Silvana Blanco answers questions about Argentina's recent legislative changes
1. What is the most significant change to your region/jurisdiction’s tax legislation in the past 12 months?
The most significant tax change in Argentina in the last 12 months, was the publication of Law 27.541. On 23 December 2019, the income tax amendments proposed by Congress were approved and published in the Official Gazette as Law 27.541. The amendments to the Income Tax Law are set out below.
The tax on financial investments created by Law 27.430 was partially abrogated in order to exclude the interest derived from bank deposits, government bonds, commercial paper and quotas in mutual funds (in ARS or USD), as of tax year 2020. However, since such income remained taxable for the fiscal year 2019, a specific exemption for individualscomprising of interest derived from domestic currency deposits in banks accounts (including savings accounts, fixed-time deposits, etc.), has been established.
The reduction of corporate tax rate to 25% that was scheduled to be applicable since 1 January 2020 has been postponed to 2021. As a result, the increase of withholding tax to 13% on the distribution of dividends (that was linked to that corporate income tax reduction) has been postponed accordingly.
The adjustment for inflation for fiscal years of 2019 and 2020 must be allocated among the relevant tax year and the following five years equally.
2. How do you anticipate that change impacting your work and the market moving forwards?
The FX (Foreign Exchange) restrictions, recession that had begun right before the COVID-19 global disruption, and fiscal deficit have been affecting the business environment. It´s important to point out that the tax system is inefficient, and the tax burden does not promote incentives to increase investments coupled with the political environment in which Argentina is mired. Having said that, the authorities are announcing a 60-point programme in order to overcome such restrictionsspecifically, they will provide fiscal incentives to boost the economic situation to create jobs and enhance investments, which in turn will aim to decline the poverty rate. Agricultural crops will also contribute to improve the country’s economic situation since Argentina is an agricultural powerhouse.
3. What impact do you see the COVID-19 pandemic having on your work directly and on the wider tax environment, in both the short and long term?
To begin with, the COVID-19 pandemic will have a longstanding effect in the way people work. This will further determine that remote working will be and has to be widely used. We will shift from meeting clients at their offices/organizations to meetings via Skype and Zoom. On the other hand, Deloitte Argentina’s professionals are very well prepared to move to a wider remote working environment.
Regarding the tax environment, I believe that the tax authorities will quite likely target e-companies to get additional tax inflows to compensate for the downturn of conventional sectors in the economy, who have been hit hard by the pandemic.
4. Given the likely long-term implications of COVID-19 on things like remote working and digital retail, how do you see tax technology developing to accommodate this new reality and where do you think the next area of focus might be?
I can foresee tax technology developing at a swift pace to accommodate this new reality. Several technological and computerized tools will be introduced to automate information gathering processes, replacing manual procedures with the introduction of robots to enable more efficient and secure tax calculations and methods.
5. What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
The new law to promote the digital economy will have a big impact in Argentina.
Argentina is about to enact a law that establishes a promotional regime for the knowledge-based economy. The promotional regime will be in force from 1 January2020 to 31 December2029. Among the regime’s benefits is a reduced income tax rate of 15% for eligible taxpayers and activities.
The objective of this regime is to promote knowledge-based and digital activities that result in the manufacturing of goods, provision of services or improvement of processes.
The following activities are included in the promotional regime: software development and related activities (e.g. cloud computing, software as a service, help desk services exported to foreign markets), audio-visual productions, biotechnology, geologic services, professional services qualifying as service exports, nanotechnology, satellite and aerospace industries, artificial intelligence, robotics, internet of things (i.e. extension of internet connectivity to physical devices), medicine and agriculture-related investigations and experimental developments.
6. What are the potential outcomes that might occur if those changes are implemented?
Processes will be faster, and all activities not requiring complex tax planning or special tax work, which has to be carried out by highly experienced people, will be done by computers or other intelligent machines.
Tax firms will staff their teams with very skilled and knowledgeable personnel capable of doing tax work for almost all major countries.
Organizations will be more horizontal, and partners and staff will work in a more collaborative fashion. I do not envision getting less work but rather our services will be carried out with a different approach, which means a more sophisticated approach trying to cope with this new environment. Needless to say, we should prepare our human resources in order to attain such a goal.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Certainly, those changes will have a positive impact since tax professionals will focus on value-added services to serve their clients.
8. What legislative changes would you like to see be implemented that you think would have the most positive effect on your practice and the wider regional/jurisdictional market?
Our region (South LATAM) must enact new transfer pricing and international legislation to be in line with the increasing global economy. In addition, the region has not taken forward digital service taxes in the way that others have, although there are some countries that are updating their norms to the digital era. Legislation should enable the introduction of new technologies for tax calculations specially related to indirect taxes. Tax administrations also need new tools to expedite processes and evaluate taxpayers’ returns and other filings.
9. Do you think something like that is likely to be implemented in the near future?
I am unsure whether I can foresee legislative changes, which I think would have a positive effect on Deloitte Argentina’s practice (other than the Digital Economy Law Promotion Regime). As stated before, the potential changes in a prospective tax reform that might be sent to Congress, are more taxes and regulations.
However, recent events make me think that a digital service tax is in the pipeline in-sync with the international trend.
10. What have been the biggest developments in tax technology and where do you think the next area of focus might be?
The biggest developments in tax technology are tax automation software to accelerate processes. Software and services help in-house tax departments deploy good tax practice and better manage risk, freeing up staff to do more than just deliver the numbers. Tax automation software can scale up quickly to the size of the company, for a lesser cost. Such software integrates with leading Enterprise Resource Planning and financial systems to streamline the way companies manage sales, use, and excise taxes, VAT (Value Added Tax), and GST (Goods and Services Tax).
