Taxpayers should review the bill's provisions and determine whether they might benefit. The tax authorities are expected to release regulations clarifying certain parts of the bill's provisions.

Argentina's Congress approved a bill on June 30, 2016, that would significantly change to the pension system and establish new tax regimes and reforms, which may significantly affect individuals and companies doing business in Argentina. The president is expected to sign the bill into law in the coming days.

The bill includes the following tax provisions:

1. A new system for the voluntary declaration of undeclared foreign and national currency and assets held by Argentine residents

2. A new tax debt settlement plan

3. New benefits for compliant taxpayers

4. Amendments to the income tax, minimum presumed income tax and personal assets tax

The tax authorities will have to issue regulations to clarify the specific requirements for these tax regimes.

New system for voluntary declaration of undeclared foreign and national currency and asset holdings

The voluntary declaration would apply to national and foreign currency and assets (including shares and credits) held by individuals as of the date of enactment. For entities, the voluntary declaration would apply to national and foreign currency and assets held by entities on the date of the last financial statements closed before January 1, 2016.

The bill would impose a special tax -ranging from 5% to 15%- on the declared currency or assets. The specific rate would depend on the type of assets being declared, the amounts involved and the date on which the declaration is made. In addition, the bill would allow taxpayers to make a declaration without any taxation when they intend to invest the funds in specific instruments (e.g., governmental bonds, mutual funds) with particular characteristics.

Under this regime, individuals and companies would be relieved of their past tax omissions and any related interest and fines would be forgiven. In addition, they would no longer be subject to any related civil, administrative and criminal prosecution.

If the Tax Administration discovers the failure to declare any other assets when the taxpayer makes the declaration, all of the previously mentioned benefits obtained by the taxpayer would be jeopardized.

New tax debt settlement plan

The bill would allow taxpayers to settle their outstanding debts as of May 31, 2016, including national taxes, social security taxes (certain exceptions apply), and import and export duties. Tax liabilities subject to administrative or judicial claims could also benefit from this regime. The deadline to apply for the settlement plan would be March 31, 2017.

The plan would provide the following benefits:

— Exemption from fines and penalties not yet determined as of the date of entering into this regime

— Total or partial exemption from compensatory and punitive interest

— Reduction of up to 15% of the consolidated tax debt, depending on the payment conditions chosen (e.g., cash, installments plan)

— Possible payment plan of up to 90 monthly installments, with a monthly interest rate ranging from 1% to 1.5%

Access to the settlement plan would be analyzed on a case-by-case basis.

Benefits for compliant taxpayers

The bill would grant the following benefits to compliant taxpayers:

— Exemption from the personal assets tax corresponding to fiscal years 2016, 2017 and 2018 to the extent that taxpayers have fulfilled all their tax liabilities in the last two fiscal years before fiscal year 2016

— Exemption from income tax on the first half of the payment of the 13th month salary of fiscal year 2016 for those compliant taxpayers not reached by the previously mentioned benefit (this benefit only applies to employees)

The deadline to apply for these benefits is March 31, 2017.

Amendments to income tax, minimum presumed income tax and personal assets tax

The bill would make the following amendments to the tax laws:

— Income tax. Eliminatethe 10% withholding tax on dividend distributions

— Minimum presumed income tax. Eliminate the 1% tax applicable to the assets of local entities (complementary to the income tax) beginning with fiscal year 2019

— Personal assets tax. Progressively increasethe minimum taxable base applicable for individuals as follows: (1) from Argentine Pesos (ARS) 305,000 (approx. USD 20,000) to ARS 800,000 (approx. USD 53,000) in 2016; (2) from ARS 950,000 (approx. USD 63,000) in 2017; and (3) from ARS 1,050,000 (approx. USD 70,000) in 2018; the tax rate would be reduced to 0.75% in 2016, 0.50% in 2017 and 0.25% in 2018.

For companies, the bill would reduce the tax rate applicable to the participation in Argentine entities owned by Argentine individuals and by foreign individuals or entities from 0.50% to 0.25%.

Implications

The new bill contains several measures that may provide taxpayers with the opportunity to settle past obligations, as well as reduce their tax burden for the future. Once the president signs the bill, taxpayers should continue to monitor the release of regulations on many of the bill's provisions by the tax authorities.

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