1. A New Era for Argentina
Beginning in early 2016, Argentina entered a
new era of transformation due to the
enactment of drastic legislative changes
signed by new President, Mr. Mauricio
Macri. The changes involve labor, pension
fund and foreign exchange, but also include
tax changes.
Certainly, the beginning of
tax reform in Argentina
was initiated through the
enactment of Law 27260
on July 22, 2016. Law
27260 brings significant
changes regarding fiscal transparency, tax
debt settlement, incentive to good-standing
taxpayers and some specific changes in the
income tax law.
These changes were introduced in order to
boost the economy and send a positive
message to the market and taxpayers that
transparency will be a key focus. But, there
is still more to come as the same Law
27260 created a bicameral commission in
Congress to evaluate and approve a
proposal of comprehensive tax reform to be
submitted by the Executive Branch. This
proposal is expected in the next 12 months.
Looking at the rearview mirror of history
I am convinced that in order to understand
why a tax reform comes about in a country,
one must analyze not only the cyclical eco-
nomic and political aspects, but also take a
look into the rearview mirror of recent history.
There is no doubt that Argentina has suffered
economically and politically since 1930 and
even recently on several occasions.
Argentina underachieved in the last 80 years
despite the fact that in the early 1900 it was
considered one of the ten richest countries in
the world (only behind Great Britain, Australia
and United States, for example, but ahead of
France, Germany and Italy) due to its
production of meat, soy and wheat in
addition to a very well educated population.
During the two 4-year presidential terms of
Cristina Fernandez de Kirchner, from
2007-2015, foreign investment was unfairly
treated. There were expropriations of compa-
nies held by Multinationals, holdout investors
were dealt with through debt default, foreign
currency was restricted on the open market
and Argentines who wanted to travel
overseas were disproportionally taxed.
Some of the many
consequences on the
Argentine economy
was a significant
annual inflation rate
(around 30% in the last
few years), rampant
devaluation of the currency and implosion of
the fiscal revenues needed to attend to the
economy. From an international perspective,
the Argentine Governmental Bonds have
been depreciated for many years and now is
sending positive signs to leave behind the
status as an international markets pariah.
Optimism is on its way
After a very contested presidential race in
2015, President Macri, from the Conserva-
tive Party, finally took the Argentine
Presidency in early December 2015, which
brought optimism to the market. This was
visible from the eventual stabilization of the
Argentine currency against the U.S. dollar.
The new president made significant changes
in legislation, and one of them positively
impacted the market. This was the
elimination of restrictions on individuals and
companies to have
access to foreign
currency.
The original and now
repealed legislation introduced severe
restrictions on foreign currency for individuals
and companies to pay debts in U.S. dollars
and also limited importations. Foreign
currency restriction was a common
economic policy in Latin America in
the 80’s, but it is not sustainable in
the current business environment of
globalization and open markets.
In this sense, Argentina is freeing
itself from the past.
President Macri also proposed and
carried out significant social and economic
changes. One of them is aimed towards a
long-awaited comprehensive tax reform
(over 20 years). The enactment of Law
27260 is just the beginning of a new era in
Argentina.
1
Tax News LATAM - Number 2 / 2016
by Rafael Pinzas, Tax
Director Latin America
& Caribbean
Tax News LATAM - Number 2 / 2016 (issued August 28, 2016)
The Beginning of
Comprehensive Tax
Reform in Argentina
Article written on August 28, 2016
New Voluntary Tax Transparency Program, Tax Debt Settlement
Program (Amnesty), Incentive to Compliant Taxpayers and
specific changes to the Income Tax Law

2. Law 27260 -The beginning of a tax reform
On July 22, 2016, the Government published
an omnibus law in the Official Gazette, Law
27260, with a total of ninety-
seven articles and was named
“The National Program of
Historic Remedy for Retired
Individuals”.
This omnibus law included in
its section II a so called “Tax
Transparency Regime” that
fundamentally approved the
following aspects:
1. A Voluntary Tax Transparency program
focused on incentivizing taxpayers to
declare previously omitted assets, with
the payment of a special reduced tax
ranging from 0% up to 15%,
2. The repeal of 10% withholding tax on
dividends,
3. The elimination of the Minimum
Presumptive Income Tax regime, starting
in fiscal year 2019,
4. Introduction of a Debt Settlement
program for taxes, social security and
customs liabilities,
5. Introduction of a Tax Incentive program
for good-standing and compliant
taxpayers offering the exemption of the
Net Wealth Tax for 2016-2018; and
6. Modifications to the Net Wealth Tax.
This article will focus on Section II (Articles
36-97) of Law 27260, which provides for
changes in tax legislation. It will not deal with
any aspect of Section I (seven chapters),
which relates to changes made to the pen-
sion fund and retiree’s legislation. It is worth
noting that the special tax to be collected
through the Tax Transparency Program will
be allocated toward the funding of the
retirees program in Argentina.
1. Voluntary Tax Transparency Program to
Declare Omitted Assets
Chapter I, Section II of Law 27260 (Article
No. 36 through No. 51) offers a special
voluntary program in which taxpayers,
individuals and companies, will be able to
declare previously omitted assets to the
National Tax Authority, including local and
foreign currency, real-estate and other
assets such as shares and credits. By doing
so (not only declaring but also paying the
special tax) taxpay-
ers will avoid taxes,
penalties and any
other tax conse-
quence of not
previously disclosing
such assets. The
special tax rate is
dependent on the
date reported, the
type of omitted asset now being declared
and some thresholds determined by the law.
On July 28, 2016, the Government issued
Decree No. 895/2016 which regulates how
individuals and corporations access the
Voluntary Tax Transparency Program.
The Law 27260 provides an option for
individuals or companies to avoid this
special tax (mainly when dealing with
currencies) as long as the asset is invested
in two new bonds to be issue by the Ar-
gentine government (with maturity in 2019
and 2023, respectively). These bonds will
generally not be transferable in the open
market. One of the peculiar characteristics
of this special voluntary program is that if the
omitted assets are located overseas, it will
not require repatriation.
Certainly, the National Tax Authority is trying
to incentivize taxpayers to declare omitted
assets in order to
have a higher base
to apply the Net
Wealth Tax for the
years after the
voluntary declara-
tion. One of the
surprising aspects is
that there is already a smart-phone
application developed by the Tax Authority
to make it easy to apply to this Voluntary Tax
Transparency program.
In order to apply to this special voluntary
program, taxpayers will need to declare the
omitted assets through the Tax Authority’s
web page (or through the smart-phone
application) between the enactment of Law
27260 and March 31, 2017.
2Tax News LATAM - Number 2 / 2016 (issued August 28, 2016)
The special tax will need to be paid at the
time of the electronic declaration. Currently,
the National Tax Authority is modifying its
web page to roll-out the declaration format
and even providing information about
inconsistencies filed in prior years by the
taxpayers related to potential assets not
declared.
According to Article 51, the proceeds of this
so called special tax will be transferred to
the Social Security Administration to fund
the “National Program of Historic Remedy
for Retired Individuals.”
One of the items being discussed among
tax professionals in Argentina is if this
“special tax” should be considered
deductible or not for income tax purposes.
So far, the National Tax Administration has
not issued any guidance in this regard.
Looking at the Latin America region, we can
say that Argentina is following in the
footsteps of Colombia, which enacted Tax
Reform measures on December 23, 2014
(Law No. 1739). This legislation included
significant changes in the income tax law,
but specifically a similar Voluntary Program
to Declare Omitted Assets (which also
included “Non-declared Liabilities”), but with
the difference of a longer period to apply for
this special incentive (years 2015 through
2017) and the special tax to be paid, which
ranges from 10% to 13% depending on the
year when the omitted assets are finally
declared.
It is evident that as a result of the
multi-country agreement (already
more than 50 countries have signed)
to exchange information, which will
start in 2017, more Latin American
countries will be enacting similar
voluntary tax transparency programs
to the ones already enacted by
Colombia (2014) and Argentina (2016).
2. Repeal of the 10% dividend
withholding tax created in September
2013 by Law 26893
One of the changes to prior tax legislation
introduced by former President Cristina
Fernandez de Kirchner is the elimination of
10% dividend withholding tax made by
Argentine entities to Argentina individuals
Article written on August 28, 2016Tax News LATAM - Number 2 / 2016

3. and foreign shareholders. Practically, the
effective income tax rate to distribute dividends
of Argentine entities is reduced from 41.5% to
35% as it was before the enactment of Law
26893, which originally established the
additional 10% dividend withholding tax over
the surviving equalization tax (in Argentina
dividends are tax free as long as the distributed
dividends come from profits which were taxed
at the corporate income tax rate of 35%).
This repeal of the 10% withholding tax burden
on dividend distributions will attract foreign
investors that were not previously incentivized
when compared to other Latin American
jurisdictions like Peru where there is a current
dividend withholding tax of 6.8% in 2015-2016.
3. Elimination of the Minimum Presumptive
Income Tax regime starting on January
1st, 2019
Argentina is leading the way in Latin America to
eliminate the Minimum Presumptive Income Tax
regime (1% on assets held at the end of the
period) whereby other countries such as
Ecuador, Peru and Colombia are keeping this
complementary “asset tax” to be paid if higher
than the corporate income tax regime.
According to chapter V of Law 27260 the
Minimum Presumptive Income Tax will be
eliminated on January 1, 2019. This Minimum
Presumptive Income Tax was challenged in
courts as it was considered unfair, especially for
companies reporting losses.
4. Debt settlement of taxes, social security
and customs liabilities
Chapter II (articles 52 through 62) gives
taxpayers the opportunity to enter into a debt
settlement program regarding taxes, social
security and customs liabilities, all of them
administered by the National Tax
Authority, with some specific
exceptions. This program
applies as well to tax debts
related to withholding income
taxes.
The law introduced the elimina-
tion of penalties and fines and
almost 100% elimination of interest. The law
includes a 15% discount if the payment is
made in cash and in one payment. Taxpayers
will be able to solicit the debt settlement from
August 1, 2015 until March 3, 2017.
The acceptance of the tax debt settlement
can be made in any instance of the
discussion with the Tax Authority and/or in
any instance of judicial procedures. This
option for tax payers also will relief them
from any penal implication.
5. Tax incentive to good-standing and
compliant tax payers
Chapter III (articles 63 through 66) provides
a tax incentive for compliant tax payers. The
law grants an exemption of the Net Wealth
Tax for fiscal years 2016, 2017 and 2018 if
the taxpayer can prove that it complied with
all its tax obligations in the two fiscal years
prior to the enactment of this law (years
2015 and 2014).
It is worth mentioning that the Net Wealth
Tax is an annual tax assessed on resident
individuals’ net wealth as well as a tax
assessed on foreign individuals and
companies who are shareholders of
Argentine entities.
We consider this an attractive incentive for
compliant taxpayers as the Net Wealth Tax is
quite onerous and in the case of Argentine
entities where shares are held by foreign
companies, this Wealth Tax is paid by the
Argentine entity on behalf
of the foreign shareholders;
for which the tax incentive
will finally be to the foreign
shareholder. The due date
to apply for this tax incen-
tive is March 31, 2017.
Colombia is one of the few countries in Latin
America that introduced a similar Net Wealth
Tax and in this case Argentina is taking a
step ahead to bring some relief to taxpayers
that can demonstrate good-standing with
their tax obligations.
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Tax News LATAM - Number 2 / 2016
Tax News LATAM - Number 2 / 2016 (issued August 28, 2016)
6. Modifications to the Net Wealth Tax
(“Impuesto a los Bienes Personales”)
Fundamentally, the changes enacted by
Law 27260 relates to an increase of the
base to apply the Net Wealth Tax and an
increase of the tax rates applicable for fiscal
year 2016 (0.75%) and a progressive re-
duction in the tax rate up to 0.5% for 2017
and 0.25% for 2018 onward. Taxpayers
who are required to pay a similar tax in a
foreign country will be able to use that as a
tax credit against the Argentine Net Wealth
Tax (with some specific limitations).
Conclusion
Argentina has made a significant and
promising step towards tax transparency
by allowing taxpayers to declare omitted
assets and resolve the situation through the
payment of a special tax that ranges from
0% to 15%. This is in addition to the relief
of a tax debt settlement regime and tax
incentives for compliant taxpayers.
This is clearly the beginning of a more
ambitious plan for comprehensive tax
reform, now that the base of taxable trans-
actions will be increased. This initiative will
provide for more equitable tax environment
and be less regressive.
This tax initiative is fully aligned with the
Multilateral Competent Authority Agreement
relating to the reciprocity of exchanging
information, already signed by more than
50 countries. It is a good sign seeing
Argentina taking the lead in Latin America
in this sense (recently followed by Uruguay).
We look forward to comprehensive tax
reform in Argentina, which will probably
occur by mid-2017.
Rafael Pinzas
Article written on August 28, 2016
Through the payment of a special tax, Argentina
individuals and corporations will be able to give
transparency to its tax situation and even declare
omitted assets before the Multilateral Competent
Authority Agreement (MCAA) starts in 2017