By: Augusto Nicolás Mancinelli

The Argentine executive branch has established new export duties applicable to goods and services. These new export duties were established by a Decree of the Executive Power (Decree No. 793/2018) issued on September 3, 2018 and published at the official Gazette on September 4, 2018, with immediate effect for the export of goods.

The effective date for the application of export duties on services is expected to be January 1, 2019, as the government would need Congress to enact a law providing for such export duties.

The new export duties on goods and services are among the measures being applied by the Macri Administration with the goal of reducing Argentina’s fiscal deficit.

The new export duties, which amount to 12 percent of the value of the exported goods and/or services, include a cap of AR$3 or AR$4 for each US dollar of exports, depending on the kind of exported good or service. These new export duties apply in addition to any other export duties already in force.

The authority of the executive branch to create or impose taxes or import/export duties without Congressional approval is questionable. Although the Argentine Customs Code provides the executive branch with wide power to establish import/export duties, such delegation has been challenged before the federal courts on constitutional grounds.

The Argentine Federal Supreme Court, in its ruling in Camaronera Patagónica, dated April 15, 2014, established that the executive branch is not entitled to create or impose taxes or export duties, even when reasons of urgency, crisis or financial needs are invoked, claiming that, pursuant to the Argentine Constitution, taxes fall under the scope of the legislative branch’s authority, not the executive’s.

DLA Piper Argentina’s tax team has initiated a protective action (amparo) and requested an injunction before the federal courts, in order to challenge the constitutionality of Decree No. 793/2018.

Inflation – effects on income tax

The recent devaluation of the Argentine peso is expected to have an impact on inflation. Actual predictions set inflation at a 42 percent rate for 2018.

Prior to the Tax Reform Law No. 27,430, inflation adjustment on tax calculation and tax returns had been forbidden for local entities subject to income tax. With the enactment of Tax Reform Law No. 27,430, as per the amended Section 95 of the Income Tax Law, inflation adjustment is applicable when accumulated inflation during the previous 36 months is higher than 100 percent, when accumulated inflation during the previous 24 months is higher than 66 percent, or when the accumulated inflation during the previous 12 months is higher than 33 percent.

The National Statistics Institute (INDEC) calculated a 24.8 percent inflation rate for 2017. Thus, if in 2018 inflation reaches a 42 percent rate, local entities will be entitled to apply inflation adjustments in their tax returns for the 2018 fiscal period.

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