Amendments to the Income Tax Law – Bill to Tax the Transfer of Shares and Divide

On August 28, 2013, the Argentine government announced some changes to the Income Tax.

1. Bill to Tax the Transfer of Shares and dividends

The Argentine government has sent a bill to amend the Income Tax Law to the Congress.

The main amendments proposed are the following:

1. The results derived from the sale, of shares, securities, bonds, and other securities, regardless of the individual who obtains them are taxable.
2. The results derived from the sale, exchange or disposal of shares, securities or bonds obtained by individuals and undivided estates resident in Argentina will be exempted, if such securities are publicly offered in the stock or securities exchange market.
3. The results derived from the sale, exchange or disposal of shares, securities, bonds, obtained by individuals and undivided estates resident in Argentina will not be exempted if such securities are privately traded. In this case, the tax rate will be 15%.
4. The results derived from the sale, exchange or disposal of shares, securities, bonds, obtained by foreign individuals and foreign entities will be levied with the tax. Currently, the results derived from the purchase and sale, exchange, disposal of shares, bonds, and securities obtained by foreign beneficiaries are exempted (Section 78 of Decree No. 2284/1991). The bill revokes this exemption.
5. Dividends or profits distributed by companies will no longer be applicable for Argentine residents and will be taxed at a tax rate of 10%. A withholding of such profits for foreign entities has not yet been set.

As a general rule, dividends paid (in cash or in-kind) to shareholders (local or foreign) are not subject to withholding tax. However, if the amount distributed exceeds the taxable income, such excess will be subject to a withholding of 35% (“equalization tax”). In such a case, companies are liable for collecting and paying the equalization tax to the Tax Authorities. The equalization tax would still be applied.

On August 27, 2013 the Bill entered the House of National Deputies for discussion.

The provisions of the bill would be in force as of the date the law is published in the Official Gazette and would apply for the taxable events performed as of the enforceable date.

2. Amendments to the Non-Taxable Minimum Income for Employees

The Argentine Executive Branch issues Decree No. 1242/2013 with the purpose of amending non-taxable minimum income for employees (published on August 28, 2013 at the Official Gazette).

The main amendments are the following:

1. Employees with a monthly gross salary which within January and August 2013 has been lower or equal to AR$ 15,000, will not be levied with income tax.
2. There is an increase of 20% to the non-taxable minimum income for employees whose gross monthly salary between January and August 2013 has been higher to AR$ 15,000 and lower or equal to AR$ 25,000.
3. Employees working in the Provinces of Patagonia have been granted an increase of 30% to the non-taxable minimum income.
4. The current regime of non-taxable minimum income is maintained as is for the employees whose gross monthly salary is higher to AR$ 25,000.

These amendments will apply as of September 1, 2013.

This article is intended to provide readers with basic information concerning issues of general interest. It does not purport to be comprehensive or to render legal advice. For advice about particular facts and legal issues, the reader should consult legal counsel.