An Argentine court has issued a ruling stating that the fiscal authorities (Agencia de Recaudación y Control Aduanero, or ARCA) must reimburse the taxpayer (the plaintiff in this case) the taxes and punitive interest paid1 in respect of the so-called “Solidarity and Extraordinary Contribution to Help Mitigate the Effects of the Pandemic” (Aporte solidario y extraordinario para ayudar a morigerar los efectos de la pandemia). This tax was created in 2020 during the COVID-19 pandemic as a one-off tax to help cover extraordinary expenses tied to various forms of efforts and assistance related to the impact of the pandemic2 (for prior coverage, see GMS Flash Alert 2021-027, 15 January 2021).
WHY THIS MATTERS
The ruling by the National Tax Court in Argentina (Tribunal Fiscal de la Nación) sets an important precedent regarding the application of the Solidarity and Extraordinary Contribution (Aporte solidario y extraordinario; “ASE” is its Spanish acronym) on assets transferred to irrevocable trusts. While this ruling applies to a specific case and only to the taxpayer involved, it could influence future interpretations and legal disputes about the inclusion of certain assets in the ASE tax base, which is relevant for taxpayers and their tax advisers seeking to understand their tax obligations.
From a global-mobility perspective, this ruling does not make any distinction between an Argentine taxpayer who is purely domestically-based in Argentina or an inbound or outbound mobile employee – what is relevant is that the taxpayer is tax resident in Argentina.
More Details
The National Tax Court determined in December that assets transferred to an irrevocable trust before the enactment of the ASE law came into force should not be included in the tax base, even though the law states the opposite. This is because those assets were no longer owned by the taxpayer at the time the law came into effect. The court’s decision was based on the understanding that transferring assets to an irrevocable trust results in the loss of control over them, and therefore, there is no contributory capacity. Additionally, the court affirmed that the creation of the trust was not an evasive maneuver as it was established before the suspicion period3 defined by the law.
Finally, the court states that ARCA must reimburse (capital plus punitive interest) the amount paid by the taxpayer.
KPMG INSIGHTS
This decision by the Tax Court could have implications for taxpayers finding themselves in similar situations. Taxpayers who have transferred assets to irrevocable trusts might reconsider their tax strategies in light of this ruling and whether to undertake legal proceedings in respect of the application of ASE on similarly-treated trust assets.
Furthermore, tax advisers may wish to monitor this and other judicial developments related to the ASE and other extraordinary taxes, and, if appropriate, reach out to clients with trusts that had been subject to ASE in order to evaluate their situations.
FOOTNOTES:
1 Ruling by the National Tax Court named “MAGDALENA MARIA WILLINER”. Date: 13 December 2024.
2 Aporte Solidario y Extraordinario. Ley No 27.605.
3 Not unlike a “probationary” period, the law provides for a six-month “suspicion” period for any assest changes that could be deemed made for the purpose of avoiding the ASE tax. For example, the taxpayer makes a donation five months before the law is in force; so the fiscal authorities will consider that a possible evasive maneuver.
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* Please note the KPMG International member firm in the United States does not provide immigration or labour law services. However, KPMG Law LLP in Canada can assist clients with U.S. immigration matters.
The information contained in this newsletter was submitted by the KPMG International member firm in Argentina.
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