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These regulations clarify when property will be considered acquired under the tax reform enacted in 2017, as well as when severance payments to management personnel are subject to income tax. While these regulations provide guidelines for taxpayers, many provisions in the tax reform still need clarification. Taxpayers in Argentina should continue to monitor the release of regulations on the tax reform.

On November 1, 2018, Argentina published, in the Official Gazette, Decree No. 976/2018 (the Decree), which contains regulations clarifying the rules applicable to real estate transactions and severance payments. These regulations respond to the comprehensive tax reform enacted through Law 27,430 (the Law), effective from January 1, 2018.

Real estate transactions

The Law imposes a 15% tax rate on income derived from the transfer of real estate (except real estate for dwelling purposes), to the extent the real estate was acquired on or after January 1, 2018. The Decree clarifies the situations in which property will be considered acquired on or after January 1, 2018 (e.g., when the public deed was executed, when possession was granted, when the "advanced bill of sale" was executed).

When it is not possible to determine the acquisition value of the property, the Decree clarifies that taxpayers may use the market value, which must be based on a certification issued by a real estate broker, other professional, or a public banking institution.

For nonresident individuals, the Decree establishes that such individuals may only take into consideration expenses incurred in Argentina when determining net taxable gain. Additionally, when a nonresident enters into a real estate transaction with a resident buyer, the Decree clarifies that the buyer will be responsible for withholding the tax on the transaction. If the real estate transaction is between nonresidents, however, the nonresident seller will be required to pay the tax on the transaction either personally or through a legal representative in Argentina.

Severance payments

The Law imposes income tax on the portion of severance payments to management personnel that exceeds the minimum legal severance amounts as established by labor legislation.

The Decree clarifies that severance payments will be subject to income tax if the following two conditions are met:

• During the 12-month period before the end of the employment relationship, the individual receiving the severance payments held a position on the board of directors, an executive position, or another management position that involved decision making and the execution of policies and directives adopted by shareholders or other governing bodies.
• The gross remuneration considered for purposes of the severance calculation is at least 15 times higher than the official minimum monthly salary, according to the labor legislation.

These reform-related regulations have been long awaited, but many aspects of the tax reform still require further clarification. Companies and individuals doing business in or holding investments in Argentina should continue to monitor these developments.

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