I. New Extraordinary Advance Tax
On 21 July 2023, Resolution No. 5391/2023 (“Resolution”) was published in the Official Gazette, whereby the Argentine Revenue Services (“ARS”) requires 1 15% tax payment for non-exempt companies with income tax results for the 2022/2023 tax year of at least AR$ 600.000.000 (US$ 2.200.000), before deducting prior year’s losses.
Thus, the advance income tax payment is applicable to taxpayers that meet the following requirements:
a. That the amount of the income tax result arising from the tax returns corresponding to either fiscal year 2022 or 2023, without considering the deduction of tax losses from previous years, is equal to or higher than AR$ 600.000.000.
b. That they did not pay income tax.
In order for the taxpayer to determine whether it is included in these parameters, it must consider the income tax return for the 2022 tax period, if the closing of its business year took place between August and December 2022, both inclusive. For taxpayers whose fiscal year operates between January and July 2023, both inclusive, they must consider the tax return corresponding to the 2023 fiscal year.
With respect to the calculation of the advance income tax, it is important to take into account that taxpayers who (i) have obtained a tax result for either 2022 or 2023 equal to or higher than AR$ 600.000.000, without considering the deduction of tax losses from previous years, and (ii) did not pay income tax, the amount of the advance income tax shall be equivalent to 15% of the tax result obtained.
The Resolution establishes that the advance income tax, as well as its interest and other accessories, will be deferred in 3 equal installments. The due dates for each installment are set according to the closing of the taxpayer’s business year, as shown below:
II. Analysis of the Extraordinary Advance Tax
The Resolution establishes that the advance income tax may not be cancelled through tax compensation, nor may it be considered by the taxpayer in the estimate within the framework of the advance income tax reduction option. Therefore, it is reasonable to construe that the advance tax has some peculiar features that make it resemble a tax, and not a tax prepayment.
In this regard, it could be stated that the ARS is not entitled to go beyond fixing a prepayment on account of the final tax liability, as it would happen with the advance tax which implies an extra 15% prepayment based on the previous income tax liability, before deducting accumulated NOLs, and will not be necessarily absorbed by the tax liability of the current year because the correcting mechanisms, contemplated in the case of ordinary prepayments, are excluded.
The exclusion of accumulated NOLs, for purposes of the extraordinary advance payment calculation, appears to be an alien to the Income Tax System, since it is inherent to the latter the offsetting of periods of losses with subsequent periods of taxable profits (or even vice versa, wherever the carryback of losses is allowed). Therefore, if an excess payment if verified, that payment would not be in the nature of an Income Tax but a new tax which can only be created by a law passed by the Federal Congress.
It is expectable that the Courts correct the excess embodied in the Resolution, in light of the reserve principle that prevent imposing a levy without a previous law passed by Congress approving it, and to declare the new levy unconstitutional since it affects the constitutional principles of reasonableness and taxable economic capacity.
You can access General Resolution No. 5391/2023 at the following link: Resolución General 5391/2023
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