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Draft bill introduced to amend income tax rules
A bill drafted by the National Executive Branch, which intends to introduce significant changes to income tax rules, has been filed before the National Congress. Taxand Argentina discusses what the new rules will entail when sanctioned.
The results derived from the transfer of depreciable movable goods, shares, bonds and other securities will be taxed regardless of the nature and residence of the beneficiary. Argentine individuals and undivided estates will be exempt when the transferred assets are listed in stock exchange markets.
In the case of income subject to tax according to what is stated above, when obtained by Argentine individuals and undivided estates, a new 15% tax rate will apply. It is expected that such a rate would also apply to non-resident taxpayers, however the wording of the bill is not clear in this respect.
As to non-resident taxpayers, the exemption stated in article 78 of Decree No. 2,284/1991 (ratified by Law No. 24,307), which applies to results derived from the transfer of shares, bonds and other securities, would be abrogated. However, the exemptions contained in special laws, such as Law No. 23,576 (publicly offered negotiable obligations and public bonds) and Law No. 24,441 (publicly offered securities of financial trusts), are not affected by the bill.
The distribution of dividends made by the companies foreseen under section A of article 69 of the Income Tax Law will be taxed with a new 10% tax rate, without prejudice to the application of the so-called 'equalisation tax', if applicable. According to the wording of the bill, Argentine companies would not apply such tax on dividends received (as the bill only amends the tax treatment of local individuals).
The wording of the bill creates a number of doubts, such as:
- the tax rate which would apply to results derived from the transfer of shares and other securities obtained by non-resident taxpayers
- if those dividends or profits distributed by the taxpayers foreseen under section A of article 69 of the Income Tax Law that do not qualify as companies are subject to 10% tax (such as trusts, mutual funds, etc)
- if the 10% tax over dividends would apply (and in such case in which way) when dividends are paid to a non-resident taxpayer
Furthermore, and notwithstanding the fact that the income derived from the transfer of local shares or securities would technically qualify as an Argentine source income, the bill does not establish a payment mechanism for those cases in which the transaction is closed between non-resident taxpayers.