New tax on foreign currency purchases in Argentina

March 2020 | EXPERT BRIEFING | CORPORATE TAX

financierworldwide.com

Like the movie Groundhog Day, in which history keeps repeating itself, Argentina has again imposed additional exchange controls, in the form of a special 30 percent tax on foreign currency purchases.

Argentina enacted Law 27,541 on 23 December 2019 (Solidarity Law). The Solidarity Law not only amends and increases tax on income, personal assets, excise on certain goods, and debits and credits in local bank accounts, it also establishes a new tax on certain foreign currency purchases. Social security rules have also been amended.

Following the law’s enactment, Argentina published Decree 99/2019 in the Official Gazette. The Decree contains final regulations which implement the tax reform, which is now fully effective.

The Law creates a new tax (‘Tax for an inclusive and supportive Argentina’, also known as the ‘Solidarity Tax’) that will apply for five years, as of 23 December 2019, to the following transactions: (i) foreign currency purchases (i.e., “constitution of foreign assets”) without a specific purpose by Argentine residents, under the limitations imposed by the Central Bank; (ii) goods or services purchased abroad by Argentine residents abroad through credit or debit, including cash withdrawals made outside Argentina; (iii) online purchases through portals or virtual websites in a foreign currency; (iv) services rendered abroad through Argentine travel agencies, including if they are paid in cash and access to the foreign exchange market to buy foreign currency is needed to pay the foreign service provider; and (v) ground, air and water transport services with destinations outside Argentina (except ground passenger services to neighbouring countries), including if they are paid in cash and access to the foreign exchange market to buy foreign currency is needed to pay the foreign service provider.

The Decree extends application to goods or services from abroad purchased using any other payment method. However, the final scope of this provision is still under discussion.

Both Argentine individuals and companies are subject to the tax. The tax rate is 30 percent and applies to taxable purchases, except for digital services, which will be subject to an 8 percent rate. Argentine financial institutions, credit card issuers, travel agencies and transport companies will be collection agents for the tax, which will be withheld at the time purchases are due to be paid.

It is noteworthy that the current applicable exchange controls, which allow for up to $200 worth of purchases per person, per month, remain in place and the Solidarity Tax will be charged on top.

The act of buying peso-denominated securities and selling dollar-denominated securities, known as the ‘Blue Chip Swap’ (contado con liquidación), by means of which foreign currency can be purchased, remains valid, however. The implicit value of such transactions depicts the 30 percent Solidarity Tax in its intrinsic value.

Javier Canosa is a partner at Canosa Abogados. He can be contacted on +54 11 5252 2462 or by email: jc@canosa.com.

Javier Canosa

Canosa Abogados