Argentina's New Tax On Residents Global Wealth

[dilmah]

As far as I understand, the US tax system is based on citizenship while ours is based in domicile (wealth tax) or residence (income tax).

large chunk of the US tax system is based on residence/domicile as well.
"Green card" holders and people residing in the US on temporary visas (e.g. holders of H and L working visas) all must pay income taxes on their worldwide income.

If "green card" holder makes an attempt to establish domicile outside of the US then he will be deemed to abandon his permanent residence status and green card is revoked.

 

[Alby]

Again, it seems that the way in the past for Argentines and for foreigners with Argentine residency or citizen to avoid the Bienes Personales tax on their assets located outside Argentina, was to claim their "domicile" as being outside Argentina, which entailed (i) claiming it and (ii) being able to demonstrate (if challenged by AFIP) that their family and emotional and financial affairs where tied more to the overseas location than to Argentina. I understood from the December press reports that this is one of the most important things that was going to change; regardless of one's "domicile", once the individual has spent their 91st day in Argentina in the calendar year, they are up for the Wealth Tax on their assets located outside Argentina.

The key issue that seems to be emerging is the claim that the "intent" of the law is to capture only Argentine "citizens" who have passed their 91st day in the Argentina in the year and whose wealth offshore was taken originally from wealth held in Argentina. Intent is one thing; clear regulation is another. Does the regulation explicitly identify the distinction between these people, and other people who are potential collateral damage? Is it clear in the regulation that AFIP should only charge the tax on someone who is (i) an Argentine citizen, (ii) who sent their wealth offshore and (iii) has spent 91 days in Argentina in the year. If not, it may not be the intent of the law to sweep up foreign residents with assets overseas obtained prior to their arrival in Argentina, but it may be the unintended effect of the law.

 

[jeff1234]

Again, it seems that the way in the past for Argentines and for foreigners with Argentine residency or citizen to avoid the Bienes Personales tax on their assets located outside Argentina, was to claim their "domicile" as being outside Argentina, which entailed (i) claiming it and (ii) being able to demonstrate (if challenged by AFIP) that their family and emotional and financial affairs where tied more to the overseas location than to Argentina. I understood from the December press reports that this is one of the most important things that was going to change; regardless of one's "domicile", once the individual has spent their 91st day in Argentina in the calendar year, they are up for the Wealth Tax on their assets located outside Argentina.

The key issue that seems to be emerging is the claim that the "intent" of the law is to capture only Argentine "citizens" who have passed their 91st day in the Argentina in the year and whose wealth offshore was taken originally from wealth held in Argentina. Intent is one thing; clear regulation is another. Does the regulation explicitly identify the distinction between these people, and other people who are potential collateral damage? Is it clear in the regulation that AFIP should only charge the tax on someone who is (i) an Argentine citizen, (ii) who sent their wealth offshore and (iii) has spent 91 days in Argentina in the year. If not, it may not be the intent of the law to sweep up foreign residents with assets overseas obtained prior to their arrival in Argentina, but it may be the unintended effect of the law.

Many of the articles I've read, including this one by the economista.ar refer to REPATRIATION of assets. Assets that were acquired by expats before arriving in Argentina cannot be 'repatriated' to Argentina.


Oficializan las nuevas alícuotas de Bienes Personales - El Economista
Informando desde 1951 sobre Argentina y el mundo
www.eleconomista.com.ar
The Government formalized the new tax rates for Personal Property through decree 99 published today in the Official Gazette, which regulates the Law of Social Solidarity and Productive Reactivation in the framework of Public Emergency.
In a measure aimed at stimulating the repatriation of Argentine assets abroad, a differential rate of up to 2.25% was established for goods outside the country, as benefits are also granted to those who return them to Argentina.

 

[Alby]

Let's hope this is correct. But what it "aims" to do, and what it actually does, may be two different things. Journalists´ use of a word like "repatriation" may be loose, especially in this case if they are only writing for an Argentinian audience with offshore assets. We are looking at it from a different angle. The key will be what the regulation says.

 

[rickulivi]

Again, it seems that the way in the past for Argentines and for foreigners with Argentine residency or citizen to avoid the Bienes Personales tax on their assets located outside Argentina, was to claim their "domicile" as being outside Argentina, which entailed (i) claiming it and (ii) being able to demonstrate (if challenged by AFIP) that their family and emotional and financial affairs where tied more to the overseas location than to Argentina. I understood from the December press reports that this is one of the most important things that was going to change; regardless of one's "domicile", once the individual has spent their 91st day in Argentina in the calendar year, they are up for the Wealth Tax on their assets located outside Argentina.

The key issue that seems to be emerging is the claim that the "intent" of the law is to capture only Argentine "citizens" who have passed their 91st day in the Argentina in the year and whose wealth offshore was taken originally from wealth held in Argentina. Intent is one thing; clear regulation is another. Does the regulation explicitly identify the distinction between these people, and other people who are potential collateral damage? Is it clear in the regulation that AFIP should only charge the tax on someone who is (i) an Argentine citizen, (ii) who sent their wealth offshore and (iii) has spent 91 days in Argentina in the year. If not, it may not be the intent of the law to sweep up foreign residents with assets overseas obtained prior to their arrival in Argentina, but it may be the unintended effect of the law.

Alby:

I think the 91 day rule applies to continuous 91 days, not cumulative. Plus, you need to spend one day more than six month, cumulative, for it to take effect. That is, you can spend two and a half month, leave, and come back and spend another two and a half months and you are OK. Just make sure that you stay less than six month, and never more than 89 continuous days.

Finally, I don't think the new tax only applies to Argentine's. I think it applies to ALL who establish domicile in Argentina.

 

[rickulivi]

Alby

Thank you for bringing this topic up. It's important and we all need to understand its implications.

 

[ben]

The thing to bear in mind is, that the “target” of these regulations (capital stored abroad by people with enough money and know-how to do that) will invariably figure out how to dodge them.
They will be left chasing small fish.
Does anyone really think that someone will move their money here in the climate these regs portend?

 

[Alby]

Exactly Ben. We may fall into the small fish category.

Thank you Rickulivi. That appears to shed more light on the 90 days versus 182 days issue.

I still feel from my amateur research that the domicile issue ceases to be relevant and the eligiblility for the wealth tax reverts to the mimimum days calculation that you describe and which is what has governed income tax; the two become aligned.

I see no concrete evidence yet that one can escape the tax by virtue of being a temporary or permanent resident but NOT a citizen of Argentina.

This law was rushed out and even if its principle target was Argentine citizens who had taken wealth offshore, I would not be confident that they had the time for consultation or presence of mine to draft it in way that would protect unintended targets.

If your analysis is correct about the 182/90 day business, and mine is correct about that also governing elegibility for the wealth tax, and the hope that non-citizen residencia holders escape the tax proves to be a forlorn one, then that is where it will rest: both expats with residency and those with citizenship who have assets overseas generated prior to their arrival will have to pay 2.25% each year, or evade the tax and run the risk that entails, or límit their time in the country to six months per year and no stay longer than 90 days.

 

[Alby]

... with the exception of those temporary or permanent residents whose residency is based on an employment contract of less than five years. Or those who can find shelter in one of the double taxation agreements as per one of my posts in the "5 Americans" discussion.

 

[Alby]

...and with the "limit their time" option seemingly not available to any temporary resident who wishes to retain that residency and therefore needs to be here longer than six months in each of the three years.