This afternoon the Executive Branch sent to Congress the bill called the Law of Palliative and Relevant Fiscal Measures. It is the famous “fiscal package” that was originally incorporated as part of the Omnibus Law and was later withdrawn, to propose a specific treatment.
The official initiative proposes substantial changes in the
monotribute
and the
personal property tax
, while reintroducing the
Income Tax,
reversing the exemptions that former minister and former candidate Sergio Massa had approved last year.
In addition, it offers the possibility of new
money laundering
and a
tax holiday.
The details of these initiatives are as follows:
Income Tax: The floor is $1,800,000
Employees who earn more than $1,800,000 gross per month (that is, about $1,500,000 net) in the case of those who do not have minor children, or more than $2,200,000 gross ($1,950,000) net) with 2 children will pay the Income Tax if it is approved as appears in the draft of the bill with fiscal measures that the Government sent on Tuesday to governors and deputies.
These calculations are by Fernando López Chiesa, from Estudio Lisicki, Litvin y Asociados, who clarifies that all payments received by workers, such as overtime, bonuses, long-distance travel expenses (truck drivers), Patagonian zone, are included in the calculation of the tax.
And the non-taxable minimum and the tax scales during 2024 will be updated “at the discretion of the Executive Branch. From 2025 they will be updated annually by the Consumer Price Index (CPI).”
In previous versions of this project, the quarterly adjustment due to the variation in the CPI, that is, inflation, was contemplated.
In turn, these new values will be applied from the approval of the project, not retroactively.
The project eliminates the salary floor promoted by Sergio Massa and currently in force of $2,340,000 gross (15 Minimum Salaries, Vital and Mobile - SMVM) in the law that the Milei government plans to replace. Thus, we will return to the previous scheme.
This means that some 800,000 workers currently exempt from Profits would once again pay the tax at rates ranging from 5 to 35%. In values that start at almost $3,000 per month up to about $60,000 per month for those who are exempt today. And that exceeds $100,000 per month for those who earn more than $2,500,000 gross.
The project ratifies the tax relief that was applied between October 1 and December 31, 2023 (Decree No. 473/2023), which means that there will be no retroactive withholdings.
To prevent what was paid for Profits this year until the law is passed from being withheld, “the project contemplates a special deduction so that employees do not have to pay more than what they have paid from January 1 to the last day of the month. immediately prior to the validity of the reform,” clarified the specialist Sebastián Domínguez.
In the case of the self-employed, the non-taxable minimum is lower: $1,159,138 net for singles without children and $1,644,327 net for married people with 2 children.
For retirees and pensioners, the Earnings exemption is maintained at 8 minimum assets which, in April, are $1,370,266.
All payments received will pay Profits
A novelty of the project is that it incorporates as part of the tax base of the tax all payments received by workers in a dependency relationship (whether paid by their employer or by a third party) and established exemptions or reductions will not be applied to calculate the tax. by other regulations, with the sole exception of law 26,176 applicable to oil workers.
“The different concepts that under the name of benefits (social or of any other nature) and/or fuel vouchers or for any other concept, extension or authorization of use of purchase and/or credit cards, housing, recreational trips or rest, payment of family group education expenses or other similar concepts, whether granted by the employer or through third parties in favor of his dependents or employees, are covered by this tax, even when they are not remunerative in nature for the purposes of the contributions and contributions to the Argentine Integrated Pension System (SIPA) or similar provincial or municipal regimes,” the project specifies.
There will be no more exemptions
The following exemptions and deductions, among others, are void:
Exemption from the bonus for productivity, cash failure or similar concepts (up to 40% of the Non-Taxable Minimum)
The exemption from particular supplements for military personnel is annulled.
The obligation to add one-twelfth of the remuneration is eliminated, a situation that currently generates the advancement of the withholding corresponding to the future bonus," clarifies Sebastián Domínguez.
The exemption for remuneration for on-call and overtime work performed by professionals, technicians, assistants and operational personnel of health systems
No type of exemption or deduction established by law will be applicable, except for oil workers - well personnel - (Law 26176)
The deduction for mobility expenses, travel expenses and other similar compensation is void.
Differential treatment for taxed overtime is eliminated.
The project repeals the 22% increase in deductions for workers and retirees who reside in the Patagonian area. This affects workers and retirees in the province of La Pampa, Río Negro, Chubut, Neuquén, Santa Cruz, Tierra del Fuego, Antarctica and the South Atlantic Islands and the Patagones district of the province of Buenos Aires.
Due to the application of the caps to mandatory discounts - retirement, health -, a single employee will not pay income tax if his gross remuneration is up to $1,744,175 and net of $1,494,000 and a married employee with 2 children, You are exempt if your gross remuneration is up to $2,231,452 and net compensation is up to $1,981,277, Domínguez says.
Higher amounts to be able to join the monotax
The official Monotributo project that the Government sent to Congress increases both the billing levels and the monthly fee to be paid compared to the drafts that circulated weeks ago. And it extends the billing limits for locations and services, with new categories for this segment, equaling them to the sale of furniture.
The maximum level of annual billing according to the categories would be the following: .
*A: From $2,108,288.01 to 6,450,000: + 206%
*B: From $3,133,941.63 to 9,450,000: + 202%
*C: From $4,387,518.23 to 13,250,000:+ 202%
*D: From $5,449,094.55 to 16,450,000: 202%
*E: From $6,416,528.72 to 19,350,000: +202%
*F: From $8,020,660.90 to 24,250,000: + 202%
*G: From $9,624,793.05 to 29,000,000: + 201%
*H: From $11,916,410.45 to 44,000,000: + 269%
*I: From $13,337,213.22 to 49,250,000: + 269%
*J: From $15,285,088.04 to 56,400,000: + 269%
*K: From $16,957,968.71 to 68,000,000; +301%.
The total monthly fee to pay (tax, retirement contribution and health) would have the following values (locations and services)
• A: 12,128.39 to 26,600: + 119.3%
• B: 13,561.75 to 30,280; +123.3%
• C: 15,503.51 to 35,458: + 128.7
• D: 19,497.94 to 45,443.80: +133.1
• E: 26,945.97 to 64,348.18; +138.8%
• F: 33,137.61 to 80,983.00: 144.4%
• G: 38,694.95 to 123,696.20: + 219.7%
• H: 66,111.51 to 280,734.68: + 324.6%
• For the remaining 3 categories that are added to location and services, the fees are $517,608.55, $626,931.97 and $867,084.75 per month.
With these values, if approved, it is possible that some monotributistas will not have to upgrade their category and some may even be recategorized to a lower category. In any case, these increases ranging from 200 to 300% are added to the increases in rates, school fees and prepaid bills that are affecting the middle class.
For Gabriela Russo, President of the Professional Council of Economic Sciences, the increase in billing levels is positive "considering that the Monotax has a lag in updating, since its adjustment factor is the retirement mobility index that did not accompany the growing inflation of the last years"
Another substantial change, added Russo, “has to do with the unification of categories for the sale of goods and provision of services. In the current regime, categories I, J and K apply to the sale of goods exclusively in order to cover sales costs that are usually higher than those attributable to the provision of services. This unification is positive for service providers who expand their margin of permanence.”
Russo concluded by pointing out that “the new project does not contemplate a quarterly CPI update factor, which I understand is covered by the more than proportional increase in the income parameter. However, it is always positive to have an automatic adjustment mechanism and not depend on the discretion of the Government Administration for its correction. It should also be clarified that the Project does not refer to re-entry into the Monotax for those who were excluded during this time. It will surely be subject to regulation by AFIP.”
For his part, Fernando Lopez Chiesa, from Estudio Lisicki, LItvin y Asociados, says “that these changes will allow many monotributistas to remain in this simplified system without moving to the Regime of Responsible Person Registered in VAT and Profits, which implies a cost between "6 and 7 times more than the Monotributo, added to a significant monthly administrative burden."
Facilities and lower rates for Personal Property
Among the eight measures contemplated in the new fiscal package, the Government included a strong reduction in Personal Assets. The changes contemplate a reduction in the floor from which the tax begins to be paid, a decrease in the rates and also gives the option of advance payment of 5 years with a reduced rate, an initiative that seeks to anticipate the income collection and thus comply with the fiscal adjustment agreed with the Monetary Fund in 2024.
According to the project sent by the Executive to governors and legislators, the non-taxable minimum will rise from $11 to $100 million and the deduction for family housing will go from $56 to $350 million, which implies that the taxpayer base will be reduced. reached. But in addition, these amounts will not be outdated because they will be adjusted each year based on the annual variation in inflation published by the INDEC.
Another benefit is the gradual reduction of the scale of progressive rates, eliminating the existing discrimination for goods located abroad. For fiscal year 2023, the maximum rate proposed is 1.5%, which will be gradually reduced until reaching 0.25% in 2027, below the 0.75% provided for in the December project and from the minimums in previous years.
Since its creation in 1991, the tax was extended for nine periods and the last time until 2027. In general, the rates remained between 0.5% and 1.25% until Alberto Fernández's management raised it to 2.25% for goods from abroad, which made its collection equivalent to 0.76% of GDP in 2020, while the previous average collection did not exceed 0.3% of GDP, according to the Edelstein, Mariscal, study. Torassa & Asoc.
Thirdly, a special regime is created that allows the payment to be advanced for 5 years (from 2023 to 2027) in an installment with a reduced rate of 0.45% per year for the assets that exceed the non-taxable minimum, and subsequently it will be of 0.25% of the surplus until 2028. In the case of taxpayers who enter assets into "laundering", the rate will be 0.5%. Thus, the former will pay 2.25% for five years and the latter, 2% for four years.
The advance will not require submitting sworn declarations and will enable fiscal stability until 2038 for Personal Assets and any other national tax that taxes any asset. However, "since this reform is established by law, there is nothing to prevent Congress from deciding to repeal it in the future and increase the burden on the property tax, as happened with Alberto Fernández," said Darío Rajmilovich, partner at Expansion Holding.
On the other hand, taxpayers who have fulfilled their obligations between 2020 and 2022 and do not adhere to the "money laundering" will have a reduction of 0.25% in the rate for 5 years (2023 to 2027).
The reduction in Personal Assets goes hand in hand with the "laundering" provided for in the fiscal package, which contemplates the payment of a 0% rate of the special tax for those who regularize more than US$ 100,000 and leave them in the financial system. Like Mauricio Macri, Javier Milei's tax reform aims to encourage the repatriation of capital that evaded taxes in order to alleviate reserves and improve collection.
Due to the recession, collections in the first quarter were the lowest in a decade. To achieve fiscal surplus, the Government strongly adjusted spending and now seeks to raise taxes (Profits and Monotax) and recompose resources (Moratorium, Personal Assets and Money Laundering). "They first seek to have a volume of income that they do not have today, look at the moratorium and with Personal Assets, too," said Martín Caranta, partner at Lisicki Litvin & Asociados.
Thus, according to the specialist, the changes in Personal Assets aim to: 1) generate money today with advance payments, 2) make money laundering more attractive with a tax reduction, or make it not an obstacle, and 3) avoid that future taxpayers will be tempted to go to another jurisdiction, with the reduction of the rates. Together, the fiscal measures could contribute 1% of GDP, which is equivalent to about US$5 billion.
Tax moratorium
The fiscal package that will be sent to Congress includes a broad moratorium that will allow tax and social security obligations due as of March 31, 2024 to be paid in up to 84 installments with various benefits such as the forgiveness of all fines and up to 70% of interest on balances owed, depending on the payment method.
Along with the reversal of the Income Tax for workers and money laundering, the Government seeks to improve collection and "balance its tax accounts", since the tax pressure "led to non-compliance with tax obligations by these companies , which greatly damaged tax collection," according to the text message.
In this framework, the planned moratorium contemplates debts for a longer period than the previous initiative rejected last February by Congress (previously it was until November 30, 2023), the deadline to adhere is 150 days from the entry into force. of the regulations and pending obligations for the wealth tax (solidarity contribution) may be included.
Debts included in payment facility plans - expired or not - and in administrative and judicial discussion will be taken into account, providing for these cases the extinction of the criminal action once the entire debt has been paid, to the extent that there is no sentence. firm on the date of cancellation, according to the Edelstein, Mariscal, Torassa & Asoc study.
The benefits will depend on the payment method and terms. In the case of cash payment (or three-installment plan), adhesion in the first 30 calendar days will enable the forgiveness of 70% of the compensatory and punitive interest accrued; From 31 days of validity and up to 60 days, 60% interest will be forgiven; and if the adhesion is from 61 days of validity to 90 days, the reduction will be 50%.
In the event of canceling debt with a payment facility plan, the forgiveness will be 40% of the interest if the adhesion occurs within 90 calendar days of its validity, and 20% after 91 calendar days. For obligations that are regularized as of March 31 in payment plans, the reduction will be 30% of interest on the consolidation date, to then be able to apply the benefit of cash payment methods.
For payment plans, individuals (unless they qualify as SMEs) will make an advance payment of 20% of the debt in up to 60 monthly installments; MSMEs, 15% in up to 84 installments; medium-sized companies, 20% in up to 48 payments; and the rest of the taxpayers, 25% in up to 36 installments. The financing rate will be calculated based on the commercial discount rate of Banco Nación.
Money laundering
The Government revived extensive "laundering" of capital in the fiscal package that it will send to Congress along with the new Bases Law project. After the failure of a previous initiative last February, the new mechanism contemplates the payment of progressive rates from 0 to 15% and the possibility of regularizing undeclared assets greater than US$ 100,000 without paying the special tax, in exchange for meeting certain conditions. .
These are the main keys of the initiative:
1) Who does money laundering affect?
Residents and non-residents may externalize assets in Argentina and abroad. The tax to be paid will be in dollars and will be calculated on the total value of the assets that are regularized through this regime, according to a mechanism of progressive rates and decreasing benefits, although those who meet certain requirements may also be exempt from the tax, beyond of the amount they enter.
2) How much do you have to pay?
The project establishes that assets for up to US$100,000 will have a 0% rate, while higher amounts will pay increasing rates depending on the time they are received. In the first stage, which will last until September 30, 2024, the rate on the surplus will be 5%; in the second stage, until December 31, 2024, it will be 10%; and in the third, until March 31, 2025, 15%.
It is also zero rate for amounts greater than 100 thousand dollars, as long as you enter it into the Argentine financial system and do not withdraw it until 12/31/25, or allocate it to certain types of investments to be defined by the executive power.
3) What are the exceptions?
The regime provides for "special exclusion subjects" from paying the tax. Thus, amounts deposited greater than US$ 100,000 will not pay said tax either as long as the funds remain deposited in special accounts of the Argentine financial system until December 31, 2025, or are destined for "financial instruments" to be defined by the Executive power.
4) What can be regularized?
For goods in Argentina, cash in pesos or dollars. Real estate, shares, quotas and participation in companies, rights of beneficiaries of trusts or shares of common investment funds, bonds, negotiable obligations, certificates of deposit in custody, credits of any type or nature, rights and other intangible assets and credits. Assets abroad also include cryptocurrencies.
5) Do I have to pay other taxes?
Unlike taxpayers who comply with their obligations, those who regularize undeclared assets will be freed from all civil action and for tax, exchange, customs and administrative infractions, as well as will be exonerated from paying taxes that they had omitted to pay (profits, internal taxes, VAT, Personal Assets and the extraordinary contribution, called Wealth Tax).
In the case of Gross Income, it is different because it is a provincial tax and will depend on the provinces that adhere to the regime. In this way, if, for example, Córdoba decided not to adhere and obtained information from a taxpayer who pays income for assets not declared to the regime, the province could claim payment of Gross Income for the omitted sales.
6) Why are they launching a new whitewash?
The Government seeks to increase reserves and collection as part of the agreement with the Monetary Fund to achieve fiscal surplus in 2024. It is estimated that the fiscal package could contribute US$ 2.5 billion (0.5% of GDP) through the reinstatement of the tax on Profits to employees and resources obtained from laundering and advances in Personal Assets, with the granting of tax benefits to higher-income sectors.
The project became known last night after the President raised the need for greater facilities to launder undeclared funds. "That 50 thousand dollars can be used without problems seems fine to you. If they want them to use 50 green sticks, I don't give a damn (...) We will have to do a more flexible laundering so that they can launder," said Javier Milei on Monday in a interview with Neura.
Argentina has already ordered at least seven whitewashes since the return of democracy. Cristina Kircher's management did so for US$4.7 billion in 2009 and US$2.6 billion between 2013 and 2015. Mauricio Macri regularized US$100 billion and Sergio Massa promoted a money laundering regime in construction. In most cases, the collection represented no more than 5% of what was declared.