September 23, 2019
Argentina establishes early VAT reimbursement procedure for fixed-asset investments
On 18 September 2019, Argentina’s Government published, in the Official Gazette, General Resolution 4,581/2019 (GR 4,581), which establishes the early reimbursement procedure for Value Added Tax (VAT) associated with fixed-asset investments. Argentine companies should review the new procedure and determine whether it might provide them with an opportunity to improve their working capital position. GR 4,581 was effective 18 September 2019.
Law 27,430 created a new system to reimburse VAT credits resulting from the purchase, manufacture, preparation or import of fixed assets (other than automobiles). The reimbursement applies to VAT credits remaining after six months. For more information on Law 27,430, see EY Global Tax Alert, Argentine tax reform: A review of key provisions, dated 10 January 2018.
The budget law will set forth the quota for VAT credit reimbursements each year. For 2019, the quota is set at approximately US$250 million. VAT credit reimbursements will be prioritized from the oldest VAT credits to the newest.
The VAT credit reimbursement applies to: (i) existing investments in fixed assets that are treated as depreciable assets for income tax purposes; and (ii) the extent the invoices from which the VAT credits arise were issued after the early reimbursement procedure was established. For construction and goods in production, reimbursement will be available for input VAT incurred after 1 January 2018.
To be eligible for the reimbursement, taxpayers must have VAT credits from the purchase, manufacture, preparation or import of fixed assets (other than automobiles), and the VAT credits must still exist after six months. Additionally, taxpayers must prove that they have complied with their tax filing obligations, and their information is up to date in the tax authorities’ various registries. Taxpayers also must have a special report from an Argentine Certified Public Accountant that sets forth the fixed assets included in the reimbursement request and the reasonability, existence and legitimacy of the VAT credits.
Taxpayers must file annually the reimbursement claim through the tax authorities’ website from 1 through 10 December. The electronic system will indicate if the taxpayer is eligible to access the annual quota.
The tax authorities will analyze the reimbursement request and will issue a notification to the taxpayer approving or denying the benefit. Taxpayers that were not eligible for a reimbursement because the quota was not big enough in a given year may make a new request in the following year to try to start the process again.
As indicated by Law 27,430, the reimbursement will be subject to the condition that the VAT credit reimbursement will be absorbed within 60 months, through VAT payable for local transactions or VAT reimbursements related to exports. If such condition is not met, the taxpayer will be required to reimburse the tax authorities for the amount that did not meet the condition, plus the related interest and penalties, if any.
Companies doing business in Argentina should evaluate the new VAT benefit and assess the potential benefits in relation to their past and future investments.
For additional information with respect to this Alert, please contact the following:
Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific