DUTIES ON EXPORTS OF SERVICES REALLY ARE COMING INTO EFFECT AS OF JANUARY 2, 2019
HERE IS WHAT YOU NEED TO KNOW
December 11, 2018
In our Client Update dated September 20, 2018 we reported on Decree No. 793/18 issued by the president seeking to continue or increase duties on exports of goods and, for the first time in Argentine history, to impose duties on exports of services. That Client Update can be found here. (https://www.linkedin.com/company/wiener-soto-caparros/)
At the time, we asked how the government would be able to assess and collect duties on services, an intangible that crosses borders seamlessly in the modern economy. On December 4 the Budget Law (Law No. 27,467) was passed and, come January 2, 2019, duties on exported services will be a reality. For now, here is what you need to know:
- The duties apply to all persons providing services and to those assigned the contractual rights for payment of those services.
- The tax will be levied on the amount of the invoice (or similar document) at a rate not to exceed 12%.
- The legislature has delegated to the executive the authority to regulate by December 31, 2020, the exact rate or rates. We believe the executive will publish regulations quickly and, while it could be a flat tax (like VAT), our guess is that it will apply a graduated rate and (like VAT) will not apply uniformly to all services.
- Decree 793/18 clarified that duties on exported goods stated in dollars or other foreign currency would be capped at AR$ 4 per dollar or equivalent. In a macroeconomic context in which the peso is currently hovering close to 40, this offered at least some sense of relief to exporters. We believe the executive regulations will apply the same or a similar cap but, for now, the Budget Law does not specify a local currency cap for exported services.
- While the taxpayer will be able to deduct the duties paid from its taxable income the duties do not as of now yield a peso-for-peso credit toward the payment of income taxes.As we previously warned, this tax will prompt evasion or under-invoicing simply because, unlike goods inspected at a border, for services it is relatively easy to accomplish, and the importer has little reason to audit the accuracy or validity of an invoice for services. Presumably, the government is aware of this but, confronted with a two-year window in which it must balance the budget, these duties will still offer substantial revenue.
The foregoing article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.