Transfer of Credit Balances in Favor of Gross Income Tax in Joint Ventures

It is common to constitute joint ventures to participate in public tenders, for example. Under Corporate Law No. 19,550, joint ventures are not considered legal entities and the relationship between their parties is of a purely contractual nature. However, different tax regulations, both at Provincial level (as in this case) and at the Federal level, provide that joint ventures can be legal entities for taxation purposes.

As regards the Tax on Gross Incomes (IIBB by its Spanish acronym), joint ventures can earn tax credits for withholdings and payments (retenciones and percepciones) and advances of tax paid during the course of its business.

When joint ventures have concluded the object they were created for (for example, the conclusion of public construction works), the Resolution provides for a mechanism which allows the companies integrating the joint venture to compute the joint venture’s IIBB credit balance as its own.

According to Resolution (ARBA) No. 88/2010, the tax credit in the joint ventures can be used by the companies integrating the joint venture to pay their own Provincial taxes. Hence, the credit may be transferred only to the companies that integrate the joint venture in accordance to the proportion of their participation percentage provided by the incorporation act.

Furthermore, the Resolution provides that said mechanism may only be used to pay obligations arising from the withholdings, payments and advances paid for IIBB attributable to the members of the joint venture with a maturity date after the joint venture termination.

The credit balance transfer mechanism provided by the Resolution is not mandatory but optional to the demand of repetition.