Personal Assets: in which cases the tax reduction benefit does not apply to those who decide to repatriate funds that are abroad

[Inkriql]

The regulation of the Personal Assets tax for 2019, which must be declared in the next year, explained that the special rates that taxpayers who have goods abroad must pay for the country will go to a minimum of 0.7% (for goods up to $ 3 million) up to a maximum of 2.25% (for goods for $ 18 million and up). But as a novelty, it was arranged that taxpayers who decide to bring 5% of those goods to the country will pay the same rates as for the goods in the country, ranging from 0.5% (more than $ 3 million) to 1, 25% (from $ 18 million and up).

According to decree 99/2019 published on Saturday, December 28, which regulates the Law of Social Solidarity and Productive Reactivation, repatriation must be carried out before March 31, 2020 and maintained in an account in the financial system until December 31, this year. However, the benefit will not apply to all cases. For example, for people who have real estate or bonds abroad.

“One option is that when the tax is settled, which is probably in June 2020, the funds will be declared as of March 31. The decree says that the benefit is to the extent that conditions are met such as keeping the money deposited in an account in a financial entity until December 31 of that year. If the funds are withdrawn before, the benefit is lost and the tax entry obligation is reborn, ”explained the taxpayer Sebastián Domínguez, partner of SDC Tax Advisors. The other possibility is that you pay the entire tax and then return the corresponding for the repatriation, but it should not be so. "

In which cases would it not apply for the benefit of reduced scales due to repatriation?

Dominguez explained that to obtain the benefit, the repatriation must correspond to the possession of cash or the sale of some financial asset as of December 31. But not for real estate.

Here are three examples:

- The taxpayer has two properties outside the country. On March 1, 2020, he sold one of the properties and on March 15, 2020 he turned the funds over to the country. He leaves them deposited until January 2 in a dollar savings account open in his name in a bank. In that case, you must pay the tax for real estate abroad considering the increased rates, since the repatriation of funds does not correspond to the realization of financial assets but of real estate.

- Goods abroad include money deposited in a bank account and a real estate, which represent 10% and 90% respectively. On March 20, 2020, he transfers money deposited in the bank account that represents 5% of the total value of the goods abroad to a dollar savings account in his name. Having repatriated financial assets for 5% of the total value of the goods abroad, you will enjoy the benefit of not applying the increased rates set by the Executive Branch both for the balance of the bank account and for the value of the property.

- A person has shares of foreign companies and public securities issued by foreign countries deposited in an account in a Foreign Investment Bank. On February 5, 2020, 100% of the indicated holdings are transferred to a client account opened in a financial institution in Argentina. Although it repatriated the financial assets, in order to enjoy the benefit, the decree requires that the repatriation be of possession of foreign currency or the proceeds of financial investments. Consequently, the benefit does not apply. The tax must be taxed with increased rates.

When can it be more convenient to repatriate funds?

The savings that can be obtained by repatriating funds can be very significant for taxpayers with large sums of money outside the country. For example, a person who has USD 500,000 in an account abroad ($ 32.5 million with the exchange rate at $ 65) would pay $ 731,250 of taxes with a 2.25% rate or $ 406,250 with a 1.25% rate obtained thanks to repatriation. A difference of $ 325,000 million.

In addition, in a possible scenario of devaluation of the peso throughout 2020, it is probable that the amount that the taxpayer must repatriate to obtain the benefit according to the moment in which the funds are brought will decrease. According to the SDC Tax Advisors study calculations, in the case of USD 500,000, with an exchange rate of $ 65 per dollar, USD 25,000 must be repatriated. But with an exchange rate of $ 70 per dollar, the amount is USD23,214 and if it is $ 75 they become USD 21,666.

As March 31 approaches, if it is assumed that the peso will continue to be devalued, less dollars will need to be repatriated to cover 5% of the value of the estate because it must be calculated in pesos. The decree does not speak of 5% in the same currency of the goods, ”said Dominguez.

At the local level, money - pesos or dollars - deposited in a savings account or fixed term does not pay the tax. Therefore, some of the people who have money in their homes or in safe deposit boxes decided to deposit them in an account before December 31. But for those who were still in doubt about the convenience of performing this operation, the novelty of the benefits for repatriation can be an incentive. “The repatriation, of bringing 5% of the goods from abroad before March so that the new scales are not applied, implicitly gives peace of mind for those who want to deposit the dollars in a savings account as of December 31. If the government is motivating a repatriation as of March 31, it is less likely that there will be any confiscation or exchange for titles, ”Dominguez added.