On September 11, 2025, Division V of the National Chamber of Appeals in Federal Administrative Matters (the “Chamber”) rendered a decision in the case “Norauto Argentina SA (Tf 35897-I) c/ Dirección General Impositiva s/Recurso Directo de Organismo Externo”, upholding the decision of the National Tax Court (the “Tax Court”), which held that the absorption of losses through irrevocable capital contributions does not give rise to tax consequences.
The case
The Tax Authority assessed, ex officio, an adjustment to corporate income tax and imposed a penalty for omission on Norauto Argentina S.A. (“Norauto”) for failing to report as taxable income the revenue allegedly obtained from the “forgiveness” of irrevocable contributions made by its controlling company to absorb losses in fiscal years 2006–2007. The Tax Authority argued that such irrevocable contributions should be treated as a “gratuitous enrichment.”
Norauto filed an appeal before the Tax Court, arguing that the transaction constituted a capital movement rather than a transaction generating results, whether profits or losses.
According to the expert accounting report, the extraordinary shareholders’ meeting resolved to increase the company’s share capital through the capitalization of the inflation adjustment of share capital accounts and irrevocable contributions, after deducting unallocated negative results. As a result, the aggregate of both accounts plus the existing share capital amounted to a figure equivalent to the share capital existing in the prior fiscal year (2005).
Relying on the precedent “Flint Ink Argentina SRL”, which held that irrevocable contributions intended to absorb losses do not constitute taxable income, the Tax Court decided to overturn the Tax Authority’s ex officio assessment, as no gratuitous enrichment had been proven, given that there was neither a forgiveness of contributions nor an increase in net worth as a result of the absorption of losses through shareholders’ irrevocable contributions.
The Tax Authority appealed the Tax Court’s decision.
Decision of the Chamber
The Chamber once again cited the “Flint Ink Argentina SRL” precedent and concluded that allocating irrevocable contributions to the creation of a voluntary reserve to absorb losses does not entail a quantitative change in net worth, since such contributions do not form part of the company’s liabilities at any time and therefore constitute a “mere reclassification among its components.”
With respect to the alleged forgiveness, the Chamber emphasized that both the shareholders’ meeting minutes and the accounting expert evidence showed that the cash contribution was intended for the company’s business activity and had a definitive nature, clearly reflecting the controlling shareholder’s intention to make an irrevocable contribution pending its capitalization for the purpose of absorbing losses. Accordingly, for tax purposes, it could hardly be considered a loan capable of being subsequently forgiven and thus generating an increase in net worth subject to income tax.
Therefore, the Chamber rejected the appeal filed by the Tax Authority and upheld the first-instance decision.
