This country-specific Q&A provides an overview to tax laws and regulations that may occur in Argentina.
This Q&A is part of the global guide to Private Client. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/private-client-2nd-edition/
Which factors bring an individual within the scope of tax on income and capital gains?
Individuals residing in Argentina are subject to personal income tax (Impuesto a las Ganancias Personas Físicas) on worldwide income while non-residents are only taxable on their Argentine sourced income through a withholding system.
Section 119 of Income Tax Law (hereinafter “ITL”) establishes that the following will be deemed Argentine residents for income tax purposes:
- Argentine citizens, whether native or naturalized individuals excluding those that lost their income tax resident status according with the parameters mentioned in Section 120 of ITL. (see below);
- Foreign individuals who have obtained permanent residency status in Argentina or, if they have not obtained such status, have been in Argentina with temporary authorizations for 12 months assuming that the temporary absences that comply with the terms and conditions established by the regulations in this regard will not interrupt the continuity of the permanence. The acquirement of argentine income tax resident status will cause effect as from the beginning of the month which follows the month in which either the permanent resident status was obtained or the 12 month period was achieved.
However, foreign individuals who have not obtained permanent residency in the country and whose stay in the country is due to causes that do not imply an intention of habitual residence, may prove before the Argentine National Tax Authority (“AFIP”, for its acronym in Spanish) the circumstances that motivated it within the deadline and conditions established by the regulations (example: complex health treatment).
Contrarily, it must be stressed that if a foreign individual enters Argentina with the intention of habitual residence he/she will be considered an Argentine resident for income tax purposes as from the beginning of the month which follows the month in which the mentioned individual entered Argentina. That is to say that the 12 month period would not apply in this case.
- Undivided estates in which the decedent was an Argentine resident as of the date of his or her death.
According with Section 120 of ITL, an individual will lose its Argentine resident status for income tax purposes if:
a) The individual acquires a permanent resident status in a foreign Country according to such foreign country’s migration laws (pérdida de residencia de derecho); or
b) The individual stays abroad for a period of 12 months. For these purposes, the continuous or alternate presence in the country that does not exceed 90 days during each 12-month period does not change the criterion of loss of residence (pérdida de residencia de hecho).
Related with the above, on May 8th, 2018, AFIP published the General Resolutions number 4236/2018 and 4237/2018 in the Official Gazette, which regulates both the way in which an individual must prove the loss of its Argentine income tax resident status and the procedure that must be encouraged before AFIP in order to terminate the registration in income tax, alleging the grounds provided for in Section 120 ITL. The loss of argentine income tax resident status will cause effect as from the beginning of the month which follows the month in which the registration was terminated. As from then the individual will be deemed a non-resident (Beneficiario del Exterior) and will be taxed exclusively for its Argentine sourced income. Notwithstanding the foregoing, the individual should file an income tax return for the involved irregular tax period.
If the individual who have lost his Argentine resident status for income tax purposes (according to Section 120 ITL) returns to Argentina for the periods mentioned below, the following would apply:
- Individual will acquire again the Argentine income tax resident status if he stays more than 183 days throughout the calendar year;
- AFIP may consider that the Individual has an Argentine income tax resident status if he stays more than 90 days throughout the calendar year provided he keeps his permanent home in Argentina and he has no permanent home in the other country. If the individual keeps permanent homes both in Argentina and in the other country, then AFIP will analyze other factors in order to ascertain with which country his personal and economic relations are closer (center of vital interests). This is known as the double residence test (Section 125 ITL).
Notwithstanding the foregoing, if the individual enters Argentina with the intention of habitual residence he/she will be considered an Argentine resident for income tax purposes as from the beginning of the month which follows the month in which the mentioned individual entered Argentina. That is to say that the 183 days would not apply in this case.
What are the taxes and rates of tax to which an individual is subject in respect of income and capital gains and, in relation to those taxes, when does the tax year start and end, and when must tax returns be submitted and tax paid?
At national level, individuals deemed Argentine residents for income tax purposes (as seen in Question 1 above) are subject to personal income tax (Ganancias Personas Físicas) applicable on their worldwide income. There is no capital gains tax for individuals in Argentina as such, due to the fact that it is income tax at a different rate as seen below.
ITL establishes a progressive rate which is composed of two concepts: one flat tax amount and another variable rate (ranging from 9% to 35%). However, ITL sets a differential treatment with rates of 5%, 7% or 15% in case of gains derived from the sale of bonds, shares, other securities, real property (residential property is exempt from taxation), and income derived from dividends distributed by entities.
Income tax is an annual tax and in the case of individuals the Fiscal Period begins on January 1st of each year and ends on December 31st. Argentine residents must submit their income tax return and pay the corresponding tax balance in mid-June of the year following the given Fiscal Period, except for individuals that earn only employment income from which tax is withheld by the employer (five prepayments of tax must be made at bimonthly intervals, beginning in July of the Fiscal Period).
At provincial level individual’s income is subject to Gross Revenue Tax (Impuesto a los Ingresos Brutos). It is regulated by each province and the Autonomous City of Buenos Aires, through their respective Tax Codes (Código Fiscal, hereinafter “CF”), where it is specifically defined the kind of activities to which it applies, who are deemed taxpayers and the rates which apply. The Gross Revenue Tax is a monthly tax. In general, the submission of the tax return and the payment of the respective balance must be done in the first 15 days of the following month.
In the Autonomous City of Buenos Aires, the applicable rates range from 0.48% to 15%. In the case of services, a general rate of 3% is established when the annual gross income in the previous fiscal year is equal to or less than fifty-five million ($ 55,000,000) and 5% when the annual gross income in the fiscal year previous fiscal exceeds fifty-five million ($ 55,000,000). Also, the law establishes differential rates for certain services, among the main ones are:
Financial and other similar Services
Brokerage and other similar services
Real estate services performed on their own, with own or leased property
In Buenos Aires Province, the applicable rates range from 0.1% to 15%. In the case of services the law established a general rate of 3, 50%.
As general rule, a non-resident (Beneficiario del Exterior) receiving any Argentine sourced income will be subject to a withholding tax. The tax rate will vary according to the source of the income as explained in Question 3 below.
Are withholding taxes relevant to individuals and, if so, how, in what circumstances and at what rates do they apply?
Both resident and non-resident individuals are subject to a Withholding Personal Income Tax Regime.
As a general rule, a resident will be subject to withholding tax for certain Argentine sourced income (such as employment income, dividends distributed by an Argentine non listed Company, etc) and may be subject to withholding tax in other countries which the given individual will compute in their income tax return (Tax Credit) as far as the requirements under Section 168 ITL are met, that is, it must be an "analogous national tax" and it must have been "effectively paid in the countries in which such gains were obtained". The amount to be computed as tax credit cannot exceed the increase in the global tax generated by the incorporation of income from a foreign source. The non-computable portion for exceeding the indicated limit may be deducted from the net tax from a foreign source obtained in the following five fiscal periods (Section 178 ITL). Once this period is over, accumulated tax credit cannot be computed.
For resident individuals, the General Resolution 830 (hereinafter “GR 830”) establishes which parties are required to act as withholding agents, among others:
- Financial Entities
- Individuals and undivided estates, only when payments are made as part of their business or service activity.
The GR 830 establishes that the withholding tax must be practiced at the moment in which the payment, distribution or liquidation of the amount corresponding to the concept subject to withholding is made.
A non-resident individual receiving any Argentine sourced income will be subject to a withholding tax. The tax rate and the withholding applicable regime, will vary according to the source and type of income involved.
Section 92 of ITL establishes that incomes received by foreign beneficiaries are generally subject to 35% income tax withholding. In addition to this, Section 93 ITL presumes a fixed level of net income (presumed income) to which the 35% income tax withholding rate applies, such as:
- The 70% of the amount paid as salaries, fees, and other compensations of individuals domiciled in the Argentine Republic for no more than six months in the taxable year will be presumed net income and will be applicable the 35% tax withholding rate, being 24,5% the effective tax withholding rate.
- The 60% of the amount paid for rental of an Argentine real property will be presumed net income and will be applicable the 35% tax withholding rate, being 21% the effective tax withholding rate.
- The 90% of any other payment not contemplated in particular in Section 93 ITL will be presumed net income and will be applicable the 35% tax withholding rate, being 31,5% the effective tax withholding rate.
With the enactment of Law 27.430 (December 2017) which modifies the ITL, many changes concerning income tax on capital gains and interest, have been introduced.
Before the enactment of Law 27.430, the ITL in Section 20 w) provided an exemption for the results from sale, transfer or disposition of shares, participations, bonds and other securities obtained by individuals and undivided estates located in Argentina, whenever they were listed on stock exchanges or securities markets and had public offer authorization. Also, in Section 20 k), ITL established the exemption to gains derived from shares, bonds, letters and other obligations issued by official entities.
The tax reform limits the exemption provided in Section 20 w) by establishing that only the results from sale, transfer or disposition of shares, securities representing shares and certificates of deposits that are carried out through stock exchanges or stock markets authorized by the Argentine Securities and Exchange Commission (CNV for its acronym in Spanish) will be exempt. It also established that the mentioned exemption will apply to foreign beneficiaries as long as they do not reside in and/or the funds do not come from non-cooperative jurisdictions. In the case of foreign beneficiaries, Section 20 w) also exempt interest received and capital gains from the following securities:
- Public securities issued by the National, Provincial, Municipal or the City of Buenos Aires governments
- Negotiable obligations and representative shares or deposit certificates shares
- Other securities provided that such securities have been issued by entities domiciled or located in Argentina
The exemption will not apply for Argentine Central Bank Notes (LEBACS, LELIQ, LECAP, etc.).
The changes introduced by the Tax Reform, have been regulated by different Regulatory decrees and General Resolutions issued throughout the year 2018. In particular, Regulatory Decree 279 (published on the Official Gazette on April 2018), General Resolution 4227 (published on the Official Gazette on April 2018) and Regulatory Decree 976 (published on the Official Gazette November 2018), have a major impact on the treatment on incomes received by foreign beneficiaries:
(a) Financial Investments:
- Regulatory Decree 279, extends the aforementioned in relation to the net income that is presumed to be Argentine source (Section 93 ITL), clarifying that for incomes derived from LEBACs (Argentine Central Bank Notes) the presumed percentage for Argentine-source income is 100% and a 5% tax rate applies to that income.
- General Resolution 4227 established the mechanism for non-resident investors to pay income tax on interest and capital gains.
- A 5% withholding tax rate applies to investments in Argentine Pesos (ARS) without an adjustment clause (e.g., a clause to adjust for inflation).
- A 15% withholding tax rate applies to investments in ARS with an adjustment clause or investments denominated in foreign currency.
- The Argentine banks for interest arising from term deposits in Argentina banks
- The entities having in custody Argentine Central Bank Notes
- The parties that pay the interest arising from investments in negotiable obligations, certain common investments funds, debt titles of financial trusts and similar contracts, bonds, and certain other investments
- The depositary company or the integral placement and distribution agent (ACDI for its acronym in Spanish) for participations in common investment funds
- Argentine Central Bank Notes, negotiable obligations, debt securities and other securities without an adjustment clause: A 5% withholding tax rate applies
- Argentine Central Bank Notes, negotiable obligations, debt securities and others securities with an adjustment clause: A 15% withholding tax rate applies
- Shares listed on stock exchanges or securities markets authorized by the Argentine Securities and Exchange Commission that do not meet the requirements referred to in Section 20 w) (exemption) or that are not listed in the aforementioned stock exchanges or markets (non listed Argentine Companies): A 15% withholding tax rate applies.
- The purchaser, if this is a resident.
- The entity that exercises the custody in the case of Argentine Central Bank Notes and other securities quoted in public offer authorized by the National Securities Commission
- The legal representative domiciled in Argentina when the purchaser is also a non-resident. If there is no legal representative domiciled in Argentina, the tax must be paid by the seller (foreign beneficiary) through international transfer wire (expressed in USD or Euros). Before the enactment of Law 27.430, if the purchaser and the seller were both non-residents, the payment of the tax was the responsibility of the purchaser.
When the non-resident individual receives interest on bank deposits, government bonds, negotiable obligations, Argentine Central Bank Notes, term deposits and other securities will be subject to:
The following parties will be required to act as withholding agents:
When the non-resident receives incomes from sale of financial investments will be subject to the following tax rate depending on the type of asset:
The following parties will be required to act as withholding agents:
The rates apply on a 90% presumed net income, unless the beneficiary of the income wishes to apply the rates to the actual net income.
If the non-resident wishes to apply the 90% presumed income tax rate on the income received, the effective rate will be 4,5% and 13.5% instead of 5% and 15%.
(b) Sale of Real Property
Regulatory Decree 976 regulates the sale of real property establishing that:
- A 1.5% withholding tax (Real Property Transfer Tax, ITI for its acronym in Spanish) upon the sale of real property situated in Argentina, whenever the real property sold was acquired prior to January 2018. The non-resident shall obtain from AFIP a certificate known as “Certificado de retención ITI” in order for the notary taking part in the public deed (withholding agent) to withhold the sum indicated in the said certificate; or
- A 15% withholding tax (Income Tax on capital gains) upon the sale on real property situated in Argentina, whenever the real property sold was acquired on or after January 2018. In case the seller is a non-resident and the buyer is an Argentine resident, such buyer must withhold and pay the tax and, if both parties are non- residents, the tax must be directly paid by the transferor, either personally or through its legal representative in the country.
(c) Dividends distributed non listed Argentine Companies
Law 27.430 modified Section 46 of ITL introducing a withholding tax applicable to residents and non-residents which received dividends distributed from non-listed Argentine Companies. For distributions from income generated in 2018 and 2019, the applicable rate will be 7%; for distributions from income generated in 2020 and subsequent periods the applicable rate will be 13%.
(d) Tax on indirect transfer by non- residents of argentine situs assets
The income received by a non-resident which derives from the sale or transfer by of shares or other participations in foreign entities when at least 30% of its value derives from assets located in Argentina, will be taxable. The applicable tax rate must be determined in the same way as established in GR 4227 for capital gains (see (a) Financial Investments, GR 4227, Capital Gains)
Is there a wealth tax and, if so, which factors bring an individual within the scope of that tax, at what rate or rates is it charged, and when must tax returns be submitted and tax paid?
Argentine domiciled individuals are subject to a tax that is assessed on all of the individual’s property known as Personal Asset Tax (Impuesto sobre los Bienes Personales) located in Argentina and abroad as of 31 December each year.
Argentine Congress has recently passed a Law (December 5th 2018) which intends to modify Personal Asset Tax Law. At the time of this contribution, the Executive Branch has not promulgated the mentioned law.
However it can be said that the mentioned law raises the minimum taxable base from ARS1,050,000 to ARS 2,000,000 and introduces again a progressive scale (no longer a fixed tax rate), as follows:
- Between ARS 0 and ARS 3,000,000, the applicable rate will be 0,25% on the amount exceeding ARS 3,000,000.
- Between ARS 3,000,000 and ARS 18,000,000, will pay a flat rate of ARS 7.500 and a rate of 0,50% the amount exceeding ARS 3,000,000.
- As from ARS 18,000,000, will pay a flat amount of ARS 82.500 and a tax rate of 0,75% on the amount exceeding ARS 18,000,000.
In the case of the real property in which the taxpayer lives (Casa Habitación) or in which the deceased used to live in the case of undivided estates, will not be taxable when their value is equal or less than ARS 18,000,000.
The taxable base is the value of such assets and except for few exceptions, debts are not deductible.
This tax is also applicable to individuals domiciled abroad. To ensure that the tax is collected, the law provides a method of substitution that imposes on the local resident that has the administration of the asset owned by a foreigner, the obligation to file the tax return and pay the tax (Substitute Taxpayer Regime). In this case, it is assessed on property located in Argentina applying a fixed tax rate of 0,25%.
Expatriates residing in Argentina on work assignments for a period not exceeding five years are considered to be domiciled in Argentina, but they are taxed only on personal assets located in Argentina.
Personal Asset Tax is an annual tax. The tax return must be filed in mid-June of the year following the given Fiscal Period. In the case of individuals domiciled abroad the tax return should be filed by the Substitute Taxpayer.
In must be said, that although the shares and other equity participations in local companies must be disclosed in the relevant tax return by the resident individual or the Substitute Taxpayer, the taxable base conformed by the value of these assets would not be computed, due to the fact that the local company is responsible to file a special tax return (Declaración Jurada de Acciones y Participaciones) and pay the tax at the applicable rate of 0.25% on the net worth value of the company.
Is tax charged on death or on gifts by individuals and, if so, which factors cause the tax to apply, when must a tax return be submitted, and at what rate, by whom and when must the tax be paid?
In Argentina, and for the moment, there is neither federal gift nor inheritance/estate tax. A gift tax/estate tax (Impuesto a la Transmisión Gratuita de Bienes, hereinafter “ITGB”) is only applicable within Buenos Aires Province (Entre Ríos has abrogated this tax on December 22nd 2018).
ITGB is assessed on any increase in an individual’s wealth due to the receipt of a gratuitous transfer of assets from acts including inheritances, legacies and gifts. According to the law, the following are deemed to be taxpayers:
- Natural persons and legal entities domiciled within the province, which benefited from the gratuitous transfer. In this case, the tax applies to the total sum of the assets received by that person or entity.
- Natural persons and legal entities domiciled outside the province when the increase in their wealth comes from a gratuitous transfer of assets located within the province (hereinafter “PBA situs assets”). In this case, the tax applies only to the amount of the increase derived from the transfer. Controversially, Buenos Aires Province Tax Code considers that the shares and equity interests of a Company registered outside Buenos Aires Province is a PBA situs asset in the proportion of those assets held by the Company which are situated in Buenos Aires Province (Example: Company incorporated and registered in the Autonomous City of Buenos Aires having real property in Buenos Aires Province). For tax assessment purposes, the shares will be valued by the net asset value of the latest closed financial statements.
The tax-free allowance and the tax rates have both been modified on 2018 as follows:
- The tax-free allowance (mínimo no imponible) has been increased to ARS1,120,000 when the receiving party is the spouse, child or parent of the transferor. In any other case, the tax-free allowance is ARS269,000.
- The applicable tax rates have been recently reduced. Currently, the applicable tax rate varies from 1.60% to 8.78% depending upon the value of the property transferred and the relationship between the transferor and the transferee of the property, and is assessed on the assessment value or the market value, whichever is higher. The tax must be determined by applying a flat tax amount and another variable depending on the applicable tax rate according to the scale (see table below).
Father, son and spouse
Other ascendants and descendants
Collateral of 2nd degree
Collaterals of 3rd and 4th degree and other relatives and strangers (including entities)
Up to (Upper Limit)
Flat Tax amount ($)
Tax Rate on amount exceeding the upper limit (%)
Flat Tax amount ($)
Tax Rate on amount exceeding the upper limit (%)
Flat Tax amount ($)
Tax Rate on amount exceeding the upper limit (%)
Flat Tax amount (%)
Tax Rate on amount exceeding (%)
The tax return must be filed and paid by the beneficiary (donee, heirs, legatees, etc.), as follows:
- In case of gifts: until expired fifteen days from the acceptance of the gift by the Donee;
- In transmissions produced by cause of death: up to fifteen days of the judicial request for registration or delivery of the transmitted asset, release of funds, or act of a similar nature, or until twenty-four (24) months from the decedent's death, whichever comes first.
In addition, there is a Court Tax (Tasa de Justicia) applicable upon the judicial recognition of the transfer of the relevant estate The applicable tax rate will depend on where the succession process takes place (1,5% in the Autonomous City of Buenos Aires and 2,2% in Buenos Aires Province).
Are tax reliefs available on gifts (either during the donor’s lifetime or on death) to a spouse, civil partner, or to any other relation, or of particular kinds of assets (e.g. business or agricultural assets), and how do any such reliefs apply?
Buenos Aires Province Tax Code (Section 320 of Provincial Law 10.397) provides that certain heirs (surviving spouse, ascendants and/or descendants) will be exempt of ITGB when they receive mortis causa any of the following assets:
- Homestead (Vivienda Familiar, according with Section 244 of Argentine Civil and Commercial Code hereinafter “CCC”)
- Real property entirely destined for the housing of the decedent or his family, provided that it is the only property and its assessed value does not exceed ARS 962.000 (for Fiscal Period 2018).
- Company, whatever its form of organization provided the valuation of its assets does not exceed the amount established by Law (ARS 17,910,000, for fiscal period 2018) and as long as the activity is effectively maintained following five years from the death of the decedent. Otherwise, they must pay the tax reassessment for the remaining years to obtain the benefits of the exemption. Notwithstanding the foregoing, when the income of the Company deriving from rents and financial assets exceeds ARS 17,910,000 (for Fiscal Period 2018) this exemption will not apply.
Do the tax laws encourage gifts (either during the donor’s lifetime or on death) to a charity, public foundation or similar entity, and how do the relevant tax rules apply?
The ITL only allows deduction of the gift when the destination of it is:
- National, Provincial and Municipal Tax authorities.
- To the Permanent Support Fund, to the political organization recognized also for the case of electoral campaigns
In addition, for the following entities, the same persons must be recognized by the Federal Administration according to current regulations:
- Religious institutions exempt from the tax
- Exempt entities
- The realization of the non-profit welfare medical assistance work, including the activities of care and protection of children, old age, disability and disability.
- Scientific and technological research recognized by the relevant body or scientific research on economic, political and social issues oriented to the development of the plans of political parties.
- The systematic and degree educational activity for the granting of degrees officially recognized by the Ministry of Culture and Education.
How is real property situated in the jurisdiction taxed, in particular where it is owned by an individual who has no connection with the jurisdiction other than ownership of property there?
Individuals owning a real property in Argentina shall pay the following taxes:
- Real Property Tax (Impuesto Inmobiliario) at Provincial Level, must be paid annually, in one or several instalments that expire in the months of February, April, June, August and October. The tax is composed of a fixed amount (from ARS 150 to ARS 85,975, for the fiscal year 2018) and a tax rate to be applied on the surplus of the established minimum of the scale which goes from 0,02% to 1,25% and varies according to the type of property and the fiscal valuation carried out by the Land Registry and Territorial Information Service (being the minimum and maximum, ARS 179,851 and ARS 10,000,000, respectively). In the year 2018 Buenos Aires Province Revenue Agency (ARBA for its acronym in Spanish) has made a sharp increase in the revaluation of real property situated in the Province.
- Sweeping and Cleaning, Maintenance Fee (Tasa por Alumbrado, Barrido y Limpieza) at Municipal Level, must be paid annually, in one or several instalments, with rates which are usually between 0.30% and 0.40% applicable on the fiscal valuation carried out by the Land Registry and Territorial Information Service.
- Personal Asset Tax (Impuesto sobre los Bienes Personales) at a Federal Level. As mentioned in Question 4 above, through the Substitute Taxpayer.
- Real Property Transfer Tax (Impuesto a la Transferencia de Inmuebles) at a Federal Level), in the event the individual sales its real property provided this was acquired before January 2018. Tax rate 1,5% that the notary will withhold and pay to AFIP.
- Income Tax (Impuesto a las ganancias persona física): (i) if the individual rents its real property, the tenant should withhold 21% (which is the effective tax rate in this case, tax rate of 35% applicable to the net income which the ITL presumes is 60%) and pay to AFIP. (ii) If the individual sales its real property and this was acquired on or after January 2018, the notary will withhold income tax at the rate of 15% (incorporated by Law 27.430).
Are taxes other than those described above imposed on individuals and, if so, how do they apply?
Value Added Tax (VAT) is a federal tax. It taxes sale of goods located in Argentina, services performed in Argentina, the imports of goods and services performed abroad but economically used in Argentina.
The general rate is 21% but there a increased rate of 27% applies to certain services such as communications services, natural gas, water and power and a reduced rate of 10,5% applies to services like passenger transports, provisions of fruits and certain medical services.
The VAT is a monthly tax. The submission of the tax return and the payment of the respective balance must be done between the 15th and the 21st of the following month.
Non-residents performing taxable services in Argentina are subject to VAT. The obligation to collect and report the VAT relies on substitute responsible domiciled in Argentina. The tenant or the individual perceiving the service and who carry out such operations as intermediaries or on behalf of foreign beneficiaries, provided that they are carried out in their own name are considered substitute responsible for the tax.
Stamp tax is a provincial tax. Each of the provinces legislates in its tax code. It taxes the formalized acts, contracts and operations within the provincial jurisdiction. This tax reaches the public deeds or instruments of any nature or origin in which transfer the legal ownership of a property.
The instrument must have the following characteristics to be met by the tax:
- Onerous: there must be a price or a consideration.
- Formalization: the acts, contracts and operations must be formalized in public or private instruments.
- Territoriality: must be celebrated within the province, must cause effects on it.
The average tax rate is 1% applicable on the economic value of the contract. The submit and pay must be made by the taxpayers or third parties involved in the celebration of acts, contracts or operations reached by the tax, formalized through private instruments within 15 working days or calendar days (depends on the province) from the conclusion of the contract.
Is there an advantageous tax regime for individuals who have recently arrived in or are only partially connected with the jurisdiction?
There is a differential treatment both in the Personal Income Tax and in the Personal Assets Tax for those individual of foreign nationality whom after duly proven employment reasons reside for no more than five years in Argentina.
Non-residents domiciled in Argentina for employment reasons for a period not exceeding 5 years, will not be considered Argentine residents for tax purposes, for which reason they will be subject to tax only for their income from Argentine source.
In the case of the personal assets tax, the expatriate, despite being temporary domiciled in Argentina, will be taxed only for his assets in Argentina. In this way, if the value of the assets in Argentina of the expatriate does not exceed the minimum subject to taxation (see Question 4 above), it will not be taxable.
What steps might an individual be advised to consider before establishing residence in (or becoming otherwise connected for tax purposes with) the jurisdiction?
An individual must consider that upon becoming an Argentine tax resident he/she will be subject to personal income tax (Ganancias Personas Físicas) on their worldwide income and if he/she becomes Argentine domiciled (as the case might be) he/she will be subject to Personal Asset Tax assessed on those assets located in Argentina and abroad as of 31st December each year. In this sense, he/she should be advised that Argentina has one of the highest tax burdens in Latin America.
The individual should consider too that Argentina have faced cyclical economic and political crisis (basically, every ten years) and that whenever a crisis arises, the right of ownership is at risk. Devaluation, asymmetric pesification, foreign exchange restrictions are a few examples of this. Insecurity is another important issue to consider.
Having said this, it would be advisable that if the person analyzing the possibility of establishing residence in Argentina is a High-net-worth Individual, he/she shall previously settle up a structure in order to tackle asset protection, avoid disclosure of assets in the relevant tax returns (mainly for insecurity reasons), and ease their eventual tax burden.
What are the main rules of succession, and what are the scope and effect of any rules of forced heirship?
Under the CCC succession is governed by the law of the country where the decedent was domiciled at the time of his death. This law governs:
- The determination of the decedent's heirs.
- Any succession rights arising by reason of death.
- The validity of testamentary dispositions.
Argentina has a forced heirship (public order) regime. The forced heirship portion refers to a portion of the estate that is reserved for certain heirs by law (that is, the forced heirs). This allows for descendants, ascendants and the surviving spouse to have a reserved portion in the deceased estate which cannot be deprived either by will or by any free inter vivos act (gifts) (Section 2444 CCC).
Under the CCC the reserved/forced portions are as follows:
- Descendants: the forced portion is two-thirds.
- Ascendants: the forced portion is one-half.
- The surviving spouse: the forced portion is one-half.
These portions are calculated taking into account the sum of the liquid value of the estate at the time of the decedent's death and the gifts provided for each of the forced heirs at the time the gift was made.
The CCC introduces the concept of improvement. This allows the decedent to reduce the reserved portion in order to exclusively improve it for disabled heirs, whether they are descendants or ascendants (first part of Section 2448).
A forced heir can be deprived of his legitimate portion if the decedent invokes in his will one of the statutory causes for disinheritance established in the Civil and Commercial Code (for example, the decedent invokes in his will that he was the victim of violence by his son). The onus probandi of the invoked disinheritance cause is in charge of the other heirs.
Is there a special regime for matrimonial property or the property of a civil partnership, and how does that regime affect succession?
Under the CCC future spouses have the possibility of opting, by entering into marriage conventions (the "Conventions"), between a shared/marital property regime or a separate property regime.
Section 463 of the CCC establishes that in the event that no convention is made or the convention does not set forth any provision regarding the property regime, the traditional shared/marital property regime will be applied.
Conventions may be created for the purpose of (Section 446, CCC):
- Designation and appraisal of the goods that each of the future spouses brings to the marriage.
- Admission of debts.
- Donations made between each other.
- Option chosen taking into account the regimes contemplated in the CCC.
Section 448 of the CCC provides that in order for the Conventions to be valid, they must be executed by public deed (escritura pública). In order for the Conventions to be effective towards third parties, the marriage certificate must include a note in the margin specifying the chosen regime.
In the event that the spouses decide to change the regime, the amendment must also be made by Convention and by a public deed, for which the spouses must have been married for at least one year. In the event that there are creditors affected by this change, they will have one year to object, as from the date they became aware of the change.
When a marriage is terminated (due to death or divorce), the assets that qualify as shared/marital property are grouped together and, after the applicable liabilities and claims of each spouse have been worked out, divided and distributed between the spouses and in the case of death, between the surviving spouse and the heirs of the deceased.
Argentine law recognizes marriage between same-sex couples, so the same marital property regime applies in such cases. "Marriage" is defined as a person being united to another of the same or opposite sex, in a consensual and contractual relationship recognised by law, the consent to which is usually expressed in the presence of a public officer. Argentine law also recognizes a civil partnership, which is a legal union or contract similar to a marriage between two people of the same sex.
The CCC recognizes certain rights of domestic partners provided they have been together for at least two years. Through the means of "cohabitation agreements" (Pacto de Convivencia) domestic partners are able to regulate different aspects of their life together, such as economic aspects and other responsibilities. It also provides protection for the family home and, in case of death of one partner, the survivor is granted the right of free housing in the home they shared, for a period of two years.
Under Section 524 of the CCC, a domestic partner who suffers a glaring imbalance in his or her economic situation (as a result of the end of the cohabitation) may claim before court an economic compensation. The surviving domestic partner has no inheritance rights over the estate of the decedent.
What factors cause the succession law of the jurisdiction to apply on the death of an individual?
The last domicile of the deceased person and the location of the immovable property (if any), determines the territorial jurisdiction.
Therefore, if the decedent was domiciled in Argentina or if the decedent was domiciled abroad leaving immovable property located in Argentina, Argentine rules will apply and a court-based procedure (proceso sucesorio) must be followed (section 2643 CCC).
The applicable law, is determined by the last domicile of the decedent. However, an exception applies if the deceased was last domiciled in a foreign country and their estate comprises immovable property located in Argentina. In this case, the applicable law would be the CCC as established in section 2644 of the CCC. As mentioned in Question 12 above, this law governs:
- The determination of the decedent's heirs.
- Any succession rights arising by reason of death.
- The validity of testamentary dispositions.
How does the jurisdiction deal with conflict between its succession laws and those of another jurisdiction with which the deceased was connected or in which the deceased owned property?
In what circumstances should an individual make a Will, what are the consequences of dying without having made a Will, and what are the formal requirements for making a Will?
As mentioned in Question 12 above, Argentina has a forced heirship (public order) regime. This allows for descendants, ascendants and the surviving spouse (that is, the forced heirs) to have a reserved/forced portion (porción legítima) in the deceased estate from which any of them cannot be deprived either by will or by any free inter vivos act (gifts) (Section 2444 CCC). The reserved/forced portions are as follows:
- Descendants: the forced portion is two-thirds.
- Ascendants: the forced portion is one-half.
- The surviving spouse: the forced portion is one-half.
Therefore and assuming the decedent was last domiciled in Argentina, the absence of a will determines the application of intestacy rules. In such a case, the estate will be divided depending on who survives the decedent, as described below:
- Surviving descendants only. The children are entitled to the entire estate. If any of the children have predeceased but have surviving issue, the share that would have been allocated to that child goes to his issue per stirpes (if the predeceased has two children the portion of the predeceased is divided in two equal shares). This is known as “derecho de representación".
- Surviving spouse and surviving descendants. One-half of the decedent's marital property is distributed to the surviving spouse and the children are entitled to receive the other half. Both the surviving spouse and the children are entitled to receive equal portions of the decedent's own property.
- Surviving ascendants but no surviving descendants or surviving spouse. The whole estate passes to the surviving ascendants. In this case, the closer generations exclude the inheritance rights of the further generations (for example, the grandfather is excluded if the father survived).
- Surviving spouse and surviving ascendants but no descendants. The surviving spouse is entitled to one-half of the marital and one-half of the own property of the deceased. The other half goes to the ascendants.
- Surviving spouse but no surviving ascendants or descendants. The surviving spouse is entitled to the whole estate.
- No surviving ascendants or descendants, and there is not a surviving spouse. The collaterals (until the fourth degree of relationship) are entitled to the estate.
Therefore, under the CCCC individuals have freedom to dispose one-third of their assets if they have descendants, one-half if they have ascendants and one-half if the relevant individual is married. In this sense an individual will be interested in making a will in case he wants to assign the available portion (porción disponible) for the exclusive benefit of one or more of his/her forced heirs or to any other person or entity. Otherwise intestacy rules will apply and the heirs will be entitled to receive the estate according with the parameters seen above.
The law of the deceased's domicile at the date of his death governs the enforcement and contents of wills and the legal succession. The will's form is governed by either:
- The law in force in the territory where it is made.
- The law in force in the country from which the testator is a national.
- Where the testator has his domicile or his residency.
In this sense, the validity of a will, no matter where it was extended, is deemed to be governed by Argentine law if the decedent was last domiciled in Argentina.
The formalities for making a will in Argentina are the same, regardless of the nationality, residence and/or domicile of the testator.
Any person can make a will in Argentine in any of these two ordinary forms:
- Holographic will (testamento ológrafo): This will is wholly written by the testator in his own hand, dated and signed. This will is neither witnessed nor notarized.
- Notarized will (testamento por acto público): This will is made before a notary public and two witnesses and entered on a notary record. It is also known as an "open will".
How is the estate of a deceased individual administered and who is responsible for collecting in assets, paying debts, and distributing to beneficiaries?
The administration of the estate of a deceased individual should be carried out by an administrator.
The administrator could be designated by the testator in his will. If there is no testamentary designation, the heirs acting by majority may designate an administrator. The administrator must carry out conservatory acts regarding the assets comprised in the estate and any act linked with the normal course of the decedent business (administración judicial).
In order to transfer certain assets, the administrator must have the unanimous consent of the heirs, or failing this, judicial authorization.
However, if no administrator has been designated, any heir may undertake acts of conservation or urgent measures in order to preserve the estate. In order to undertake administration or disposition acts, he will need the unanimous consent of the other heirs (administración extrajudicial).
The administrator must give full account of their administration on a quarterly basis, except where the majority of the heirs have agreed to an alternative term. If no objection is made, the judge will approve the accounts.
Regarding distribution of the assets composing the decedent´s estate, this may be done privately (partición privada) which under Section 2369 CCC requires unanimity of the involved heirs, or within the court-based procedure (partición judicial) which is mandatory whenever any of the heirs is a minor and/or faces an incapacity (Section 2371 CCC). If the heirs cannot agree on a distribution of the assets, the courts will order its liquidation (sale and distribution).
Do the laws of your jurisdiction allow individuals to create trusts, private foundations, family companies, family partnerships or similar structures to hold, administer and regulate succession to private family wealth and, if so, which structures are most commonly or advantageously used?
Argentina has no legislation on private foundations. Concerning Trusts (fideicomisos), this figure was previously regulated by the Housing and Construction Financing Law No. 24,441, in particular Title I (Trust Law), which contemplated two types of trusts:
- Financial trust (fideicomiso financiero). Under this type of trust, the trustee must be a financial entity or a corporation specifically authorised by the Argentine Securities Commission to act as financial trustee.
- Ordinary trust (fideicomiso ordinario). These can be:
- management trusts (fideicomisos de administración); or
- guarantee trusts (fideicomisos de garantía).
The CCC amended the Trust Law. Therefore, trusts are now regulated in Chapter 30 of the CCC, which incorporates suggestions of legal scholars and case law with respect to certain issues of interpretation and application of trust law.
Formerly, in order to avoid commencing a court-based procedure and the costs thereby involved (Court Tax and attorney’s fees among others), it was customary for individuals to grant inter vivos gifts (inheritance advances). However, after the enactment of the CCC (Law 26.994), inheritance advances involving real property – even if it’s done in favor of forced heirs - became no longer an option due to the fact that the title would be deemed imperfect (Section 2458 CCC).
Consequently, management revocable local Trusts became an alternative figure to regulate succession to private family wealth, mainly for real property located in Argentina. In this way, the effect of avoiding the entrance of these assets into a court-based procedure is attained as well. Additionally, if the mentioned real property were to be situated in Buenos Aires Province, this structure allows the deferral of the ITGB.
In order to regulate succession to private family wealth of other assets rather than real property situated in Argentina, Foreign Trusts are a better option than local management Trusts, mainly for the following reasons:
- Asset Protection (mainly regarding the “argentine risk”);
- The 30 year limit under Section 1668 CCC would not apply, which gives flexibility in order to regulate private family wealth succession for different generations, extending in this way the asset protection period and allowing a gradual and prudent transfer taking into consideration any particular situation around any given beneficiary (political context, tax residency, marital situation, etc.); and
- Fiscal efficiency (under certain conditions, as seen in Question 22 below)
When it comes to family-owned companies, it is common for the founder to gift his/her shares/interest to his/her heirs reserving for himself/herself the economic rights and in some cases the political rights too, until his or her death (usufructo vitalicio). Related to this, and mainly when the family-owned company held real property or rural land, tax-free reorganizations procedures are commonly used to split them between their members (escisión libre de impuestos), without facing any tax burden, provided the following requirements are accomplished:
- prohibition for the owners to sell the reorganized entities within two years of the reorganization; or
- change their activities within two years of the reorganization.
In the case of family-owned companies where attaining to the particular activity of the given company a reorganization procedure as the mentioned above is not an option, further planning might be suggested aimed to achieve not only an efficient succession on the property (shares of the family company) but also the subsistence of the Family Company throughout generations. A Family Business Constitution (Protocolo de Empresa Familiar) might be an effective figure in order to future-proofing a Family Business.
How is any such structure constituted, what are the main rules that govern it, and what requirements are there for registration with or disclosure to any authority or regulator?
What information is required to be made available to the public regarding such structures and the ultimate beneficial ownership or control of such structures or of private assets generally?
How are such structures and their settlors, founders, trustees, directors and beneficiaries treated for tax purposes?
Are foreign trusts, private foundations etc recognised?
Argentina has not signed the Convention on the Law Applicable to Trusts and on their Recognition (July 1st 1985). However, there have been court precedents recognizing the existence and enforceability of foreign trusts, providing that Argentine public order is not infringed (mainly, the forced heirship rules). This was then included in Section 2651, Subsection e) CCC. Therefore, Argentina recognizes both foreign trusts and private foundations. The property contributed to the structure will be owned by the Trustee in its fiduciary capacity. Notwithstanding the foregoing, the tax treatment will vary depending on the characteristics of the mentioned structures. In certain cases fiscal transparency will apply as seen in Question 23 below.
How are such foreign structures and their settlors, founders, trustees, directors and beneficiaries treated for tax purposes?
Until the enactment of Law 27,430, Section 140 b) ITL was the only reference to foreign trusts in local legislation, which established that beneficiaries would be subject to income tax upon receiving distributions from the Trust, unless the given beneficiary proves that the amounts he/she received do not derive from profits obtained by the trust, but rather from redemption of capital originally contributed to it, in which case, such amounts would not be subject to taxation.
Law 27,430 establishes the cases in which a foreign trust/private foundation should be considered transparent for fiscal purposes. In this sense, fiscal transparency for income tax purposes will apply to revocable trusts/private foundations, and we believe that the Settlor will have to include in its income tax return the income and capital gains generated by the structure which will be then taxed as if the assets where owned by him/her directly. However, as the Regulatory Decree that should clarify this has not yet been issued, we cannot assure that it will work as mentioned above.
Concerning irrevocable trusts, neither fiscal transparency nor anti-deferral rules will apply unless either of the following situations pertains: (i) the Settlor is also a beneficiary of the trust; or (ii) the Settlor keeps direct or indirect powers to decide investments of the assets comprising the Trust Fund. Therefore, if structured correctly, income and capital gains derived from the assets held in trust would not be subject to tax in the jurisdiction of the trustee, and the trustee becoming the legal owner of the assets will allow that neither personal assets tax nor income tax will be levied on the Settlor for such assets and their revenues. Beneficiaries will pay according with the provisions of Section 140 b); this is that beneficiaries would be subject to income tax upon receiving distributions from the Trust. Our understanding is that the 35% applies over the portion of the distributed amount which in proportion corresponds to accumulated income.
To what extent can trusts, private foundations etc be used to shelter assets from the creditors of a settlor or beneficiary of the structure?
These foreign structures could be used to shelter assets from creditors. However and according to the particular circumstances around the set up of the given structure, creditors could eventually encourage a legal action either under Section 333 CCC (acción de simulación) or under Section 338 CCC (acción de fraude). Both actions constitute a measure of patrimony integration due to the fact that if the court issues a ruling favorable to the creditor those acts by which the structure has been set up will be regarded void and consequently those assets held in structure would be treated as if they had never left the patrimony of the involved party (Sections 334 and 390 of the CCCN).
What provision can be made to hold and manage assets for minor children and grandchildren?
Foreign Trusts are appropriate structures to hold and manage assets for minor children and grandchildren.
Are individuals advised to create documents or take other steps in view of their possible mental incapacity and, if so, what are the main features of the advisable arrangements?
What forms of charitable trust, charitable company, or philanthropic foundation are commonly established by individuals, and how is this done?
Charities are recognised under argentine legislation. However, in Argentina there is not a single regulatory authority for all charities. In addition, unlike some other jurisdictions, the Argentine law does not provide an exact definition of a "charity".
Despite the lack of a legal definition, charity can be defined as an organization whose purpose is to work for the public benefit without making a profit. The two main types of not-for-profit organizations are:
- Foundations (fundaciones). These are non-profit legal entities created with certain funds or assets which have been endowed by its founders to carry out some specific activity for the public benefit without seeking profit. Foundations are governed by Chapter 3 of the CCC.
- Civil associations (asociaciones civiles). These are non-profit legal entities with a public benefit purpose. Unlike foundations, they are incorporated by a number people willing to carry out its charitable purpose for the benefit of those who are members of the organisation. Civil associations are governed by Chapter 2 of the CCC.
To incorporate a charity, the founding members must file the following documents with the local Public Registry of Commerce:
- Constituting documents: memorandum of association and the bye-laws (Estatuto).
- Financial forecast for the first three years.
- Details of activities to be performed during the first three years.
- Evidence of paid-in capital or assets. The assets initially donated or promised to the foundation must be at least prima facie sufficient to carry out its purpose to obtain the registration by the relevant authority.
Local registration is mandatory, and the appropriate registry will be determined by the domicile of the foundation or association. For example, in the City of Buenos Aires, foundations and civil associations are registered with and controlled by the Public Registry of Commerce (Inspección General de Justicia), the government agency with supervisory authority over companies registered in the City of Buenos Aires. In other provincial jurisdictions, the same body that controls commercial companies may also be in charge of regulating charities, and registering them in the local Public Registry of Commerce.
Once the charity is registered with the Public Registry of Commerce, it must be registered with AFIP. The AFIP will provide the charity an identification number, which will identify the organisation as a charity, with all applicable tax exemptions.
The benefits for individuals when setting up a charitable organisation are the following:
- Separate legal personality. The law recognizes the charity as having a separate legal personality to that of their founders or members. Therefore, people may engage in charitable activities limiting their responsibility, and the charity's assets are segregated from the patrimony of the founder.
- Tax benefits. Most charities are exempt from property tax and/or value added tax (VAT). Charities are also usually income tax-exempt, provided the income is:
- used for charitable purpose only; and
- not directly or indirectly distributed among its members, founders or directors.
What important legislative changes do you anticipate so far as they affect your advice to private clients?
There has been a rumor that in the near future the Executive Branch may send a bill to the Congress to establish an inheritance/estate tax at a federal level. This rumor was especially strong when Law 27,260 was enacted introducing staggered modifications increasing the non-taxable minimum amounts and decreasing the rates of Personal Assets Tax, in a context where the Executive Branch was struggling to reduce the fiscal deficit. However, as mentioned in Question 4 above, the rates of Personal Asset Tax have been recently increased again and although the struggle to reduce fiscal deficit is still in the agenda, this rumor has been silenced.