The government is proposing an ambitious tax amnesty law which would allow taxpayers to disclose undeclared assets and extinguish any tax obligation relating to such assets by paying a penalty. The penalty rate may vary depending on certain circumstances, but the general rate is:

  • 10% of the value of the assets if they are declared before December 31 2016; and
  • 15% of the value of the assets if they are declared after that date and before March 31 2017.

The government proposal gives taxpayers the option to use the disclosed assets to subscribe to one of the two bonds offered under the amnesty instead of paying a penalty. The options are a three-year zero coupon bond and a seven-year 1% per year coupon bond. The zero coupon bond cannot be transferred, but the 1% bond can be transferred after the fourth year. The option to subscribe to the zero coupon is available to parties that avail of the amnesty before September 30 2016 and the 1% bond is available until December 31 2016.

The amnesty offers taxpayers the option to pay a 10% penalty and keep the remaining assets or subscribe to the zero coupon bond or the 1% bond. The bond subscription alternative will be attractive if it offers taxpayers a higher value than keeping 90% of the assets declared.

Zero coupon bond

A taxpayer declaring $100 in assets has two options:

  • pay the penalty and keep $90; or
  • subscribe to a $100 face-value zero coupon bond.

Therefore, the subscription price of the zero coupon bond is $90 (ie, the value of the assets that the taxpayer would retain after availing of the amnesty). The yield from a zero coupon bond purchased at 90% of face value is 3.6% per year. Therefore, a taxpayer would choose a zero coupon bond over a penalty only if the market yield for a three-year government bond was lower than 3.6%. Otherwise, it would be better for the taxpayer to pay the penalty and buy a bond with $90 that pays a higher yield.

One percent bond

The 1% bond is more attractive than the zero coupon bond due to a difference in the amnesty offer. Taxpayers that subscribe to the 1% bond can declare up to three times its face value without penalty. A taxpayer declaring $300 can:

  • pay the penalty and keep $270; or
  • subscribe to a $100 face-value 1% bond and keep $200 in cash plus the 1% bond.

The taxpayer is better off subscribing to the 1% bond if it is worth more than $70. The 1% bond will be worth $70 when the market yield is 6.5%. If the market yield for the 1% bond is less than 6.5% per year, the taxpayer should subscribe to the 1% bond, if it is willing to accept the transfer restriction.


The 1% bond may be an alternative for taxpayers entering into the amnesty if the prevailing bond rates are below 6.5% per year. The 1% bond and the right to declare up to three times its face value with no penalties were amendments introduced to the law to make the bond option more attractive. It is a welcome addition, which may increase the appeal of the amnesty if the market interest rates are below the bond yield.

For further information on this topic please contact Pablo Gayol at Marval O'Farrell & Mairal by telephone (+54 11 4310 0100) or email ( The Marval O'Farrell & Mairal website can be accessed at

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