Argentina's New Tax On Residents Global Wealth

[Stantucker]

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?

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.

If I have understood correctly, it doesn't matter when your earned/inherited the funds or when your bought the properties and vehicles, whether that was post or pre you getting whatever kind of residency you have, you have to pay either 2,25% on all your current foreign wealth unless you repatriate 5% of the value of all your assets by March 31, thereby reducing your tax rate to 1,25%.

 

[Irelander]

it doesn't matter when your earned/inherited the funds or when your bought the properties and vehicles, whether that was post or pre you getting whatever kind of residency you have

Yes this is the way it is.

As for the details of 'repatriation', I don't know because I didn't go into it. I have an invitation to go to my contador to discuss my situation, but in my particular case, I'm out of Argentina in 2-3 years' time and it makes no sense to disinvest in my home country, bring it all here, and then take it back with me when I go. With inflation, the real rate of the tax is around 1.6%, so for the moment, I'm just going to take it on the chin.

 

[sts7049]

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

part of the reason i am not concerned at all, is that as part of my work assignment here my company handles all of my taxes for me. both here and in the US. PWC is my contador, so to speak. i've been given no indication by them that i am liable for any of the bienes personales taxes. i don't need to go to AFIP myself and ask them, PWC is responsible for managing this for me.

in addition, i don't view this as tax evasion at all. i'm avoiding paying anything i don't have to, until they tell me i have to. and if they DO eventually decide that it applies to me and tries to enforce it, then you can call it tax evasion because it is completely ridiculous for me as a temporary resident of ~4years max in total to pay any taxes on anything i own or acquired outside this country. i earn a salary here, in pesos i might add, so any taxes i need to pay based on that is completely valid.

 

[d.gray]

I've been living in Argentina for over a decade and have been paying Bienes Personales for many of those years. This tax is nothing new, they've just increased the amount you have to pay this year on overseas assets. I'm here long-term and couldn't just leave the country if they caught up with me one day, and I don't have much anyway so it's never cost me that much to pay and be en blanco.

If I was only here for a few years, I probably wouldn't have bothered paying it. But basically, if you are a resident (at least a permanent resident), then legally you have always had to pay Bienes Personales on your assets anywhere in the world. Now the rate's just gone up to 2.25%. I think there is still a tax-free allowance, but I'm not entirely sure.

Whether AFIP will ever catch up with you if you don't pay, who knows.

 

[Irelander]

sts7049, there may well be a special 'regimen' covering your situation. When I first came here I was told about special conditions for employees of multinationals on secondment - they don't apply to me because I'm self employed, and they don't apply to most of the people on this forum. What you should do is check with your company's tax department, and share the information you're given on here as it might be useful to people in a situation comparable to yours.

My main point is that anyone with residence, or planning to reside here, has to abide by the law, period. Mere opinions expressed on this forum are of no value in terms of compliance with the law. Your personal views on what constitutes tax evasion are irrelevant. In the US, you can't decide which parts of the law you'll abide by, and which you'll flout: it's exactly the same here. Thinking you can relax here because well, this is a dodgy South American country where tax evasion is part of the culture, can be dangerous because once you step outside of legality, you yourself become open to corruption and fraud, which you can't denounce without incriminating yourself. I've learned in my 15 years' residence in this country that it's much better to keep you nose clean.

 

[Alby]

I was fairly certain sts7049 would find if he talks to PWC that he was one of the lucky one's that fall into one of the exemption categories I have been mentioning: on an employment contract of less than five years. However, when I now review the source (PWC itself) where I obtained the information (http://taxsummaries.pwc.com/ID/Argentina-Individual-Other-taxes) here is what it says:

Individuals domiciled in Argentina as of 31 December, are subject to an annual wealth tax on their worldwide taxable personal assets exceeding the minimum exempt threshold as of 31 December, without consideration of liabilities. These taxable assets include, among other items, real estate, cars, shares, and bank accounts. However, savings accounts and term deposits at Argentine banks are tax exempt. Individuals domiciled abroad and working in Argentina for reasons duly proven for a period not longer than five years are assessable only on personal assets located in Argentina.

The information predates the changes to the tax. What is interesting, unfortunately, is that claiming that exemption relied (as per the bolded text) on being domiciled abroad (i.e., being able to show that, regardless of your physical presence in Argentina and your Migraciones residency status, your broader social and economic relationships were elsewhere), precisely the loophole (for Argentines) that the new law closes. The old law was logical and well thought through in exempting expats residents who clearly are in Argentina for a relatively fixed and short period. Due to the haste in which the legistation was drafted, the new law has probably bulldozed its way through that subtelty.

As the domicile escape hatch no longer exists, PWC would probably now have to admit that even someone on an employment contract of less than five years is now swept up, just like everyone else. If this is true, it will, right now, be affecting all major companies employing expats and you would think some lobbying would be in order to draw attention to this probably unintended consequence of the change.

On this revised reading, I now believe the only legal way out of this is through the few double taxation treaties that deal with parallel wealth taxes in both countries. A few people may indeed be saved there, but even in those cases, because the size of the tax in Argentinadwarfs anything similar in other countries, AFIP would probably be able to claim the difference between the amount paid at home and the amount payable in Argentina.

 

[Irelander]

If I have understood correctly, it doesn't matter when your earned/inherited the funds or when your bought the properties and vehicles, whether that was post or pre you getting whatever kind of residency you have, you have to pay either 2,25% on all your current foreign wealth unless you repatriate 5% of the value of all your assets by March 31, thereby reducing your tax rate to 1,25%.

Hi Stan, it appears you're right about the 5%. I've just received the following circular from my contador. This is urgent, the funds have to be here by the end of the month:

BIENES PERSONALES

Para aquellos activos expresados en moneda extranjera, tomando al dólar estadounidense, el incremento de la cotización a utilizar para la valuación de los mismos ha sufrido un incremento del 60 % pasando de $ 37,50 a $ 59,69.

A los efectos de dotar de progresividad al impuesto se ha establecido una escala general del impuesto que va desde el 0,50 % hasta un máximo de 1,25 % (para activos imponibles superiores a $ 18.000.000,-), recordando que en 2018 la tasa del impuesto era del 0,25 %, LO QUE REPRESENTA POR LO MENOS UN INCREMENTO DEL 100 %.

Para los bienes en el exterior, excepto que se opte por la repatriación que ampliaremos a continuación, se establecen alícuotas progresivas especiales, progresividad dada en base al total de los bienes imponibles, país y exterior, elevando la alícuota del primer escalón al 0,70 % y hasta un máximo de 2,25 %.

Repatriación. Opción de ingresar al país, desde cuentas del exterior dichos fondos, o derivados de la liquidación de activos financieros existentes en el exterior (acciones, bonos, etc), siendo el monto a repatriar, del 5 % del valor total de los bienes totales en el exterior (financieros o no, ej. inmuebles) valuados de acuerdo a las disposiciones de la ley (ej. usd x $ 59,69)

Los montos repatriados deberán ser ingresados al país hasta el 31/3/2020, y deberán permanecer inmovilizados hasta el 31/12/2020, pudiendo sólo ser aplicados a plazo fijos en usd, certificados de participación y/o títulos de deuda de fideicomisos de inversión productiva que constituya el BICE, suscripción o adquisición de cuotaspartes de FCI existentes o a crearse regulados por la CNV, o venta de divisas en el mercado único y libre de cambios.

De ejercer la opción comentada, los bienes del exterior se encontrarán sujetos a la escala general del impuesto, con un máximo de 1,25 % en lugar del 2,25 %.

IMPORTANTE: El vto. para el ingreso de los fondos repatriados es el 31/3/2020, por lo cual, agradeceremos nos hagan llegar cuanto antes información respecto a sus activos en el exterior, para poder así poderles presentar un cálculo del monto a repatriar y del ahorro estimado de impuesto que el ejercicio de la opción genera.

 

[jeff1234]

When will it be challenged in court?

Is there any expat with assets who plans to pay this tax?

Where to next?

 

[Sequoia1321]

Whatever happened regarding this tax law? If I keep my house in US and rent it out I have to pay 2.25% tax on the value of it, and my stock market accounts and bank accounts as well? What if I take out the equity from my US house by refinance, but still keep the house and rent it out, and take the money and buy a house in Argentina? Then since the equity is gone I don't have to pay taxes on the house itself, but on the rental income, and whatever equity is left or adds up? And I can avoid this by not staying there more than 180 days?

 

[antipodean]

Whatever happened regarding this tax law? If I keep my house in US and rent it out I have to pay 2.25% tax on the value of it, and my stock market accounts and bank accounts as well? What if I take out the equity from my US house by refinance, but still keep the house and rent it out, and take the money and buy a house in Argentina? Then since the equity is gone I don't have to pay taxes on the house itself, but on the rental income, and whatever equity is left or adds up? And I can avoid this by not staying there more than 180 days?

https://www2.deloitte.com/content/d...nts/Tax/dttl-tax-argentinahighlights-2020.pdf