May 2, 2018 Argentina publishes new regulations on the tax revaluation option and VAT on digital services, enacted as part of tax reform When calculating the value of their assets in Argentina, taxpayers may want to consider the tax revaluation option, enacted as part of tax reform. Taxpayers also should be aware of their VAT obligation for digital services. Argentina has published, in the Official Gazette (April 24, 2018), Regulatory Decree No. 353/2018 (D. 353) on the tax revaluation option for resident taxpayers, enacted as part of the recent tax reform (Law 27,430). Argentina also published Regulatory Decree No. 354/2018 (D. 354) on the application of value added tax (VAT) on digital services. (For more information on the tax reform, see Tax Alert 2017-2120.) Companies doing business in Argentina should consider the consequences of the changes and evaluate the effect on their current Argentine operations. Tax revaluation option — Regulatory Decree No. 353/2018 The tax reform established the tax revaluation option, which is a one-time mechanism for Argentine-resident individuals and companies to revaluate for tax purposes their assets located in Argentina that generate taxable income. The new tax value of the assets will be determined by applying a "revaluation factor" to the tax value originally determined in each year or period of the asset's acquisition or construction. In the case of immovable or movable property qualifying as fixed assets, an independent appraiser may determine the value under certain circumstances. This mechanism requires the payment of a one-time special tax on the amount of the revaluation. The special tax rates are from 5% to 15%, depending on the type of asset. Decree No. 353 establishes that the deadline to pay the special revaluation tax is the last business day of the sixth month after the tax year in which the optional tax revaluation is performed. For tax years ended on or before April 25, 2018, the Argentine tax authorities (AFIP) may extend the payment deadline for 60 calendar days. The revaluation option applies to the first tax year that ends after December 29, 2017 (i.e., the enactment date of Law 27,430). For example, for tax years ending on December 31, 2017, the revaluation option applies and the deadline for applying the revaluation option and paying the tax is June 29, 2018. Decree No. 353 also establishes that the revaluation tax may be paid in up to four monthly, equal and consecutive installments (plus interest to be established by the AFIP). In addition, Decree No. 353 clarifies a number of provisions, including assets under construction, assets acquired under leasing agreements, condominium properties, depletable assets, and sale and replacement of assets (roll-over). Companies doing business in Argentina should evaluate the convenience of adopting the tax revaluation option taking into account future plans (e.g., future sale or keeping the assets) and the cost of the tax compared to the tax benefit of the option. In making their decision to use the tax revaluation option, companies should consider the net present value of the alternatives involved (i.e., using the revaluation option and paying the special tax or choosing not to revaluate), with special attention on the effect of inflation in Argentina. VAT on digital services — Regulatory Decree No 354/2018 The tax reform established a VAT on digital services, including internet and website services; remote system management and online technical support; data storage and online advertising; software as a service (SaaS); and downloads of digital content (e.g., music, games). Decree No. 354 regulates the VAT treatment applicable to digital services provided by foreign entities and used in Argentina. Decree No. 354 establishes that the responsible party for reporting and paying the VAT is the service recipient. If a resident intermediary (e.g., credit card company, bank) is involved in the payment, however, it will be required to act as a collection agent. If more than one intermediary is involved, the one required to act as a collection agent will be the agent with the closest commercial relationship with the digital service provider. The AFIP will prepare a list of digital service providers for whom the collection agents must collect the VAT. The AFIP is authorized to update the list. The AFIP will establish the terms and conditions for collecting the VAT, as well as the payment methods for the VAT. The provisions of Decree No. 354 will be effective once the AFIP publishes the list. Providers, users and intermediaries connected with digital services should monitor the developments related to the list and mechanisms for paying the VAT. ———————————————
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