Sweeping reforms

On 10 December 2023, Javier Milei took the presidential oath in Argentina for a four-year mandate. During his campaign, he promised radical change, including the liberalisation of the economy and a complete overhaul of the current legal framework to promote free competition. Several days after he assumed office, the Necessity and Urgency Decree No. 70/2023 was enacted; it entered into force on 29 December. This kind of decree may be issued if the president considers the normal procedures to pass a law via congress impossible to comply with, due to the urgency of the measures.

Further, the president sent a Bill to congress, titled Law of Bases and Starting Points for the Freedom of Argentines. The Bill has more than 600 sections and touches on or modifies 20 current laws. The Bill includes, among other points, a reduction in personal wealth tax and the approval of double-taxation treaties (DTTs) with China, Japan, Luxembourg and Turkey.

The Bill was rejected by congress initially. However, following the presidential address to congress on 1 March, the Bill is expected to be put before congress again, with a higher chance of being passed.

Unification of taxation

Argentina’s personal wealth tax is paid each year on 31 December, based on an Argentine-resident individual’s global assets. Assets in Argentina are taxed at rates that range from 0.5 per cent up to 1.75 per cent, and local shares are taxed at 0.5 per cent over the net value of the company. Assets of Argentine residents outside of Argentina are subject to rates that range from 0.7 per cent up to 2.25 per cent. Foreign owners of assets in Argentina are subject to tax on such assets. Assets in trust (under the right conditions) are not taxed. The Bill provides the unification of tax rates for assets inside and outside of Argentina, a reduction to a maximum of 1.3 per cent and a further reduction for the following year.[1]

DTTs

Argentina has 21 DTTs in force.[2] If the Bills are passed, the DTTs with China, Japan, Luxembourg and Turkey would be added to the list. Not so obvious, and not to be missed, is that these inclusions could trigger the application of a most-favoured nation clause in the existing treaties, so reducing or eliminating the withholding over certain payments to these countries.

Tax amnesty

The last point to be mentioned on the Bills sent to congress is the inclusion of a broad tax amnesty. This should be analysed in light of Argentina’s treaty with the US, which provides that automatic exchange of information will commence between the two countries in September 2024. It should be noted that Argentina was one of the first signatories of the Common Reporting Standard (CRS) and has been very active in the international exchange of information.

One key case to mention is Volij, Gabriela v Argentine Tax Authorities on Law Nr. 27,605, in which an Argentine individual created an irrevocable trust abroad. In December 2023, a one-time extraordinary tax over the assets of all individuals entered into force. The judge correctly declared that assets transferred to irrevocable trusts are no longer the property of the settlor and so could not be taxed on the settlor.[3]

Conclusion

In summary, although the final result is not yet clear, several changes should be expected and considered by practitioners with clients in or with connections to Argentina.