The new tax reform bill in Argentina will continue to be an issue throughout 2018, since, according to Marcelo Gutiérrez, Director at Invertax, it’s that country’s most significant change in regulations during the past 30 years. One of the income tax related modifications refers to the deferral of the tax payment due on offshore income.
Prior to the adoption of the new bill, many Argentineans held bank accounts in the name of an offshore company, and that allowed them to defer income tax until they decided to bring their money to Argentina. With which, the deferral could be eternal as long as the funds were not repatriated.
However, as pointed out by Invertax, the tax reform, under article 70, proposes that "the application of a new regime of international fiscal transparency, attributing the income to the holders of the intermediary structures (companies, trusts, etc.) from the moment of its generation, regardless of whether there is an effective distribution, provided that a series of requirements are met".
According to Gutiérrez: "From now on, legislation takes a 180 degree turn, because due to the content of the reform, what will happen under international tax transparency standards is that that income will be directly attributed to the Argentinean, who will have to pay taxes. In this context, international tax planning does not offer a single solution which applies to everyone, so it usually has to be customized. What is clear is that now we have to look for a sophisticated strategy."
The tax reform demonstrates the great knowledge on tax planning strategies of the law’s main author, Andrés Edelstein, Undersecretary of Public Revenues and former partner of International Taxation at Price Waterhouse Coopers. Amongst other issues the law analyzes in depth the definition of "control" in international structures and the ownership consequences for trusts constituted abroad, when they allow to defer taxes and when they do not.
"We are waiting for the regulation of the reform to come into effect because, among other things, those jurisdictions that are considered tax havens will be regulated. Offshore companies are not going to work anymore, and what they are asking for is companies from countries where taxes are levied, where companies have offices and have personnel that can carry out the activities they claim they carry out. And tax planning begins to be much more sophisticated and much more complex," informs Marcelo Gutiérrez.