Taxation of Residents

Information on the taxes on income that must be paid by residents of Argentina...

Income Subject to Tax:

For purposes of income tax, there are four categories of income in Argentina:

  1. Income from real estate.
  2. Income from capital investments.
  3. Business income.
  4. Compensation for services rendered.

Filing Procedures and Tax Payments

The Argentine tax system is based on the principle of self-assessment. The federal tax laws require taxpayers to file annual or monthly returns to report their taxable income, determine their tax liability, deduct any taxes withheld or paid in advance, and pay any balance due.

Corporations are required to make ten monthly advance payments of their annual income tax and eleven monthly advances of their minimum presumed income tax liability. The advance payments are calculated based on a percentage of the previous year's income tax or minimum presumed income tax obligation. An optional system to make estimated payments is available. The corporate tax return must be filed within five months after the end of the company's fiscal year.

The tax year for individuals is the calendar year. Individuals whose sole income is in the form of employee compensation are not required to file an individual income tax return for the year. Instead, their employers are required to withhold income tax monthly, and this tax is considered final.

Individuals with significant amounts of non-wage income, such as income from self-employment, are required to make five advance payments towards their final tax liability. These payments are calculated as a percentage of the prior year's income tax and are made bimonthly from June to February. Resident individuals with non-wage income must file an annual income tax return within four months after the end of the calendar year.

Foreign taxpayers not established in Argentina are not required to file a tax return if their income tax liability is fully satisfied by withholding taxes on income from Argentine sources.

Calculation of Tax

Tax laws establish very detailed rules on how the tax should be calculated.

In general, the calculation is based on known facts, such as those reflected in the books kept by the taxpayer or in the documentation kept on file.

Only in cases when no detailed information has been provided by the taxpayer or no proper books of account are being kept, or the information or records prove to be incorrect or incomplete, may the tax authorities turn to legal assumptions to establish the tax obligation of the taxpayer in question.

Penalties

The tax authorities for late filing of returns, omitted taxable income and fraud may impose various penalties. A penalty ranging from 50 percent to 100 percent of the underpayment of tax is imposed for failure to file tax returns and for filing inaccurate returns. The penalty for fraud is two to ten times the evaded amount.

There are prison penalties for those who commit fraud. This embraces directors, managers, syndics, members of the statutory audit committee, administrators, agents, and representatives of entities involved in the commission of the fraud.

There is a penalty interest of two percent per month for late payments of taxes.

The Federal Government has promoted a law that establishes a regulation how fiscal credits, deductions or other transactions, may be paid. It requires any transaction greater than $1,000 to be paid by bank check, wire transfer, or other specific checks created by this occasion.

Also the government has decided to create a special legal forum for tax frauds, in order to reduce the tasks of the actual Federal courts, and to improve tax collection.

Information provided by KPMG Contact Adriana Laurino, e-mail, Tel: (011) 4316-5753