Post by Edelstein Rodriguez on Feb 26, 2009 2:48:35 GMT 4
Argentina: Tax amnesty regime launched
In mid-December 2008 the Argentine congress approved law number 26,476 drafted by the executive branch through which a tax amnesty regime is granted to taxpayers who failed to comply with their federal tax obligations (including social security contributions but those addressed to health care plan), allowing them to regularise their situation at a much lower cost even when the non-fulfillment has been already disputed by the tax authorities. It has been more than seven years since a similar measure was last taken in Argentina.
The tax obligations that will benefit from this regime are those whose due date for filing and/or payment fell on or before December 31 2007. Interest accrued on unpaid tax obligations, which is determined at the annual rate of 24%, is capped at 30%, 40% or 50% of the principal amount. The sooner the taxpayer files an amended tax return, the higher the discount.
Penalties that usually range from 50% to 100% on the unpaid tax amount depending on the obligation failed will be entirely waived for taxpayers that file amended tax returns and pay the tax due at the regular tax rates under the amnesty regime. Other significant penalties related to noncompliance with formal tax obligations will also be waived.
Although further regulations remain to be issued to implement this regime, a first payment of at least 6% of the total amount due has to be made and the remaining balance can be cancelled in as many as 120 monthly instalments, with a 0.75% monthly interest rate. Once the regulations are published, taxpayers will have six months to adhere to the regimes.
As part of the same tax package, tax incentives were also enacted allegedly aimed at encouraging Argentine companies and/or individuals to repatriate their foreign earnings and hire local workers.
Instead of paying 35% income tax, among other taxes, plus interest and penalties, these incentives provide various flat tax rates for companies and/or individuals that repatriate foreign earnings and reinvest them locally, including a 1% rate for funds invested in productive assets or real estate; a 3% rate for funds invested in bonds; and a 6% rate if the funds are placed in cash accounts. Should Argentine residents maintain their assets abroad but elect to declare them an 8% rate would be assessed. Although some formal requirements and restrictions apply, taxpayers who elect to pay the special tax do not have to report the source of their assets and will not be criminally charged by the government, except in connection with any money laundering, drug and weapons trafficking, and other blacklisted activities.
Moreover, companies that provide new jobs will get a tax break. For the first 12 months after employment starts, employers will have to pay only 50% of the social security contributions. This will be increased to 75% for the second 12 months. This regime would not be applicable to employees who already work for the employer or for employees that are rehired. Companies willing to get this benefit may not experience a headcount reduction in the next two years after the benefit is granted..
Finally, the generally applicable statute of limitations of five years has been extended since the new law established a one-year suspension for these purposes.
Andrés Edelstein (andres.m.edelstein@ar.pwc.com) & Ignacio Rodríguez (ignacio.e.rodriguez@ar.pwc.com), Buenos Aires
In mid-December 2008 the Argentine congress approved law number 26,476 drafted by the executive branch through which a tax amnesty regime is granted to taxpayers who failed to comply with their federal tax obligations (including social security contributions but those addressed to health care plan), allowing them to regularise their situation at a much lower cost even when the non-fulfillment has been already disputed by the tax authorities. It has been more than seven years since a similar measure was last taken in Argentina.
The tax obligations that will benefit from this regime are those whose due date for filing and/or payment fell on or before December 31 2007. Interest accrued on unpaid tax obligations, which is determined at the annual rate of 24%, is capped at 30%, 40% or 50% of the principal amount. The sooner the taxpayer files an amended tax return, the higher the discount.
Penalties that usually range from 50% to 100% on the unpaid tax amount depending on the obligation failed will be entirely waived for taxpayers that file amended tax returns and pay the tax due at the regular tax rates under the amnesty regime. Other significant penalties related to noncompliance with formal tax obligations will also be waived.
Although further regulations remain to be issued to implement this regime, a first payment of at least 6% of the total amount due has to be made and the remaining balance can be cancelled in as many as 120 monthly instalments, with a 0.75% monthly interest rate. Once the regulations are published, taxpayers will have six months to adhere to the regimes.
As part of the same tax package, tax incentives were also enacted allegedly aimed at encouraging Argentine companies and/or individuals to repatriate their foreign earnings and hire local workers.
Instead of paying 35% income tax, among other taxes, plus interest and penalties, these incentives provide various flat tax rates for companies and/or individuals that repatriate foreign earnings and reinvest them locally, including a 1% rate for funds invested in productive assets or real estate; a 3% rate for funds invested in bonds; and a 6% rate if the funds are placed in cash accounts. Should Argentine residents maintain their assets abroad but elect to declare them an 8% rate would be assessed. Although some formal requirements and restrictions apply, taxpayers who elect to pay the special tax do not have to report the source of their assets and will not be criminally charged by the government, except in connection with any money laundering, drug and weapons trafficking, and other blacklisted activities.
Moreover, companies that provide new jobs will get a tax break. For the first 12 months after employment starts, employers will have to pay only 50% of the social security contributions. This will be increased to 75% for the second 12 months. This regime would not be applicable to employees who already work for the employer or for employees that are rehired. Companies willing to get this benefit may not experience a headcount reduction in the next two years after the benefit is granted..
Finally, the generally applicable statute of limitations of five years has been extended since the new law established a one-year suspension for these purposes.
Andrés Edelstein (andres.m.edelstein@ar.pwc.com) & Ignacio Rodríguez (ignacio.e.rodriguez@ar.pwc.com), Buenos Aires