Argentina's New Tax On Residents Global Wealth

[dsp27]

There seems little doubt that the "vibe" is exactly as you say: to "penalize" argentines who had moved funds outside the country.

But where is the evidence that the executive and the AFIP will so helpfully interpret it now (and in the future) in accordance with the vibe?

It's a genuine question. Any evidence from AFIP's past behaviour (or any equivalent agency elsewhere in Latin America--my own personal experience has been in Peru, where vibes have not been helpful in dealing with the tax authority; someone commenting above also has given the impression that in Colombia one ought to take notice of what the legislation says rather than its vibe) would be very welcome and helpful at this point of the debate.

Well, we are in Argentina and ANYTHING can happen. I am the last person anyone should listen to. I am just a random dude on an expat forum.
Not a tax lawyer nor an accountant. I am just trying to be logical and play a devil's advocate. If you read some US tax laws you will find out they’re equally if not more vague, and it's ultimately the IRS that interprets it. A “resident for tax purposes” there is a very specific term that does NOT overlap with “immigration residency”.

This law was passed in 48hs! The reason why they moved from "domiciliado" to "residente" in Argentina, is to close a loophole that some people used to claim they live abroad.

Here’s the problem with taking a NARROW interpretation of the “residency” term.
1. As a “temporary resident” you de facto declare you are domiciled here in Argentina throughout your residency and when you apply for an extension with MIGRACIONES or change of category to permanente this is also the case. The law on bienes personals has existed for many years before this amendment. So basically, if we follow this narrow view THEN ALL of us temporary or permanent residents should have paid 0.25% (the old rate) on all assets here or abroad every prior year because the law relied on “domicile” concept and when you sign your “declaracion jurada” at migraciones you de facto claim domicilio here.
2. Additionally, Argentine law considers tourists residents as well. They are residents transitorios. So if you are here as a tourist for say 6 months and 1 day are you supposed to pay this tax? Of course not.

 

[Alby]

I agree with you. However, as I pointed out a post some weeks ago, if we Google companies like PWC we will find their country advice has always been exactly that: temporary residents (even those still on Precaria status) have indeed been up for the bienes personales tax on their overseas assets even prior to the new law. All that has really changed with the new law is that the level of the tax has gone up, and the domiciliado loophole has closed.

It would obviously be extreme to charge the tax on a tourist or a Precaria holder, but charging it on a temporary resident doesn't seem quite so far fetched.

And again, let's not forget that these are decisions we take now that have implications in the future when things (such as AFIP behaviour) may not still be as we perceive them today.

At the end of the day, everyone has to get their own tax advice and make their own judgement about the risks they are entering into (as has been pointed out, for example, Rentista residency holders carry higher risk because they actually declare their asset to another part of government). And even complying carries risks, because depending on how the tax declaration is actually structured, calculating and handing your wealth tax on overseas assets that change in structure and value from year to year would be an administrative nightmare for all concerned (tax payer, accountant, even AFIP). It is useful to think about the matter in reverse by imagining actually trying to comply, and whether that would even work.

But it is useful, as part of that individual decision-making process and before people start spending money on accountants, for us to share opinions and experiences for free on this forum. Thanks to everyone who is contributing.

 

[dsp27]

I agree with you. However, as I pointed out a post some weeks ago, if we Google companies like PWC we will find their country advice has always been exactly that: temporary residents (even those still on Precaria status) have indeed been up for the bienes personales tax on their overseas assets even prior to the new law. All that has really changed with the new law is that the level of the tax has gone up, and the domiciliado loophole has closed.

It would obviously be extreme to charge the tax on a tourist or a Precaria holder, but charging it on a temporary resident doesn't seem quite so far fetched.

And again, let's not forget that these are decisions we take now that have implications in the future when things (such as AFIP behaviour) may not still be as we perceive them today.

At the end of the day, everyone has to get their own tax advice and make their own judgement about the risks they are entering into (as has been pointed out, for example, Rentista residency holders carry higher risk because they actually declare their asset to another part of government). And even complying carries risks, because depending on how the tax declaration is actually structured, calculating and handing your wealth tax on overseas assets that change in structure and value from year to year would be an administrative nightmare for all concerned (tax payer, accountant, even AFIP). It is useful to think about the matter in reverse by imagining actually trying to comply, and whether that would even work.

But it is useful, as part of that individual decision-making process and before people start spending money on accountants, for us to share opinions and experiences for free on this forum. Thanks to everyone who is contributing.

Agreed 100%

 

[Irelander]

I am sorry but I disagree with your contador. Sure, the law is vague because it was prepared very quickly and approved in a hasty manner. The executive and the AFIP will have to interpret the law and act on it. There is no indication that they will be going after non-citizens or those with no economic activity in the country or their assets abroad. This law is meant to "penalize" argentines who had moved funds outside the country.

I would get a second opinion by another consultant. I think this one just wants to charge their fee for preparing your 2.25% tax return.
You bought your house with funds that were NOT the result of economic activity in Argentina or Argentine residents, probably way before you even became a resident here. It's a non-starter.

There's nothing vague about the law: there is no exemption. Theorizing about the legislator's intent is utterly irrelevant. The only reason you don't consult a contador yourself, or drop into an AFIP office and ask, is that you don't want to hear the truth. Fine, so you're going to take the risk and not declare: square that with your own conscience, and consider how that limits you if you intend to, say, buy a property or a car, or start a business here at some point with funds you have abroad that you haven't declared. Or how you're going to cope with the niggling worry of being caught and handed with a tax demand, with fines and interest. If you think you have it figured out, and have decided to ignore the law, go ahead. Tax evasion is rife in this country and many argentines would applaud you. But don't be so naive as to think you can will yourself out of committing a tax offence by some vague opinion-shopping.

What you say about the 'contador' I quoted is counter-intuitive: an unscrupulous professional (and there are many here) will tell you what you want to hear, take your money and leave you in the lurch when the shit hits the fan. After all, it's you that swears to tell the truth in a tax declaration, not him. I've worked with the contador in question for 15 years and I've had reason to be very grateful, on the verge of a large-scale transaction with local counterparties who are preparing to fleece the 'gringo', when a phone call from his office changed everything in my favour.

So my own view, obviously based on my personal circumstances, is to favour tax avoidance rather than evasion. With this law, if you bring the funds here (and why not, if your're planning to be here?), the tax rate falls from 2.25% to 1%. Even if you don't, with 50% inflation, and the fact that the tax bill is denominated in pesos, by the time you actually pay the last of the 5 instalments, it'll actually be less than half the rate. If you're visiting your home country, bring back up to $10K in cash and change it at the 'blue' rate, saving a further 20%. Alternatively, only spend 180 days here and avoid being tax resident. Or go across the river to Uruguay, where tax on foreign income is 0% for the first 5 years, and a very modest 12% thereafter.

In my own experience, its better to be rigorous; many expats come here, look around at the lax practices, and think 'hey I can do what I like'. I think this is a bad idea, because we expats stick out; we're the the low hanging fruit, easy to catch. In my first years here I got hit with various AFIP inspections. When they saw everything was as I indicated in my declarations, they left me alone. For my general peace of mind, it's better that way imho

 

[Irelander]

Another point if forgot to make is that this notion:

the executive and the AFIP will have to interpret the law and act on it.

is an absolute fantasy. All that was months ago. In the next few days, the electronic payment VEPS will go out for the first payment, a 'pago a saldo' of 0.5% of total foreign assets as at 31 December last. If I remember correctly it has to be paid by 29th March. The mechanism is in place to get the reduction if you 'repatirate' the funds by a certain date. This is as definitive in tax law as the offences of murder and rape are in criminal law.

 

[steveinbsas]

The mechanism is in place to get the reduction if you 'repatirate' the funds by a certain date. This is as definitive in tax law as the offences of murder and rape are in criminal law.

Does the law actually requires foreigners with temporary or permanent residency to
'repatirate' funds which were earned outside of Argentina prior to obtaining temporary residency and/or pay the wealth tax on all of their assets, including real estate and vehicles which were acquired prior to obtaining residency with funds earned outside of Argentina, prior to obtaining residency?

 

[Irelander]

Yes. No distinction is made for foreigners. All residents.

 

[Irelander]

Obviously, you don't have to pay for the period before you became a resident. But once you are, you're a resident, period. There are no exceptions.

 

[Alby]

I am very grateful for Irelander's contributions here and am very pleased to see someone backing up the view I have been professing here right from the start, but I believe (if my research into this at the start of the year was not mistaken, or has not since be overtaken) there are a couple of possible exceptions:

1) If your temporary or permanent residency is due to an employment contract of less than five-years duration.
2) If a double taxation treaty is in place between Argentina and the country of your assets and their is an equivalent nationally-collected wealth tax and the treaty mentions both laws.

In terms of the latter, in an earlier post I provided a link to the double tax treaties. There are a few such treaties, and the odd one does mention that Bienes Personales tax and its overseas equivalent.

 

[toongeorges]

Is there a chance the supreme court of Argentina could rule that the law is unconstitutional, e.g. that it infringes on article 17 of the constitution?

Artículo 17.- La propiedad es inviolable, y ningún habitante de la Nación puede ser privado de ella, sino en virtud de sentencia fundada en ley. La expropiación por causa de utilidad pública, debe ser calificada por ley y previamente indemnizada. Sólo el Congreso impone las contribuciones que se expresan en el Artículo 4º. Ningún servicio personal es exigible, sino en virtud de ley o de sentencia fundada en ley. Todo autor o inventor es propietario exclusivo de su obra, invento o descubrimiento, por el término que le acuerde la ley. La confiscación de bienes queda borrada para siempre del Código Penal argentino. Ningún cuerpo armado puede hacer requisiciones, ni exigir auxilios de ninguna especie.

In other countries, tax laws are sometimes annuled by the supreme court, because they are unconstitutional, but I am not sure this could work in Argentina.