Argentina’s Federal Tax Authority (AFIP), pursuant to Resolution No. 4815/2020, has established an additional 35 percent tax on transactions subject to the PAIS Tax.
Passed by the National Congress on December 23, 2019 through Law 27.541 (Ley de Solidaridad Social y Reactivación Productiva), the PAIS Tax is a 30 percent levy applicable to the purchase of foreign currency by Argentinean residents when they purchase foreign currency directly or indirectly by paying a service to a foreign service provider. The tax rate of the PAIS Tax is 8% when related to services already taxed with the VAT on digital services.
The new tax withholding, established in September this year, applies to all transactions to which the PAIS Tax applies. Both taxes are particularly relevant to digital service providers – the additional 35 percent tax applies to most digital services that non-residents provide to Argentinean residents. Digital services are already taxed at 21 percent through the value-added tax (VAT) in addition to an 8 percent PAIS Tax.
The new 35 percent tax acts as a surcharge imposed on the payer. It is usually collected by credit card companies and other payment processors that intermediate between the payer and payee.
For the majority of taxpayers, the 35pecent tax may be credited against the payment of income tax. For those who are part of the simplified regime and who are not subject to income tax, the 35 percent levy may be credited against their personal assets tax.
The following transactions are not subject to the present collection regime:
a) Expenses related to health benefits, the purchase of medicine, the purchase of books in any format and the use of educational platforms and software for educational purposes
b) Expenses associated with research projects carried out by researchers working within the scope of the federal state, provincial states and the Autonomous City of Buenos Aires and municipalities, as well as universities and institutions that are part of the Argentine university system, and
c) The acquisition of equipment, materials and other goods from abroad that intended for firefighting and civil protection of the population by the entities recognized in Law No. 25,054 and its amendments.
Those who fall under the regime must pay the 35 percent tax at the time of purchase. The tax will be included in the buyer’s annual income tax return or, where appropriate, the personal assets tax, for the fiscal period in which the purchase occurred. Individuals who are not covered by such taxes may request a refund after the end of the calendar year in which the collection was made.