalent in all kinds of foreign entities, such participations will not be regarded as foreign financial assets as long as the entities carry out, directly or indirectly, operative activities, circumstance that will be met when more than 50% of its revenues do not derive from passive activities, as established by the Income Tax Law Regulatory Decree. Nevertheless, these participations will be deemed as foreign financial assets when they represent less than 10% of the foreign entity’s equity.

(f) The Regulation also clarifies that foreign credits and rights, which have economic value, will not be deemed as foreign financial assets as long as they are related to foreign trade operations carried out in connection to operative activities.

(g) Likewise, the credits and commercial guarantees, rights and/or derivative financial instruments involved in hedging transactions which are closely related to productive economic activity and/or are destined to preserve the entity’s labor capital, will not be deemed financial assets.

 

3. Section three: Information Regime

The Regulation establishes a reporting regime according to which the taxpayers that adhere to the Extended Moratorium shall submit to the AFIP a sworn affidavit informing its partners, shareholders and/or similar, which hold at least 30% equity and/or similar, at the date of entry into force of the Extending Law.

Moreover, the taxpayers subject to repatriation requirements must submit to the AFIP a sworn affidavit informing of the total amount of the owned foreign financial assets at the date of entry into force of the Extending Law.

In order to fulfil the latter obligation, the taxpayers must attach a special report in a “.pdf” format issued by an independent chartered public accountant, according to Chapter V of the Technical Resolution (FACPCE) No. 37, assignment of a reasonable level of assurance, with a certified signature by the professional council or the association in which the professionals are enrolled, which will rule on the reasonability, existence and legitimacy of the foreign financial assets.

 

4- Section four: Effects regarding criminal proceedings

(a) The suspension of current criminal proceedings and the interruption of the criminal statute of limitation will occur on the date of the adherence to the regime.

(b) The rejection of the adherence to the regime due to non-compliance of any requirements of the Extended Moratorium will resume the criminal proceedings and the count of the criminal statute of limitation.

(c) The criminal proceeding will be carried out and the new statute of limitation will restart on the following day to the expiration of the regularization regime.

(d) The extinction of the criminal proceeding is not applicable in respect to goods which are prohibited from import/export.

(e) The AFIP officials are dispensed from filing criminal actions against taxpayers which regularize the obligations included in the Extended Moratorium, regarding the offences provided by the Criminal Tax Regime and its predecessors, in relation to the concepts and amounts included in the regularization. Such dispense will also be applicable criminal actions against taxpayers which have cancelled their obligations before the entry into force of the Extending Law, provided that they are not subject to any of the objective and/or subjective exclusion cases we analyzed.