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Personal Assets: Smart Strategies to Avoid Overpaying


Highlights: The annual festival of music takes place in New York City. This year's theme is the theme of the year. The festival is expected to be a celebration of the music of the U.S. music industry. The event will feature a number of different types of music, from electronic music to classical music to hip hop. It is expected that the festival will last until the end of the month. It will also feature a variety of music genres, such as pop, hip hop, classical music, electronic music, rap, jazz, blues, country music and more.

There are ways to organize the estate that allow you to avoid paying the lien. Some are riskier than others.

The end of the year is approaching and it is necessary to review what strategies are convenient to mitigate the effect of the Personal Property Tax and thus be able to meet the tax burden more efficiently.

What does this tax consist of, who is covered, what are its rates and what strategies could help taxpayers reduce their tax burden legally and effectively? Here is an attempt to answer these questions:

What is the Personal Property Tax?

It is a tax that falls on taxpayers who own assets located in the country and abroad as of December 31 of each year, provided that they are taxed in the tax and that they exceed a certain non-taxable minimum (MNI).

Since 2022, this MNI has been updated according to the variation in the CPI index between the months of October of the current year and the previous year. Although the AFIP has not yet published the updated amounts, thecalculation estimates that the new MNI for the 2023 fiscal period will be $27,377,408.28.

As for the rates to be applied, for the country's goods they vary according to a scale ranging from 0.5% to 1.75% and for foreign goods between 0.7% and 2.25%.

How Inflation and the Dollar Impact Personal Property

If we stop to analyze how these variables have evolved so far this year, we can see that there is a winner: inflation has been above the devaluation of the official dollar, but not so of financial exchange rates, such as the MEP dollar and the dollar counted with settlement.

Considering an estimated inflation for November of 14.5% then, the accumulated from January to November is 151.91% while the official dollar as of December 1, 2023 has appreciated only 103.50% and the financial dollars 176.80% and 162.80%, respectively.

At first glance it can be seen that the official exchange rate is lagging behind and that it is very possible that it will undergo a considerable correction between now and the end of the year.

That is why, in the face of a possible scenario of an increase in the official exchange rate before the end of the year, it is necessary to review certain strategies:

1) Review available assets and exemptions:

Taking advantage of the exemptions available in the regulations is crucial. Some involve a higher risk, it will all depend on each taxpayer:

  • House Room: For 2023, the dwelling house will not be taxed Personal Property up to the value of $ 136,887,041.42. If this amount is exceeded, the difference is subject to tax;
  • Rural real estate belonging to individuals and undivided inheritances both in the country and abroad. Special care must be taken about this particular exemption, as the Ministry of Economy, through a separata in the draft 2024 budget, would have advised analyzing the removal of this exemption for next year.
  • Securities, bonds and other securities issued by the Nation, the Provinces, the Municipalities and the Autonomous City of Buenos Aires. Although it is not an investment recommendation and each taxpayer must make their own financial analysis, investing in Argentine government securities not only serves to reduce the tax burden but also has high rates of return, all subject to the government of the day fulfilling its commitments and not restructuring the debt again.
  • Deposits in savings banks, fixed-term deposits or special savings accounts in Argentine and foreign currency made in banks (institutions included in the regime of Law 21526). Regarding this exemption, the president-elect's statements in recent days have brought a little more calm, as he has stated in the media that he rules out a "Bonex Plan", which means that bank deposits should not be at risk. For those who trust the Argentine financial system in the short term, it may be an option.

2) Repatriation:

At the same time, there is the option of repatriating funds from abroad in order to be exempt from the differential rate (2.25%) taxing all the assets, as if they were assets in the country.

The AFIP clarifies that repatriation is understood as the entry into the country of money in foreign currency held abroad and can be carried out until March 31 of each year, in this case 2024.

The important thing to note is that the total amount of the repatriated assets must reach at least 5% of the total assets located abroad as of December 31, 2023 and they must remain in the country until December 31, 2024, deposited in an account opened in the name of their holder in a financial institution or for a fixed term.

Most of the alternatives proposed to reduce the burden of the Personal Property Tax have a certain financial risk and it will depend on the profile of each taxpayer whether to take them or not.

There are 4 days left until the inauguration of the new president-elect and it is still a question what will happen to the official exchange rate, which is used to value goods in foreign currency. Surely, in the event of a significant devaluation, it would be a good option to take one of the suggested proposals. It will be key not to reach the end of the year with homework to do.

Enzo Celleri is Tax Director at Lisicki Litvin & Asoc

Source: clarin

All business articles on 2023-12-06

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