Set to expire on December 31, 2020, the government’s 12% duty on exported services is now in full swing.
As a reminder, this unprecedented tax applies to any agreement performed in Argentina for the benefit of a non-resident. The taxpayer exporting these services must calculate and pay the duty within 15 business days of the month in which the services were billed. He or she must also accompany this declaration and payment with a sworn affidavit as to the veracity of the disclosure and the correct calculation of the tax payable. The Federal Tax Authority is responsible for resolving any dispute with respect to the affidavit or the calculation of the taxes payable.
For payments in foreign currency, the duty is capped at AR$ 4 per US dollar (or equivalent). The payment of the duty is to be made in pesos at the official rate published on the business day “preceding the date on which the taxpayer has declared the transaction”. Any future adjustments to the declared tax due to cancellations, rejections, discounts, or similar reasons will be later compensated at the same exchange rate.
Taxpayers who export less than US$2 million in the preceding calendar year qualify for a 45-day, interest free grace period to pay duties. Those with export service revenue less than US$600,000 are not required to pay duties.
This duty applies to all persons providing services and to those assigned the contractual rights for payment of those services. While the taxpayer will be able to deduct the duties paid from its taxable income, the duties do not as of now yield a peso-to-peso credit toward income taxes. Exporters failing to comply with the regulations will have their export license revoked.
A tax based on non-physical exchange is difficult to enforce and only likely to encourage evasion. While the government made its case as to why yet another distortive tax has become necessary to sustain the economy, a duty that is not creditable toward a taxpayer’s annual income tax obligations is revealed as a particularly pernicious tax lacking a sustainable policy rationale. One can only hope this “temporary” tax does not go the way of other stop-gap measures (like the tax on bank transaction) that have become permanent. As we previously warned, this tax will prompt evasion or under-invoicing simply because, unlike goods inspected at the border, for services it is relatively easy to accomplish, and the importer has little reason to audit the accuracy or validity of an invoice for services. Presumably, the government Is aware of this but, confronted with a rapidly closing two-year window in which it must balance the budget, these duties will still offer substantial revenue.
* * *
For more information on the above or on tax and trade matters in general please contact Yanina Moyano ([email protected]).
The foregoing article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.