Confusion among airlines
On 23 December 2019 a 30% tax on tickets issued to Argentine residents was imposed under Law 27,541. Chapter 6 of Law 27,541 created a tax called 'PAIS' (tax for an inclusive and supportive Argentina).
Article 35 of Chapter 6 established this emergency tax for five fiscal periods applicable to operations relating to transport and tourism services.
Article 35(D) applies a 30% tax on services hired abroad by travel agencies located in Argentina.
Article 35(E) imposes a 30% tax on land, air and sea transportation services with a destination outside Argentina when payment for the services involves the acquisition of foreign currency.
Article 36 sets out that natural or legal persons resident in Argentina must pay this tax and if payment is made by credit card, the tax applies to the cardholder, users or additional cardholders.
Article 37 of Law 27,541 establishes that airlines must collect this new tax from passengers. However, if tickets or tourist services are purchased through a travel agency, the agency must collect the 30% tax.
If foreign travel or tourist services are paid for using an Argentine credit card, the relevant bank must collect the 30% tax when the invoice of expenses is sent to the relevant customer. The collection of the tax from the passenger must be clearly identified in the document issued to buy the ticket or tourist service.
The tax must be paid by the passengers listed on the tickets excluding all other fees (eg, security, customs and immigration and airport service fees).
Article 41 grants the president the executive power to reduce or suspend the tax.
Law 27,541's introduction resulted in confusion for airlines and the fact that the new tax was applicable the day after the law's publication created chaos for air companies as non-compliance can trigger fines with interest.
On 27 December 2019 Executive Decree 99 was issued with the aim of clarifying that PAIS applied to the acquisition of services in Argentine pesos and not US dollars.
As the tax must be clearly documented, it was impossible for airlines to show the imposition of the 30% tax rate on airline tickets.
Following meetings with the air carriers association (JURCA) and the International Air Transportation Association (IATA), Aerolineas Argentinas requested that the IATA provide a code to identify the collection of PAIS from passengers, but it took a couple of days for the code to be issued.
Further, if passengers paid PAIS in Argentine pesos or with an Argentine-issued credit card, they did not need to use the foreign currency market. Therefore, it was unclear why Law 27,541 referred to such transactions.
In this confusing legal situation, no airline started to collect the new tax because it was unclear how to apply it and to which acquisitions the tax actually applied (eg, did it apply to ancillary services, baggage collection or special services such as special food or reserving a seat?)
On 7 January 2020 the Argentine Tax Authority (AFIP) issued Resolution 4659/2020, which aimed to clarify how PAIS is collected from passengers by airlines, travel agents and banks.
Agents authorised to collect this tax must be registered with the AFIP. Resolution 4659/2020 sets out that tax deposited with the AFIP by authorised agents must be in Argentine pesos.
Further, authorised agents must provide the AFIP with taxes collected on the dates indicated in the resolution, which will not always coincide with sales made by agents to airlines under their billing and settlement plan (BSP).
This situation is complicated because airlines will need to deposit with the AFIP payments that they have not yet received. This matter is being discussed with the AFIP so that airlines can deposit the tax when they receive payments from passengers via their BSP.
Other aspects of the new tax remain confusing and it will take some time for carriers to implement the measures required to comply with the new regulations.
For further information on this topic please contact Elizabeth Mireya Freidenberg at Freidenberg Freidenberg & Lifsic by telephone (+54 11 4311 4991) or email ([email protected]).