Tax inflation adjustment - Points to consider

ARGENTINA - Tax inflation adjustment - Points to consider

September 2019

In Argentina, Financial Statements for periods ending after 1 July 2018 must be published using homogeneous values, but the following information is important from a tax viewpoint.

Law 27468 (B.O. 04/12/2018) introduced certain changes in order to apply the comprehensive tax inflation adjustment, namely:

(i) The general consumer price level (CPI) was set as the index to use; and

(ii) It will apply for periods beginning on or after 1 January 2018, provided that the variation of this index, calculated from the beginning to the end of each fiscal year, exceeds 55% for the first fiscal year, 30% for the second, and 15% for the third.

Under certain circumstances, the inability to apply the adjustment from a fiscal point of view results in a tax on nominal earnings. In view of this, companies should consider the option of taking legal action to mitigate this effect.

In general, tax is imposed on nominal earnings in any of the following circumstances:

• Acquisitions of fixed assets for significant amounts

• Sales or other receipts in local currency

• Low turnover of inventories

• Long term (over a year) production processes.

In view of the above-mentioned factors, economic groups with subsidiaries in Argentina must verify the impact of inflation in terms of Income Tax in order to avoid being subject to tax on fictitious earnings.

Guillermo Jaime Poch

Alberto Fabián Mastandrea