(Tecpetrol, 1.Nov.2018) — On December 28, 2017, the President promulgated Law No. 27.430; and on December 29, 2017, such Law was published in the Official Gazette. Among other topics, under Title I, Law No. 27.430 introduces several modifications to the income tax law, namely:
- INCOME TAX RATE: income tax rates for Argentine companies are reduced from 35% to 30% for all fiscal years commencing as from January 1, 2018 and until December 31, 2019; and to 25% for all fiscal years commencing on or after January 1, 2020.
- TAX LEVIED UPON DIVIDENDS: an additional tax will be levied on dividends or profits distributed, among others, by Argentine companies or permanent entities to physical persons, undivided estates or foreign beneficiaries, pursuant to the following schedule: (i) 7% dividend withholding tax for distributions of profits accrued for years commencing between January 1, 2018 and December 31, 2019; and (ii) 13% dividend withholding tax for distributions of profits accrued for years starting on or after January 1, 2020. Dividends arising from benefits obtained up to the year prior to the one commenced on or after January 1, 2018 shall remain subject, for all beneficiaries, to the 35% withholding tax on the amount exceeding distributable accumulated profits which have not paid income tax.
Under Title X, Chapter I; Law No. 27.430 also sets forth an optional tax revaluation. According to the new legislation, the companies might, at their option, reevaluate their assets located in the country that are affected by taxable profits. The companies that elect to be included in this regime will be subject to a special tax that will depend upon the different rates applicable to the different assets: real estate not accounted for as Inventories –8%; real estate accounted for as Inventories – 15%; other assets – 10%. Once the option is exercised in relation to a specific asset, all other assets of the same nature must also be revaluated. The abovementioned special tax is not deductible when assessing income tax. Tax profit or losses originated by the revaluation are not subject to either income tax or minimum notional income tax. The Executive Office regulated Title X, Chapter I of Law No. 27.430 and the Federal Administration of Public Revenue (Administración Federal de Ingresos Públicos, AFIP) issued the related regulations determining the operating aspects which will allow for the payment of the special tax.
As of the date of these Financial Statements, the Management of the Company is still assessing the exercise of the option, which can only be used once.
Moreover, Law No. 27.430 establishes that acquisitions of or investments in goods carried out during fiscal years commencing as from January 1, 2018, shall be updated upon the base of percentage variation of InternalBasic Price Index Wholesale (Índice de Precios Internos al por Mayor, IPIM) as indicated by the Argentine National Institute of Statistics (Instituto Nacional de Estadística y Censos); situation which increases deductible depreciation and cost in the event of sale. On October 24, 2018, the Chamber of Deputies approved the bill that replaces the IPIM with the Consumer Price Index (Índice de Precios al Consumidor).
Note: Details herewithin are from a 2018 quarterly financial filing from Tecpetrol.
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