Taxation
Tax year and payment dates
For income tax purposes, the official tax year for individuals starts on 1 January and ends on 31 December.
Domicile and residence
Domicile
For individuals, the domicile is the individual’s principal place of residence and business (Argentine Civil Code). When the principal place of residence differs from the principal place of business, the tax regulations provided that the domicile for tax purposes will be the principal place of business. For tax purposes, the domicile is relevant for receiving notices from the tax authority but is not used to determine tax liability.
Residence
Residence determines the manner in which an individual is taxed in Argentina. Whenever an individual, under the relevant rules of each tax (in particular, income tax and tax on personal assets), is deemed to be a resident of Argentina, the tax is levied on a worldwide basis (either on worldwide sourced income or the assets owned worldwide by the taxpayer) rather than on an exclusively Argentine basis. Resident individuals must file tax returns with the Argentine Tax Authority. Non-resident individuals are solely taxed on their Argentine-sourced income (through withholding) and on their Argentine-based assets.
Under Argentine income tax law, the following are considered Argentine residents for tax purposes:
– Argentinean individuals, whether native or naturalised, except for those that no longer hold a “permanent resident” status either because:
i. they became permanent residents of another country under that company’s immigration rules; or
Under certain circumstances, individuals re-entering Argentina with the intention of residing permanently in Argentina will be considered to be Argentinean residents. This will even apply if they had previously lost their residence status in Argentina or if they acquired status as a permanent resident elsewhere.
Taxation on exit
There are no exit taxes in Argentina. There are no other consequences of leaving, except that it is necessary to file a special tax return for the irregular period closing the date in which the individual leaves the country. Once an individual is no longer an Argentine resident, he:
– Is no longer subject to personal assets tax on his worldwide assets but solely on his Argentine-based assets.
Citizenship does not necessarily determine tax liability. For example, an individual that resigns Argentinean citizenship but remains a resident of Argentina is still subject to tax in Argentina on his worldwide assets and income.
Temporary residents
Foreigners who must remain in Argentina by reason of their employment for a period not exceeding five years (as well as their relatives) will not be considered to be Argentinean residents (see Question 2, Residence). Certain treaties to avoid double taxation also address the issue of temporary residents (see Question 14).
Taxes on the gains and income of foreign nationals
There is no capital gains tax on individuals in Argentina. Therefore, in principle, tax is not charged on the sale of real estate or other assets when the seller is a foreign individual.
However, if the foreign individual is usually engaged in buying and selling assets, he will be deemed an individual “enterprise” (which is not expressly defined in the Income Tax Law) and income tax is withheld on the total amount received by the seller on the sale of real estate at an effective rate of 17.5%. Alternatively, the foreign seller can file a special tax return with the tax authority to evidence the actual profit derived from the sale, and apply income tax at the rate of 35% on the net proceeds (see Question 6).
When the sale of real estate is not subject to income tax (whether made by an Argentine individual or a foreign individual), the seller is subject to a special tax on the transfer of real estate at the rate of 1.5% of the amount of sale.
Certain stamp taxes apply on the instrument (that is, public deed (escritura)) evidencing the sale. The buyer and seller customarily pay one-half each of those stamp taxes, which can be up to 4% of the sale price.
Generally, any income or profit obtained by foreign beneficiaries (as non-Argentine resident individuals are referred to under income tax regulations), which is deemed to be Argentine-sourced, is subject to withholding tax. Withholding tax does not apply on dividends paid by Argentine companies or to profits obtained from permanent establishments in Argentina.
For resident individuals, the income tax charged on a sliding scale that starts at 9% for individuals making up to ARS10,000, and goes up to 35% for individuals making more than ARS120,000. For any other taxpayer (including foreign beneficiaries) the rate of the tax is 35%.
To determine the tax liability of a foreign beneficiary, the Income Tax Law establishes a series of non-rebuttable presumptions of net income on the gross amounts paid, that varies depending on the kind of payment made by the local resident (who must act as withholding agent), including:
– 80% of other amounts paid under the Transfer of Technology Law (effective rate: 28%).
– 35% of the royalties paid for the exploitation of copyright in Argentina (effective rate: 12.25%).
-100% in the case of interest. However, 43% (effective rate: 14%) is deemed to be the net income of Argentine source where the:
i. borrower is a financial institution;
ii. lender is a bank or financial institution located in a non-tax haven jurisdiction;
iii. interest relates to certain bonds that are registered in countries with which Argentina has concluded investment protection agreements.
– 40% of the amounts paid for renting movables goods in Argentina (effective rate: 14%).
– 60% of the amounts paid for renting real estate in Argentina (effective rate: 21%).
Finally, if the concept of the income is not expressly set out in the Income Tax Law, 90% is deemed net income of Argentine source (effective rate: 31.5%).
Argentina has entered into treaties to avoid double taxation with various countries (see Question 14).
Inheritance tax and lifetime gifts
There are no federal inheritance or gift taxes in Argentina. Only one jurisdiction (the province of Buenos Aires) has imposed an inheritance and gift tax on the amount received by the beneficiary. This tax is applicable as from January 2010, and is charged on assets:
– Transferred to individuals or legal entities domiciled in the province.
The tax rate will depend on the amount received by the beneficiary and his relationship with the deceased.
Tax rates
Tax is payable on the amount received, at progressive rates from 4% to 21.92%.
Tax free allowance
There is a tax-free allowance of ARS50,000 on the aggregate of the lifetime gifts of an individual and the gifts at the time of death. This amount is increased to ARS200,000 when the receiving party is the spouse, child or parent of the transferor.
In addition, in relation to inheritance tax, the debts of the deceased existing at the time of his death, and funeral expenses, are deductible from the amount transferred to the beneficiary.
Exemptions
The following are exempt from inheritance or gift tax:
– Gifts to religious, public health, social assistance, cultural or public welfare institutions, provided those institutions comply with certain conditions.
– Transfer of art or other objects that have a historic, scientific or cultural value, as long as the deceased has transferred the property on the basis that the art or object is to be used for instruction or public exhibition purposes.
– Transfer of collections of books, newspapers, magazines or other periodic publications.
– Transfer on death of the household registered under the Family Household Protection Act (Law N° 14,934) when:
i. the transfer is made in favour of the spouse, descendants, ascendants or collateral relatives up to the third degree of relationship with the deceased;
ii. they lived with the deceased;
iii. the registration of the property under the Family Household Protection Act is maintained for at least five years after the death.
– Transfer on death of urban real estate that is used as the household, when the:
i. transfer is made in favour of the spouse, ascendants or descendants (including adopted children);
ii. property does not exceed a certain valuation, established by the province on an annual basis.
– Transfer on death of an enterprise when the:
i. aggregate gross income of the fiscal year before the year of death exceeds a certain figure established annually;
ii. transfer is made in favour of the spouse, ascendants or descendants (including adopted children);
iii. acquiring parties maintain the enterprise in activity for five-year period following the deceased’s death.
Techniques to reduce liability
The simplest way to avoid inheritance or gift tax liability is to avoid being domiciled in the province of Buenos Aires, and to own assets through a company domiciled outside of the province of Buenos Aires.
Other
Not applicable.
If the assets are located in the province of Buenos Aires, the tax applies even if the owner does not reside in Argentina.
There are no other taxes on death or on lifetime gifts.
Taxes on buying real estate and other assets
Purchase and gift taxes
The provinces impose stamp tax on the public deed required to transfer real property (see Question 5). The rate varies depending on the province, and ranges from 2% to 4% of the price paid for the property being transferred.
In addition, there is a special tax on the transfer of real estate that applies when the sale is not subject to income tax (that is, when the sale is made by an individual rather than an enterprise). The rate of the tax is 1.5% applicable of the price paid.
Wealth taxes
The Personal Assets Tax applies to foreign individuals holding property (whether real estate, movable property or intangible property) in Argentina. The rate of the tax is 1.25% and it is levied on an annual basis. When the owner of the real estate is a foreigner, there are certain methods of substitution that impose the obligation to pay the tax on the local resident that has the administration of the asset.
Other
Each of the provinces and the city of Buenos Aires (which has an autonomous status, as if it were a province) levy a tax on real estate. The tax is imposed on the fiscal valuation of the real estate and the rate varies depending on the valuation of the property.
The simplest holding structure is to have a special purpose foreign company to own the real estate in Argentina. This company must be set up in a country that does not tax capital gains (or at least does not tax the capital gains stemming from the sale of equity instruments). There are no local rules that deem the sale of this special purpose company a sale of real estate in Argentina.
Taxes on overseas real estate and other assets
Local residents are taxed on their worldwide income; however, capital gains are not subject to tax, except when the individual usually trades in selling and buying real estate or assets (see Question 5).
International tax treaties
Argentina has entered into double taxation treaties, although some have been recently cancelled or repealed (such as the ones entered into with Spain and Austria). Current treaties include treaties with: Australia, Belgium, Bolivia, Brazil, Canada, Denmark, Finland, France, Germany, Italy, The Netherlands, Norway, United Kingdom, Sweden and Switzerland.
Wills and estate administration
Governing law and formalities
It is not essential for an owner of assets in Argentina to make a will in Argentina. Where no will is present, forced heirship and intestacy rules apply (see Questions 24 to 29). In Argentina, it is not usual to have wills or testaments, except for certain wealthy individuals. There is no requirement for the will to be governed by the laws of Argentina, although the provisions of a foreign law are only applied where they do not violate Argentine public policy (for example, forced heirship rules).
The formalities for making a will in Argentina are the same, regardless of the nationality, residence and/or domicile of the testator.
There are three different ways in which wills can be made (Argentine Civil Code):
2. Public deed testament (testamento por acto public). This must be notarised by a public notary, with three witnesses that insert their signature in the public deed.
3. Closed testament (testamento cerrado). This does not have to be completely handwritten by the testator, although it must bear the testator’s signature. In addition:it must be given in a closed
ii. the testator must say aloud that the closed envelope contains his will.
Redirecting entitlements
Beneficiaries are not entitled to redirect their entitlements.
Validity of foreign wills and foreign grants of probate
Validity of foreign wills
Wills made in a foreign jurisdiction are recognised as valid, as long as they comply with the law of the place in which the wills were made. Substantive provisions, however, must comply with Argentine law (in particular, forced heirship) to be enforceable in Argentina. The law will also enforce wills made by foreigners outside of Argentina if the will complies with the formalities of the place of residence of the testator, his country of nationality, or those of Argentina.
Validity of foreign grants of probate
As with foreign wills, foreign grants of probate will be recognised in Argentina if they comply either with Argentinean laws or the relevant foreign law (see above, Validity of foreign wills). No further formalities are required.
Death of foreign nationals
The issues depend on whether the foreign national’s last domicile was in Argentina or not and whether he had any assets in Argentina. If he was domiciled in Argentina, Argentine rules apply and a court-based procedure (sucesión) must be followed. This also applies if he has assets in Argentina.
Administering the estate
Responsibility for administering
The court appoints an administrator of the estate (usually, the surviving spouse or an heir or a group of heirs) that has limited authority to carry on acts that are:
- Necessary to preserve the estate.
- Ordinary, considering the nature of the goods and assets that are being administered.
The administrator, in principle, has no authority to sell, mortgage, pledge or otherwise dispose of or encumber the goods and assets.
Vesting
A court procedure must be followed to finally declare the legitimate heirs of the deceased. When the court makes that declaration, the estate is deemed to have vested directly and immediately from the deceased to each of its heirs.
- Establishing title and gathering in assets (including any particular considerations for non-resident executors)?
- Paying taxes?
- Distributing?
Establishing title and gathering in assets
Any and all heirs are entitled to establish title and gather in assets. However, everything must be done through the court procedure and with the control of the judge. There are no particular considerations for non-resident executors in this aspect, since court participation is mandatory. If a non-resident executor has been appointed, the court will probably require from him a local address for service of process.
Procedure for paying taxes
Until the court procedure is ended, the administrator is responsible for filing tax returns and paying taxes on behalf of the estate. Failure to do so could make the administrator jointly and severally liable for any unpaid taxes.
Distributing the estate
The court distributes the estate in the court procedure (see above, Establishing title and gathering in assets). The court decides how the distribution is to be made or grants authority to distribute the estate to the testator or the executor.
In principle, there are no time limits, restrictions or valuation issues that are particularly relevant to an estate with an element in another jurisdiction.
When the estate involves elements in different jurisdictions, certain “offset” provisions of the Argentine Civil Code might be relevant, depending on the facts. Heirs of the deceased that reside in Argentina would be entitled to a larger portion of the assets that are located in Argentina if, due to the application of foreign law, they were deprived of assets located abroad (or a portion of those assets) that should have, under Argentine Law, been allocated to them under the forced heirship regime (see Question 24). Therefore, if a foreign resident dies leaving assets in both Argentina and in his home country, and through a will deprives an heir who resides in Argentina of his statutory reserved portion under Argentine Law, that heir is entitled to the additional portion of the Argentine assets, equal to the value ascribed to the deprived portion (see Question 24).
A beneficiary is entitled to challenge the:
ii. Executors, when their acts affect the portion that Argentine Law mandatorily reserves for forced heirs or when they depart from the instructions contained in the will.
iii. Administrators, when they perform their duties in excess of their authority or without fulfilling the “good businessman” standard.
Succession regimes
Argentina has a forced heirship regime that is deemed part of public policy. Any provisions of the parties (either by the deceased or the heirs) against it are invalid and of no force and effect. There are precedents in Argentine courts in which forced heirship claims have been admitted against trust assets.
Forced heirs (ascendants, descendants, spouses and others) cannot be deprived of a certain portion of the deceased’s estate (except where one of the few statutory causes for disinheritance are present and invoked by the decedent in the will). These portions are:
- i. Children and their issue: four-fifths of the total assets of the deceased.
- ii. Ascendants (where there are no children): two-thirds of the assets of the deceased.
- iii. Spouse (where there are no ascendants or descendants): one-half of the assets of the deceased.
In relation to the intestacy rules, see Question 28.
Forced heirship regimes
Avoiding the regime
There are no ways to avoid the regime and judges are reluctant to admit structures that defeat the forced heirship rules.
Assets received by beneficiaries in other jurisdictions
Assets received by beneficiaries in other jurisdictions are taken into account (see Question 22).
Mandatory or variable
Any agreement entered into between future beneficiaries during the deceased’s life is null and void. Argentine law forbids any agreement regarding the future estate.
Real estate or other assets owned by foreign nationals
Title to real property located in Argentina may only be passed in accordance with Argentine law. It is unclear, however, if this applies solely to transfers between living persons or if it should also apply in the case of transfer by death. However, most Argentinean court decisions have held that it applies to both.
The Argentine courts may, where the case concerns immovable property located in Argentina, accept a reference back to their jurisdiction; however, this is a complex area of law.
Intestacy
The intestacy succession rules depend on the surviving relatives.
ii. There is a surviving spouse and surviving descendants. One-half of the deceased’s “marital” property is distributed to the surviving spouse and the other half is transferred entirely to the children (in relation to marital property, see Question 37). The deceased’s “own” property is distributed in equal portions among all of the children and the surviving spouse.
iii. There are surviving ascendants but no surviving descendants or a surviving spouse. The whole estate passes to the surviving ascendants. In this case, the closer generations exclude the inheritance rights of the further generations (for example, the grandfather is excluded if the father survived).
iv. There is a surviving spouse and surviving ascendants but no descendants. The surviving spouse is entitled to one-half of the marital and one-half of the own property of the deceased. The other half goes to the ascendants.
v. There is a surviving spouse but no surviving ascendants or descendants. The surviving spouse is entitled to the whole estate.
vi. There are no surviving ascendants or descendants, and there is not a surviving spouse. The collaterals (until the fourth degree of relationship) are entitled to the estate.
It is not possible for beneficiaries to challenge the adequacy of their provision under the intestacy rules.
Trusts
Type of trust and taxation
Law No. 24,441 (Trust Act), enacted in December 1994, established the regulation for trusts in Argentina. Trusts under the Trust Act depend on the concept of revocable property (dominio revocable) and have certain differences with the common law concept of trust.
Generally, the Trust Act considers two types of trusts, a financial trust and an ordinary trust. The difference between the two depends on the person acting as trustee. If it is a financial trust, the trustee must be a financial entity or a corporation specifically authorised by the Argentine Securities Commission to act as financial trustee.
Residence of trusts
In general terms, if the trust is set up under Argentine law, it is deemed a resident of Argentina for tax purposes.
Argentina recognises trusts that are governed by another jurisdiction’s laws and are created for foreign persons.
If any foreign entity (including a trust) becomes resident in Argentina, it is subject to tax in the same manner as an Argentine corporation.
– Does the law provide specifically for the creation of non-charitable purpose trusts?
– Does the law restrict the perpetuity period within which gifts in trusts must vest, or the period during which income may be accumulated?
– Can the trust document restrict the beneficiaries’ rights to information about the trust?
Purpose trusts
The Trust Act does not include specific provisions regarding non-charitable purpose trusts. However, Argentine law distinguishes between an act that is gratuitous from an act which is made for a consideration that has certain legal effects such as, for example, a fraud of creditors, which may be relevant in the context of transfers to trusts.
Perpetuities and accumulations
A trust has a maximum term of 30 years from the date on which it was created. The restriction does not apply where the beneficiary is not capable, in which case the trust can extend until the incapacity ceases or the person with the incapacity dies. There are no regulations regarding the period within which income must be accumulated.
Beneficiaries’ rights to information
The Trust Act does not include any information rights in favour of the beneficiary that cannot be contractually restricted. However, the statute does prohibit any provision that would release the trustee from liability incurred due to the non-performance of his duties.
In relation to marital property, the spouse would not be entitled to claim against trust assets in the case of dissolution of the union (that is, divorce or death of one of the spouses). However, the spouse could, depending on the circumstances, be entitled to make a claim directly against the other spouse at the time of dissolution. When the trust was settled with own property, and the settlor dies, the forced heirship rights apply (see Question 24).
Where a trust is used to shelter assets from the creditors of a settlor or beneficiary, fraudulent conveyance rules can be used under the Trust Act to invalidate the transaction.
Ownership and familial relationships
Co-ownership
The Argentine Civil Code establishes the co-ownership rules (condominio). Those rules do not have any relevant impact on taxes, succession and estate administration, except in connection with the co-ownership rules applicable to the “marital” property, in which one of the spouses is responsible for filing the tax returns on that property. Generally, any co-owner has the right to require the dissolution of the co-ownership (even if it requires the sale of the good). There are few cases in which the right to dissolve the co-ownership does not apply.
Familial relationships
Generally, the matrimonial regime in Argentina (which applies to all couples that married in Argentina, as long as their initial domicile was in Argentina) provides that all property (whether tangible or intangible) that was acquired by any of the spouses during the marriage is “marital property” (bienes gananciales). However, property that was received as a gift remains the own property of the spouse that received it. The marital property relates to the marriage “partnership” and, on dissolution, is distributed between the partners (spouses) by halves.
There are no relevant protections for cohabitees or civil partners (except for the case of same-sex civil unions, which were formalised by statute in 2010) (see Question 38).
Same-sex unions were legalised by statute in 2010. As this is a recent development, no case law exists. However, regulations passed under the statute establish that the tax and succession treatment must be the same granted to a heterosexual marriage.
- Married?
- Divorced?
- Adopted?
- Legitimate?
- Civil partnership?
Married
Marriage is defined as a person that is united to another of the opposite sex, as husband or wife, in a consensual and contractual relationship recognised by law, and in which the consent is usually expressed in the presence of a public officer. There are certain “marital duties” that the spouses must comply with (such as fidelity, maintenance payments, and residing in the same house).
Divorced
A divorce is the final termination of a marital union. It is declared by a judge in a formal procedure, and it cancels the marital duties and dissolves the marital “partnership”.
Adopted
An adopted child is one that was taken into a family that is different to the one of its parents after a legal process was followed under the Argentine Adoption Act. The adopted child’s legal rights and obligations towards his natural parents are terminated and similar rights arise with the adoptive parents. Adopted children have the same legal status as children which are not adopted.
Legitimate
Formerly, a distinction was made between “legitimate” children (born from a married couple) and “natural” children (born with no marital union). Although the difference can still be found in certain sections of the Civil Code, legitimate, natural and adopted children have the same rights and status.
Civil partnership
Civil partnership is a legal union or contract, similar to a marriage, between two people of the same sex.
Minority
Minors are represented, in general terms, by the surviving parent. If no parent survives, the court designates a representative (curador) to handle all the assets on the minor’s behalf. Disposition of assets usually requires court approval.
Capacity and power of attorney
A court procedure is required to declare that a person has lost his capacity. The court appoints a curator to represent the incompetent person.
Generally, Argentina recognises powers of attorney made under the law of other jurisdictions. However, once a person is declared to have lost his capacity, under Argentine law any and all powers of attorney are terminated.
Proposals for reform
Currently, a project to amend the Argentine Civil Code is being studied at the Congress. Although the project is complete, it is difficult to tell when (and if) it will be passed. However, although it does have effect on other areas of the civil law, it does not seem to affect significantly private client law.
The best Law firm, top Lawyers in Buenos Aires, Argentina, Attorneys, Advocates, Solicitors and Barristers.
The proven Buenos Aires – Argentina lawyer professionals at the Kier Joffe law firm have experience working with foreign clients involved in all kind of cases in Argentina. Buenos Aires Argentina attorney professionals are knowledgeable in almost all the practice areas of law, to service its international cases in Buenos Aires Argentina. International clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires lawyer in Argentina.
