Personal Property: who wants to repatriate capital?

This Tuesday was the last day to enter special bank accounts in Argentina for at least five percent of the assets that Argentines have abroad, to avoid paying the aggravated rate of the Personal Assets Tax.

But, as in the midst of the coronavirus emergency there are practical difficulties in completing these operations, the expectation is that Afip will extend the deadline. Who did not repatriate, tomorrow would have to pay a payment on account for 2019.

The difference in the amount of the lien is significant. For the 2018 financial year, the rate was 0.25 percent, but at the end of last year a progressive rate of between 0.5 and 1.25 percent was implemented for local goods, and aggravated (between 0.70 and 2.25 percent) for foreign goods. The maximum is paid by assets over 18 million pesos (about 300 thousand dollars, at the official valuation).

“The repatriation is having technical problems today (yesterday) and that is why it is very likely that the Afip will extend it. The person has to open a special bank account, and not all entities have systems in place to open accounts remotely, ”explains Sebastián Domínguez, partner at SDC Asesores Tributarios.

The taxpayer adds that “there are also delays in accrediting the funds of those who have already transferred the dollars from abroad, with problems that affect the operation of foreign trade,” he points out.

They also complicated the changes of March 19, which made it easier to open special accounts, but forced banks to change their systems just as the mandatory quarantine began.

Financial analysis

Going from paying 0.25 to 2.25 percent is a huge increase in tax burden on taxpayers. Leticia Tolosa, vice president of Petrini Valores, points out that “in the financial analysis, repatriation is convenient”, because by entering the country five percent of the assets abroad, the rate is lowered to 1.25 percent. And it exemplifies: “If I had a United States Treasury bond that last year yielded 1.5 percent, if I pay 2.25 today, it is eating up capital.”

In any case, he acknowledges that “the problem may be due to a lack of liquidity.” Here it must be considered that repatriation involves transferring dollars that were in a foreign account to the country. Whoever has financial or real estate assets, but no money, should sell them to repatriate. The issue is that, with the pandemic and with the oil war, international prices collapsed and today it is not convenient to sell anything.

Another question that taxpayers raise is what they do with the repatriated dollars. The regulations allow four alternatives.

The first: sell the dollars and transfer them to pesos in the single market, free of exchange (at the official exchange rate, which is now around 64.5 pesos).

The second: keep them in the account until December 31, 2020.

The third: invest them in special mutual funds (FCI).

And the fourth: in a trust of the Investment and Foreign Trade Bank (Bice).

“Since dollars have to be sold in the official market, this option is not convenient, but there is no problem keeping them in the account until the end of the year,” says Tolosa. “The issue is that there are people who are suspicious, because the situation is uncertain in the country. They also don’t want to give money to Bice. Anyway, you can invest in an FCI, which is being launched these days; and it doesn’t have to be now ”, he adds.

Print edition

The original text of this article was published on 03/31/2020 in our printed edition.