Triumph of Lawfulness Regarding Personal Assets Tax and Branches of Foreign Companies

On December 16, 2014, in the “The Bank of Tokyo” case, the Argentine Supreme Court of Justice put an end to a dispute involving branches of foreign companies established in Argentina regarding Personal Assets Tax.

According to the Personal Assets Tax law, this tax is levied on the holding of shares or participations on the capital of “companies ruled by Law 19,550”. Considering the fact that branches of foreign companies are not “companies” ruled by Argentine Law 19,550, the Personal Assets Tax should not be applicable to them.

Judicial intervention was necessary, due to the fact that The Executive Power, through Decree No. 988/2003, attempted to collect the tax by applying it to branches regardless of its lack of lawfulness.

The Supreme Court ruled respecting the constitutional principle that sets forth that only a law may create a tax.

In the ruling, the Court mentioned that Legislative Power is the only branch of power vested of authority to levy taxes and that both constitutional principles and precepts prohibit any other branch of power from establishing taxes of any kind.