The Tax Reform (enacted as Law 27,430) introduced a series of amendments to the Income Tax Law, including the incorporation of new deductible items and the increase in the deductible sums.
In fact, the Tax Reform referred to the possibility of deducting the sums paid by policyholders and insured parties for: (i) life insurance; (ii) combined insurance, from which life insurance and savings premiums are deductible (except private retirement plans administered by entities supervised by the Insurance Superintendence); (iii) sums allocated to buy quotas from mutual investment funds for retirement purposes; and (iv) contributions to private retirement funds administered by entities supervised by the Insurance Superintendence.
Regarding these new deductible items, the Executive Order 59/2019 issued on 21 January 2019, established the maximum deductible amounts for the items above, according to the following schedule:
- AR $ 12,000 for 2019 fiscal period;
- AR $ 18,000 for 2020; and
- AR $ 24,000 for 2021.
The new maximum deductible amounts will undoubtedly increase the interest in purchasing insurance, considering that to date, the maximum deductible amount per year was insignificant (AR $ 996.23), and it had not been updated for the last 27 years.
This will surely call employers' attention as a benefit to attract and retain human talent. However, we suggest analyzing the implementation of these benefits in each particular case, because if not properly planned, what may represent a tax advantage on one side may end up resulting in an unwanted contingency from an employment and social security standpoint.