Ministry of Finance Resolution Ends Argentine Tax Authority Abuses Regarding Interest

axation specialists often state that in Argentina the problem of citizens’ lack of taxation awareness is related to some notoriously abusive conducts incurred by the tax authorities.

It is encouraging that through Resolution Nº 598/2019 the Ministry of Finance decided to end two different situations of abuse which the Argentine Tax Authority (the “AFIP” after its Spanish acronym) had entered into regarding interests.

Taxpayers’ interest rate originated in the delay on tax amounts returns

To date the AFIP applies taxpayers’ refund claims with an accrued interest rate of 6% per year.

A 6% interest rate per year is strongly negative, particularly when applied at the same time that the currency suffers a devaluation process which is expressed in price increases of 50%, such as has happened in the last twelve months.

Resolution Nº 598/2019 states that, from August 1, 2019, the AFIP must recognize interest in favor of taxpayers, applying a rate that is directly related to the average applicable interest rate published by the Argentine Central Bank, which reflects the interest paid from banks to depositors.

The Ministry of Finance’s Resolution is not retroactive. The Ministry’s aim is to draw a line in the sand on the AFIP’s past abusive calculation of taxpayer credits.

Compensatory interest for customs duties determined in United States dollars

While the tax obligations due to the Argentine Tax Authority are determined in Argentine pesos, taxes collected by Customs are calculated in US Dollars (Section 20 of Law Nº 23.905).

The Argentine Tax Authority has been applying the same interest rate that applies for tax debts in pesos to customs duties debts expressed in US Dollars.

For example, in July 2019, Customs calculated in its favor a 4.73% monthly interest rate -equivalent to 56.76% annual rate- on the amounts it expected to receive from exporters and importers with whom it has ongoing judicial proceedings because of alleged customs duties claims.  

With this kind of example, when a National Government Agency called a creditor on a US Dollar nominated amount, expecting to increase its credit calculating in its favor of accrued interest at an annual rate of 56.76%, the definition of “abuse” seems appropriate.

With Resolution Nº 598/2019, the Ministry of Finance “considers it relevant” to determine differential interest rates depending on if it is US Dollar debt, and also settles a monthly interest rate of 0.83% -equal to 9.96% per year- from August 1, 2019.

As in the previous example the Ministry of Finance determines the abovementioned interest rate to be applied in the future. Customs will be considered creditor on accrued interests by the application of excessive interest rates on periods before August 1, 2019.