Argentina's New Tax On Residents Global Wealth

[Johnny]

Are you really calling fear mongers people who are afraid of having to pay corrupt govts a ridiculous percentage of their lifetime accumulation of assets and who are just looking for honest answers to questions about new legislation? For me a fear monger is someone who spreads fear just for the sake of spreading fear.

I don't think there is going to be "ridiculous percentage", if any significant percentage at all. For those who own property here and have essentially "settled down" it would be a concern if it were true. My point being there doesn't seem to be a reason for concern once some light is shed on the subject. Lest we forget, there are many people who enjoy passing along bad news much more than good news, and if the news isn't sufficiently bad they are often not above slanting said news so that it appears worse than it actually is. I have seen this in action innumerable times on BAExpats over the years, and clearly any number of internet sites suffer the same treatment. If it is not tax issues, then it is communists invading from Chile or hordes of Chinese bringing over the black plague. On and on it goes.

 

[Alby]

I think you are probably right about the temptation to pass on bad news or exaggerate it. That is not what is happening here. These are genuine questions about an important change that could affect a number of us. I am yet to see much "light" yet being "shed" that gives confidence that there isn't "a reason for concern". A number of direct questions posed have yet to be answered. And certain responses that purport to shed a more positive light (e.g., that the law only hits "citizens" and that what matters is where one is "domiciled") are simply mistaken and/or out-of-date.

It would be really useful if (i) anyone who knows more about the CRS could expand on that mechanism and (ii) the comment that pursuing foreigners could create a precedent in international law that AFIP would not wish to attempt, could be explained.

 

[Bajo_cero2]

Unfortunatley, Bajo Cero's information here (and in other threads where he repeats the information) is incorrect / out-of-date. The information was correct until 27 December, but the law has now changed. You can find it here: https://www.boletinoficial.gob.ar/detalleAviso/primera/224184/20191228

Your link redirects to the decree, not the law. Seems that you are confusing them. This is why to follow your quotations is a nightmare.
It is art. 30 of the law that abolishes the domicile and replace it for residency:

"Artículo 30.- Modifícase el Título VI de la ley 23.966 y sus modificatorias, del Impuesto sobre los Bienes Personales, con relación a la condición de los contribuyentes, con efectos para los períodos fiscales 2019 y siguientes, de la siguiente manera:

El sujeto del impuesto se regirá por el criterio de residencia en los términos y condiciones establecidos en los artículos 119 y siguientes de la Ley de Impuesto a las Ganancias, texto ordenado en 2019, quedando sin efecto el criterio de "domicilio".

It means that the taxable subject has nothing to do with citizenship BUT you forget to clarifies that this concept explains what repatriation means.

The bad news is the final article (Article 13) of Titulo II of the new law (again, here https://www.boletinoficial.gob.ar/detalleAviso/primera/224184/20191228) which says:
ARTÍCULO 13.- Toda referencia que efectúen las normas legales, reglamentarias y complementarias sobre el nexo de vinculación “domicilio” con relación al impuesto sobre los bienes personales, debe entenderse referida a “residencia” de conformidad a lo previsto en el artículo 116 y siguientes de la Ley de Impuesto a las Ganancias, texto ordenado en 2019 y sus modificaciones.

This is the decree NOT the law.
You forget to quote art. 10 that specifies domicile:
"ARTÍCULO 10.- Se entenderá por repatriación, a los fines del segundo párrafo del artículo 25 de la ley referida en el artículo precedente, al ingreso al país, hasta el 31 de marzo de cada año, inclusive, de: (i) las tenencias de moneda extranjera en el exterior y, (ii) los importes generados como resultado de la realización de los activos financieros pertenecientes a las personas humanas domiciliadas en el país y las sucesiones indivisas radicadas en el mismo".

This article was added at the last minute by the Parliament and has the effect of annuling the concept of domicilio from the 1997 law. Henceforth, regardless of whether you are a citizen or hold a Migraciones-issued permanent or temporary residencia, once you meet the minimum AFIP residencia requirements to pay income tax--which others have explained is 6 months in the country in the tax (calendar) year--you are also liable to pay the Wealth Tax on your overseas assets (i.e., your assets outside Argentina that exceed the threshold of 3 million pesos, or roughly USD40,000).

Well, this is not crystal clear because or art. 10 of the decree. FYI the AFIP has the duty of following the decree because this is an executive order to its subordinates BUT judges must follow the law. So, having your address outside the country is still a legal defense.

The only exception would be someone on a temporary Migraciones residency where that residency is based on an employment contract of less than five years, or someone who finds shelter in a double tax agreement that specifically prevents a wealth tax being levied twice in one year on the same person in Argentina and in the country the asset is located.

Temporary residency is not an exemption if you live here over 6 months and 1 day in Argentina.

Those on a Rentista residency are the most exposed, having already declared an asset overseas to another agency of government (DNM).

Agree.

Foreigners can no longer protect from the Wealth Tax on assets in their home country by taking out Argentine citizenship and listing an overseas address.

Wrong as I already explained.
However, as far as I understand, the law looks for repatriation of funds.

People can make their own judgements about the risks they run now or in the future of trying to evade this tax. By it is important that the out-of-date assertion contained in Bajo Cero's posts be corrected.

Thanks for the update. However, citizenships is alike bith and here is one of your mistakes. The President can make rights wider with a decree and this is why the art. 10 is enforceable, what is unconstitutional is to restrict rights with a decree. You must pay since the day you become citizen for the assets generated in Argentina that you sent abroad because the whole idea is to repatriate the capital flight that MM made happened.
FYI the citizenship law is based on the roman donation of liberty to the slave under a condition that in those days was the death of the master while now is the 2 years of non legal residency.

 

[Alby]

It appears then, that the law is, at worst, crystal clear in that we are, technically, covered, or, at best, ambiguous, giving us potential arguments if this ever became a problem. The only defense continues to be our "idea" that as the "intent" of the law is to punish Argentines who at one time expatriated assets (and to encourage them to bring them back) we should not, this year or in the future, be penalized by AFIP for not offering up at Bienes Personales declaration time our overseas assets never expatriated, something we would argue before a judge if ever chased (sounds like a tremendous way to spend one's later years).

I still don't see anything in the law or decree that gives a citizen (as opposed to a Migraciones resident) any additional protection beyond the "idea" in the previous sentence; indeed to quote Bajo Cero "It means that the taxable subject has nothing to do with citizenship BUT..." And contrary to the remainder of Bajo's sentence (...you forget to clarifies that this concept explains what repatriation means.") I don't see how Article 10's definition of repatriation for the purposes of lessening the tax clarifies that the tax only applies only to assets expatriated in the first place. At best it hints at the intent of the measure and our future lawyer explaining to the judge why AFIP is wrong could perhaps draw on that hint. But it is far from a clear clarification that the tax does not apply to assets owned by an expatriate who meets the 6 months-per-year tax residency threshold and that were acquired prior to her or his arrival in Argentina.

 

[Bajo_cero2]

It appears then, that the law is, at worst, crystal clear in that we are, technically, covered, or, at best, ambiguous, giving us potential arguments if this ever became a problem. The only defense continues to be our "idea" that as the "intent" of the law is to punish Argentines who at one time expatriated assets (and to encourage them to bring them back) we should not, this year or in the future, be penalized by AFIP for not offering up at Bienes Personales declaration time our overseas assets never expatriated, something we would argue before a judge if ever chased (sounds like a tremendous way to spend one's later years).

I still don't see anything in the law or decree that gives a citizen (as opposed to a Migraciones resident) any additional protection beyond the "idea" in the previous sentence; indeed to quote Bajo Cero "It means that the taxable subject has nothing to do with citizenship BUT..." And contrary to the remainder of Bajo's sentence (...you forget to clarifies that this concept explains what repatriation means.") I don't see how Article 10's definition of repatriation for the purposes of lessening the tax clarifies that the tax only applies only to assets expatriated in the first place. At best it hints at the intent of the measure and our future lawyer explaining to the judge why AFIP is wrong could perhaps draw on that hint. But it is far from a clear clarification that the tax does not apply to assets owned by an expatriate who meets the 6 months-per-year tax residency threshold and that were acquired prior to her or his arrival in Argentina.

You do not understand how the administrative legal system works. Art. 10 of the decree defines repatriation clarificating the law y adding the domicile instead of the residency.
Second, it is false that it is better to be a legal resident than a citizen or that being a citizen is worst. In the first case there is a presumption you lives here over 6 months and a day per year. In citizenship that presumption does not exist. It is about legal argumentation.
However, again you miss the point, AFIP has no freedom, they have to enforce the decree that accepts domicile.
Here you miss the point again. How is afip going to know about your foreign assets? Simple. They are going to use the tax [self amnesty] of Macri known as blanqueo de capitales.

 

[sts7049]

Your link redirects to the decree, not the law. Seems that you are confusing them. This is why to follow your quotations is a nightmare.
It is art. 30 of the law that abolishes the domicile and replace it for residency:

pot calling kettle

 

[Alby]

How does Article 10 of the decree maintain the domicile test/concept, when, as you say, what matters most is what the law says, and you admit that Article 30 of the law "abolishes the domicile and replace it for residency"?

 

[Bajo_cero2]

How does Article 10 of the decree maintain the domicile test/concept, when, as you say, what matters most is what the law says, and you admit that Article 30 of the law "abolishes the domicile and replace it for residency"?

I already explained you before.So, let's go again.
Decrees clarifies the law. Decrees can change the law only if they grants more rights to people like art. 10 of the decree does when describes repatriation of funds.
Judges do not have to follow decrees because they are executive orders or the judge to its employees like AFIP federal agents are.
Judges enforce the law according to the hierarchy of norms established in the Law 48:

"Art. 21. – Los Tribunales y Jueces Nacionales en el ejercicio de sus funciones procederán aplicando la Constitución como ley suprema de la Nación, las leyes que haya sancionado o sancione el Congreso, los Tratados con Naciones extranjeras, las leyes particulares de las Provincias, las leyes generales que han regido anteriormente a la Nación y los principios del derecho de gentes, según lo exijan respectivamente los casos que se sujeten a su conocimiento en el orden de prelación que va establecido".

As you can read, decrees are not there.
However, regarding tax you deal with AFIP and the best strategy is to do not arrive to a situation where you have to give explanations. If you have to, they must follow the decree. This is important because when you go to the judge you say that AFIP violated its duties as public officers because they didn't enforce the decree.

However, how is going AFIP going to enforce this law? They are going to use the database of the blanqueo de capitales because there are almost 117 billion use of money laundering. They are after a 2% of that.

Lawyers and accountants never agree. Lawyers thinks in bulletproof strategies while accountants assume that nobody is going to double check the affidavits.

I should read the whole law and decree but on Monday I start working again in real cases so, meanwhile, I have to write some appeals before Supreme Court.

 

[Alby]

And can you also please explain how Article 10 of the decree (which you say, whilst it is contradicted by the law, is what AFIP must follow) clarifies that the domicile test remains in place? I still only read Article 10 as saying that a person who had domicile overs in the past and used it to expatriate assets and avoid the Wealth Tax, can now start bringing those assets back to reduce the tax. And can you please explain the meaning of Article 13 of the decree (which you have said is what AFIP must follow), which seems to clearly abolish the concept of domicile everywhere ("las normas legales, reglamentarias y complementarias")?

 

[Alby]

Thank you. That explanation is a little clearer.

You write: "Decrees clarifies the law. Decrees can change the law only if they grants more rights to people like art. 10 of the decree does when describes repatriation of funds."

Would you agree:

(i) that regardless of anything that Article 10 of the decree says about domicile and repatriation, Article 13 of the decree abolishes the domicilio concept everywhere.
(ii) that Article 10 and Article 13 contradict each other on domicilio (because 10 discusses the concept and 13 says it no longer exists).
(iii) that, by abolishing the domicilio concept, Article 13 reduces peoples rights and, as per your explanation, is therefore unconstitutional.
(iv) that our best defense before a judge would be point (iii)--that AFIP is pursuing us over an unconstitutional article in the decree.

Finally, you write: "This is important because when you go to the judge you say that AFIP violated its duties as public officers because they didn't enforce the decree." I don't understand this defense. How and when did AFIP not enforce the decree? Surely they are enforcing the decree, but our defense is (iv) above--that the decree is unconstitutional.

Please respond when you have time after your current "real world" cases. There is no rush. I appreciate your efforts.

Thank you also for providing some concrete information and insight into the numbers (117 billion PESOS I assume) and how AFIP will go about this. That is reassuring.