ARGENTINA: An Introduction to Private Wealth Law

Political and Economic Environment 

Javier Milei, a libertarian economist, was elected last November as the new president of Argentina, after defeating Sergio Massa (the Peronist candidate) through ballotage. This means that Argentina made a 180-degree change from populism to being a liberal right-governed country.

Under this new scenario, high net worth individuals, who were attacked over the past four years by the former ruling coalition (through the brutal increase of personal assets tax (PAT) rates and the one-off “tax on big fortunes”), should expect no further chasing. Proof of this is that the Executive Branch sent a Bill to the Congress with the intent to ease high net worth individuals’ wealth tax burden through a gradual decrease in PAT rates.

Due to the critical situation, it will be difficult for the new government to show early tangible results to gain support for the 2025 mid-term elections, which is crucial to attain the structural reforms Argentina needs. However, the government is confident in defeating inflation which might leave it with a greater chance of success. If not, it will be hard to achieve the reforms that will enable positive results through 2025 and 2026 in the face of 2027 elections, and there is a risk of the return to populism (history shows that Peronism should never be discounted).

Trends and Developments in Private Client Law  

High net worth individuals and families who have been considering moving abroad will probably put this decision on hold. However, if the results for the current government in the 2025 mid-term elections are adverse, it is predicted that there will be an increase in interest in relocation alternatives (under special regimes).

High net worth individuals and families who have moved abroad in the past (but mainly in the period 2019–2022) are not yet considering returning to Argentina as they remain rather sceptical about the idea that Argentina has left behind the populist chapter of its recent history.

This scepticism will keep high net worth individuals and families on high alert for the possibility of a populism comeback (as happened in 2019). Therefore, asset protection, tax efficiency and confidentiality will still be the main drivers for high net worth individuals’ planning in the coming semester. Foreign irrevocable discretionary trusts and domestic revocable trusts (fideicomisos) might be valid mechanisms to attain these goals. As confidentiality is also a very important aspect for Argentine individuals and families, foreign non-grantor trusts are a suitable alternative. If properly structured, there would be no automatic information exchange to Argentine tax authorities (neither through CRS nor under FATCA-IGA Model 1 in force as of 1 January 2023).

Domestic revocable trusts (fideicomisos) are still a good alternative for Argentine resident individuals reluctant to give up control through an irrevocable trust structure. Although this mechanism does not allow PIT tax deferral, if properly structured, it may ease the overall wealth tax burden. Besides this, domestic trusts (fideicomisos) are a useful planning vehicle for Argentine families with members of the next generations qualifying as US persons (very common among high net worth families with members with dual nationality – Argentine and US – and/or planning to move to the US) to attain tax efficiency for the US beneficiaries allowing (if properly structured) step-up of the assets to FMV (efficiency for US capital gains) and preventing those assets from being part of the US beneficiaries’ estate (efficiency US Federal Estate Tax).

Probable new legislation that will have an effect on clients: changes in PAT, tax amnesty and broad tax moratorium

The Executive Branch sent a Tax Bill to congress on April 17th, including the following. 

Tax amnesty 

- Up to USD100,000 at 0% tax rate.

- Over USD100,000 tax rate at 5% (increase to 10% or 15% depending on the timing in which the taxpayer enters the amnesty).

- Even 0% tax rate for taxpayers disclosing cash and/or proceeds from sale of financial assets provided they deposit and/or transfer the money to a special account where they must keep these funds until 31 December 2025 (only authorised investments). A 5% withholding tax will apply if they decide to transfer from the special account before the mentioned date.

- Benefits for compliant taxpayers (decrease in PAT rates).

- Special regime for former tax residents.

Changes in PAT 

- Increase of the exemption threshold (ARS100 million, or USD100,000).

- Increase of the main residence exemption (ARS350 million, or USD350,000).

- Unification of tax rates (no differential tax rates) and gradual reduction of tax rates, as follows: 1,5% for 2023; 1,25% for 2024; 1% for 2025; 0,75 for 2026; and 0,25% for 2027 onwards.

- Special payment regime (REIBP) anticipated for 2023–2027 at a flat rate of 0,45%.

Tax moratorium 

This includes:

- condonation of 70% of interests;

- condonation of administrative penalties;

- extinction of criminal tax actions; and

- tax on big fortunes expressly authorised.

The Bill has been approved by Deputies, but it is being held up in the Senate. It is expected to be enacted in the coming weeks.

Are tax authorities active auditing high net worth individuals?

There are two reasons which explain why AFIP is increasing the number of tax audits that Argentine- resident high net worth individuals are currently facing. On the one hand there is, AEOI under CRS, and this is combined with the fact that tax inspectors who oversee tax audits have little knowledge on complex planning structures, as well as how the information is exchanged under CRS. Therefore, a tax audit is initiated “just in case” and not because the tax inspector detects an inconsistency with the filed tax returns. Most confusion arises from information related to personal accounts under joint tenancy and trust structures. Secondly, the need to encourage taxpayers to consider entering the tax moratorium. This has been very noticeable in inspections related to “tax on big fortunes”.

Due to the above, high net worth individuals are rethinking what is the best jurisdiction for certain structures to attain confidentiality (if properly structured, information would not be exchanged under CRS nor under FATCA-IGA Model 1).

How does FATCA IGA-Model 1 affect Argentine resident high net worth individuals?

After several negotiations, on 5 December 2022, Argentina signed an Intergovernmental Agreement (IGA) with the US to facilitate implementation of the United States Foreign Account Tax Compliance Act (FATCA). Although the agreement allows the reciprocal exchange of certain financial account information between the US and Argentina (Model 1), there is still asymmetry considering the extent of the information that the US will receive in comparison with Argentina (mainly as per the definition of an Argentine Reportable Account).

The IGA establishes that the obligation of the US to obtain and exchange information shall take effect on the date that US provides written notification to the Argentina competent authority when it is satisfied that Argentina has in place appropriate safeguards to ensure that the information received pursuant to the agreement shall remain confidential and used solely for tax purposes, and that the infrastructure exists for an effective exchange relationship.

In view of the above, the FATCA IGA-Model 1 (in force as of 1 January 2023) is not quite a game changer for Argentine high net worth individuals who are used to holding financial investments in US accounts through foreign corporations or trusts which do not qualify as Argentine Reportable Accounts.

Notwithstanding the foregoing, Argentine taxpayers might consider entering the above-mentioned tax amnesty, encouraged by the fear of being finally reported by the IRS under the agreement.