The customs division of the Argentine Federal Tax Authority has decided to ignore its country’s treaty obligations.  In a recent effort to increase revenue, customs has been levying assessments of import duties on importers of software. These duties are being assessed on all software imported on tangible media (e.g., pen drives, CDs, DVDs). For now, customs continues to respect the exemption from tax of digital transfers of software.
For almost three decades, Argentina has exempted all software formats from import duties. Domestically, this rule is found in a 1995 resolution from Argentina’s Ministry of Economy.[1]  That resolution exempts import duties on software, clarifying the right to tax only the value of the tangible media housing the software. The Federal Tax Authority now claims the 1995 resolution was repealed. We disagree.

If you or your client is paying tax on imported software, the ensuing paragraphs outline arguments that may restore your exemption.

THE 1995 RESOLUTION WAS NOT REPEALED

The Federal Tax Authority claims the exemption was “tacitly abrogated” by subsequent decrees issued by the executive branch. These decrees amend Argentina’s customs duties in accordance with the rules of Mercosur, the regional customs union of which Argentina is a member.[2] The Federal Tax Authority argues the newer decrees did not expressly include the exemption. Therefore, it claims, the omission reflected an intent to repeal the exemption from import duties.

CUSTOMS IS WRONG. HERE’S WHY

1. Domestic Law Cannot Override a Treaty Obligation

The exemption was not an ephemeral whim of a predecessor administration.  The 1995 resolution implemented Argentina’s consent to a 1984 decision of the Committee on Customs Valuation of the General Agreement on Tariffs and Trade (GATT). In 2010, Mercosur similarly adopted the software exemption from import duties.[3] The exemption could not be repealed by domestic law, as this would violate Argentina’s international treaty obligations and contravene the established rule that international treaty obligations prevail over domestic law.[4]

2. Denying the Exemption Is Inconsistent with Argentina’s Domestic Law

The Federal Tax Authority’s position is internally inconsistent. As discussed above, in 1995, the Ministry of Economy had expressly exempted software from customs duties. More recently, in 2012, the Federal Tax Authority incorporated a Mercosur provision containing the same exemption.[5] Although both of these laws remain in force, customs summarily concludes the executive branch intended to “implicitly” repeal the exemption.

Even an “implicit” repeal must meet a legal standard. To meet this standard, the new law must be incompatible with the earlier law, or at least indicate an intent to regulate exclusively the same subject matter.[6]  The 2017 executive decree relied on by the Federal Tax Authority does not meet this standard to imply a repeal. The decree regulates only the tax of the physical media storing the software; the 1995 resolution and the 2012 Mercosur provision incorporated as domestic law regulate what is contained on the physical media. Thus, the laws and pronouncements do not regulate the same subject matter, nor are they incompatible. The government can change the duties on physical media without affecting the exemption for the software housed on that media.

CONCLUSION

The Federal Tax Authority’s taxation of software contained on tangible media is unlawful. The assessments disregard domestic and international law. Specious attempts to enhance revenue at the expense of the Rule of Law do nothing more than weaken confidence in the fairness of government.

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If you would like a consult about this topic with the attorneys of Wiener Soto Caparros, please don’t hesitate to reach out to the article’s authors, Tomas N. Schiavini (tschiavini@wsclegal.com) and Anny E. Reyes (areyes@wsclegal.com).

Many thanks to Nicholas K. Carballo (ncarb@pennlaw.upenn.edu) for his assistance in preparing this article.

[1] See Law No. 856/1995, June 20, 1995, B.O. 28.167 [https://www.bvya-comex.com.ar/pdfs/SOFTWARE_-_DERECHOS_DE_IMPORTACION.pdf]

[2] See Law No. 509/2007, May 23, 2007, B.O. 31.161 [http://servicios.infoleg.gob.ar/infolegInternet/anexos/125000-129999/128407/norma.htm], Law No. 1126/2017, January 2, 2018, B.O. 33.782  [http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/305361/norma.htm]

[3] See Decision 16/2010, 1.4.2(Q), Mercosur Common Market Council, August 2, 2010 [https://normas.mercosur.int/simfiles/normativas/28499_DEC_016-2010_ES_Manual%20del%20Valor.pdf]

[4] See Arts. 31 and 75 § 22, Constitución Nacional (Arg.); see also Vienna Convention on the Law of Treaties arts. 26 and 27, May 23, 1969, 1155 U.N.T.S. 331, 339 (Treaties are binding and must be performed in good faith. Internal law cannot be used to justify breaking a treaty obligation.)

[5] Law No. 3284/2012, March 7, 2012, B.O. 32.360 [http://biblioteca.afip.gob.ar/dcp/REAG01003284_2012_03_07]

[6] Catalina García Vizcaíno, Tax Law Economic and Legal Considerations (Derecho Tributario Consideraciones Económicas y Jurídicas). Book I. Editorial Depalma, 1996.