On June 3, 2013 was published in the Official Gazette Law 26.860 (the “Law”) which provides the voluntary disclosure of foreign currency regime (the “Regime”), whether it’s in the country or abroad.
The Law sets up the creation of three financial instruments that will be used to disclosure the foreign currency. For the purpose of the issuance of such instruments, the Law authorizes the Ministry of Economy and Public Finance to issue “The Argentine Bond for Economic Development (BAADE)”, to be registered or bearer, with a four per cent (4%) interest rate and due on 2016, and “The Promissory Note for Economic Development (PADE)”. Both instruments will be denominated in U.S. dollars and their financial conditions will be determined at the time of issue.
Also, the Law authorizes the Central Bank of Argentina (“BCRA”) to issue “The Certificate of Deposit for Investments (CEDIN)”. The CEDIN will be denominated in U.S. dollars as well and it will come into force since July 1, 2013. It will be an endorsable order instrument, being itself an ideal medium to cancel payment obligations. The CEDIN will be cancelled in the same currency issued by the BCRA or the corresponding institution, against presentation by its holder or endorsee. Finally the Law orders that the cancellation of the CEDIN will be subject of the prior accreditation of the following real state transactions: purchase of land, sheds, business premises, office spaces, parking spaces, lots of land, parcels and already constructed housing units and/or repair of real property.
Regarding the subjects enabled to disclose foreign currency, the Law provides that individuals, undivided estates and all persons included in Section 49 of the Income Tax Law may adhere to the regime, among which there are: companies, corporations, civil associations, sole proprietor business, trusts, mutual funds and certain commercial agents, among other persons included in the third category of income.
On the basis of the mentioned paragraph, the Law provides a category of excluded subjects from joining the new regime: 1) those declared bankrupt; 2) those criminally sued or accused of crimes provided by the criminal tax regime, in respect of whom a financial judgment has been issued prior to the coming into force of the Law; 3) those who have been criminally sued or accused of ordinary crimes related to the non performance of their own or third parties’ tax obligations, in respect of whom a financial judgment has been issued prior to the coming into effect of the Law; 4) those accused of crimes related to money laundering or financing of terrorism transactions, their spouses and blood or affinity relatives up to the second degree, both in ascending or descending lines; 5) legal entities where their partners, managers, directors, statutory auditors or members of the supervisory committee have been sued or accused of crimes provided by the criminal tax regime or ordinary crimes related to the non performance of their own or third parties’ tax obligations, in respect of whom a financial judgment has been issued prior to the coming into effect of the Law; 6) those holding a public office currently or in the past, their spouses and blood or affinity relatives up to the second degree, both in ascending or descending lines.
On the other hand, regarding on how to make the disclosure of foreign currency, the Law establishes that it will be made by means of a deposit in a financial entity or by a transfer to the country whether if the foreign currency is in the country or abroad, respectively. Both procedures must be made within the term of three month after the publication of the Law.
Regarding the benefits arising from the voluntary disclosure, the Law guarantees that subjects who adhere to the regime:
a) Won’t be obligated to report to the Argentine Tax Authority (“Tax Authorities”) the purchase date of the holdings neither the source of funds used to acquire them.
b) Will be exempted from payment of the following taxes: Income Tax, Tax on the Transfer of Real Estate owned by Individuals or Undivided Estates, Tax on Debts and Credits on Bank Accounts and Other Transactions, Internal Taxes, Value Added Tax, Minimum Presumed Income Tax, Personal assets Tax and Special Tax on the Assets of Cooperative Associations.
c) Will be released from any civil, commercial, criminal tax, administrative, criminal exchange and professional action that could apply to them in connection with the funds disclosed, since the amount discloses won’t be considered as an unjustified increase of assets.
As for the partners of those companies, corporation or sole proprietor business located in the country that made a disclosure, they will be released from the Income Tax corresponding to their interests.
The deadline to adhere to the regime will be until September 3, 2013. As a requirement for the use and enjoyment of the benefits provided by the Law, the disclosing person must have complied with the filling and payment, as of May 31, 2013, of his/her obligation under the Income Tax, Minimum Presume Income Tax and Personal Assets Tax to the fiscal years ended until December 31, 2012, inclusive. For tax purposes, the amount of foreign currency shall be determined at the bid price of the National Bank of Argentina applicable on the day the deposit is done.
Finally, the Law suspends for the term of one (1) year the prescription of the action to determine or demand payment of taxes which enforcement, perception and supervision are in charge of Tax Authorities and to apply fines related to them. Also, the term for the expiry of jurisdiction is also extended one (1) year.
The Law came into force in June 11, 2013.