During the last days of December, the new regulatory decree of the Income Tax Act and changes to the Personal Assets Tax Act were published in the Official Gazette.
1. New regulatory decree of Income Tax Act
Decree No. 1170/2018 (the "Decree") was published in the Official Gazette on December 27, 2018, implementing the new regulatory decree of the Income Tax Act.
The Decree will enter into force on December 28, 2018 and will be applicable for the whole FY 2018. The main changes introduced by the Decree are described as follows:
- Transfer Pricing: the Decree regulates the new Transfer Pricing rules introduced by Law No. 27,430.
- Permanent Establishment: the Decree regulates in further detail the new Permanent Establishment concept introduced by Law No. 27,430.
- Dividends: the Decree regulates issues related to the presumption of dividends, the applicable withholdings to the distribution of dividends and profits as well as the redemption of shares and quotas.
- Sale of Argentine shares made by foreign residents: the Decree validates the possibility of paying the tax by means of a direct wire transfer from abroad.
- Disposal of funds or assets in favor of third parties: the Decree establishes the applicable rate to determine presumed interest in the case of disposal of funds or assets on behalf of third parties.
- Thin capitalization rules: the Decree establishes additional rules for the deduction of interest originated in financial debts granted to Argentine legal entities by related parties (whether they are residents or not).
- Tax on Financial Income: the Decree establishes that in the case of public bonds and convertible bonds, the interest or profits obtained during FY2018 can be allocated to the acquisition cost of the bond or security that originate them. This can be used to reduce such cost in the event of a sale, when its market value is below its acquisition value.
- CFC Rules: the Decree introduces additional rules to regulate the status of income obtained by means of offshore trusts, foundations and corporate structures incorporated abroad.
Law No. 27,480 (the "Law") was published in the Official Gazette on December 21, 2018, amending the Personal Assets Tax Act as from FY2019.
According to the Law, changes apply to FY2019 tax returns (considering assets as of December 31, 2019). As a result of this, FY2018 tax returns (that consider assets as of December 31, 2018) will not be affected by the changes and continue to pay tax at a 0.25% rate.
The Law changes the following:
- The minimum non-taxable amount is increased to AR$2,000,000.
- Real estate used as the home of the taxpayer is exempted from the tax, when its value is equal or lower than AR$18,000,000.
- Rural real estate is exempted from the tax when the owners are individuals or estates, regardless of its type of use.
- The current 0.25% rate is increased, as follows:
|Total amount of assets that exceed the minimum non taxable value:||Will pay AR$||More %||On the excess of AR$|
|More tan AR$||To AR$|