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Argentina: Suspension of exemption certificates on VAT and income tax due on certain importations

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In brief

On 30 March 2023, General Resolution 5,339 (“Resolution“) was published in the Official Gazette, by which the Federal Tax Authority (FTA) modified the value added tax (VAT) and income tax advanced payment regime on the importation of certain goods until 31 December 2023. 

In focus

On 30 March 2023, the Resolution was published in the Official Gazette, by which the FTA modified the VAT and income tax advanced payment regime on the importation of certain goods until 31 December 2023. 

The Resolution stated the following:

1. The application of the exemption certificates for the payment of (i) income tax advanced payments due on the importation of certain goods; and (ii) VAT advanced payments due on the importation of certain goods is suspended until 31 December 2023, inclusive. 
2. Until 31 December 2023, inclusive, (i) income tax advanced payments due on the importation of certain goods will not be deductible in the calculation of the monthly payments on account of the income tax to be paid annually; and (ii) VAT advanced payments due on the importation of certain goods may only be computed as tax credit as from the ninth month after the date of the import declaration (“despacho de importación”).   
3. Excluded from this regime are: (a) imports for consumption made by micro and small companies that have a “MiPyME” certificate in force at the time of importation; (b) imports for consumption made on behalf of the National State; and (c) imports for consumption exempted from national taxes by Law No. 27,701.

Effects

In macroeconomic terms, and according to FTA’s own estimates, the Resolution implies a defunding of companies for ARS 979 billion for the year 2023, which represents approximately 1.1% of the GDP for 2022 (at current prices). The measure has a clear tax collection objective which, according to the multiple criticisms that have been published, will substantially affect the competitiveness of the productive sectors.

The application of the Resolution in many cases could imply an increase in VAT and income tax credit balances. Additionally, the deferral in the computation of these payments would have a harmful economic effect due to the inflationary condition of the current economy (e.g., devaluation of the tax credits).

To have a real understanding of the impact of the Resolution, we have included a description of the import duties and taxes payable upon the importation of goods.

The import of goods into Argentina is governed by the Customs Code (Law No. 22,415), its regulatory Decree No. 1001/82 and other regulatory provisions issued by the customs authority. Import duties generally range from 0% to 25%, calculated on the C.I.F. value of the goods. By means of Law No. 24,425, Argentina approved the World Trade Organization (WTO) Agreement and Uruguay Round of the GATT, including the valuation rules.    

In addition to the import duties, an importer is required to pay: (i) a charge called a statistics fee of 3% of the customs value (normally C.I.F. value) of the imported products (the statistics fee is subject to maximum amounts, depending on the value of the imported goods. The maximum amount that may be paid for this charge is USD 150,000); (ii) value added tax, at the applicable rates, depending on the tariff classification number of the goods to be imported, on the aggregate of the C.I.F. value of the products, the import duties and the duty for statistics; (iii) a 10% or 20% VAT advanced payment, plus a 6% or 11% income tax advanced payment applied on the importation of certain goods on the basis described in (ii); and (iv) an advanced gross receipts tax.

The following formula demonstrates how to calculate the total import duties and taxes for a shipment imported into Argentina. 

Import duty + statistics fee + VAT + VAT advanced payment + income tax advanced payment + advanced gross receipts tax = total import duties and taxes

1. Import duty = (value of merchandise + freight + insurance) x (duty rate, 0% to 25%)
2. Statistics fee (if applicable) = [0.5% of (value of merchandise + freight + insurance)]
3. VAT = [(value of merchandise + freight + insurance) + import duty + statistics fee] x 21% or 10.5%, as applicable
4. Income tax advanced payment = [(value of merchandise + freight + insurance) + import duty + statistics fee] x 6% or 11%, as applicable
5.  VAT advanced payment = [(value of merchandise + freight + insurance) + import duty + statistics fee] x 10%, 20% as applicable
6.  Advanced gross receipts tax = [(value of merchandise + freight + insurance) + import duty + statistics fee] x applicable rate

VAT impact

Among other taxable events, the VAT levies the importation of goods as described in 3 and 5 above. In these cases, the local importer will be obliged to pay the FTA, in cash, the VAT arising from the importation of goods (VAT debit). However, it will be entitled to compute a VAT credit for the exact same amount to offset the VAT collected from customers on transactions subject to VAT.

Normally, if certain requirements are met, the importers of goods are entitled to apply for VAT exemption certificates to be exempt from the obligation to pay the VAT advanced payments on certain definitive import operations.

According to the Resolution, until 31 December 2023, (a) the VAT exemption certificates will be suspended (therefore, importers of goods will have to pay the VAT advanced payment described in 5 above); and (b) the VAT advanced payment may only be computed as a VAT credit as from the ninth month after the date of the importation of the goods.

Income tax impact

Corporate taxpayers are required to pay 11 monthly payments on account of the income tax liability of the fiscal year. For the calculation of these monthly payments, the income tax advanced payments described in 4 above, among other items, are deducted from the taxable basis. This means that the final amount of the 11 monthly payments is calculated after the deduction of, among other items, the income tax advanced payments described in 4 above.

Normally, if certain requirements are met, importers of certain goods are entitled to apply for income tax exemption certificates to be exempted from the obligation to pay the income tax advanced payments on definitive import operations of certain goods.

According to the Resolution, until 31 December 2023, (a) the income tax exemption certificates will be suspended (therefore, importers of goods will have to pay the income tax advanced payments described in 4 above); and (b) income tax advanced payments described in 4 above will not be deductible in the calculation of the monthly payments on account of the income tax to be paid annually.

Click here to access the Spanish version.

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Author

Martin Barreiro is experienced in various areas of tax law. He is a member of the Buenos Aires Bar Association, the American Chamber of Commerce in Argentina, the Tax Sub-Committee and the Argentine Association of Taxation Studies. His extensive list of publications include "New Argentine Social Security System" for the International Company and Commercial Law Review and "The S.R.L. in the tax planning of US investors in Argentina" for the Economic and Tax Journal.

Author

Juan Pablo Menna is a partner in the Tax Practice Group in Baker McKenzie, Buenos Aires. He is a member of the Buenos Aires Bar Association and the Argentine Association of Fiscal Studies, and was a professor in Austral University.

Author

Esteban Rópolo is a member of the Buenos Aires Bar Association. He was a professor in leading universities in Argentina — including University of Buenos Aires, Argentina Catholic University and Universidad del CEMA — where he taught political economy, foreign trade legal regime and private law. Mr. Rópolo has written a book on competition law and also contributed articles related to his areas of practice.

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