The rush to inject fresh dollars into the thirsty Argentine economy does not stop with the offer for some sector of a different exchange rate. After the information agreement that the Economy Minister, Sergio Massa, signed with the United States Ambassador, Mark Stanley, the Government is preparing a year-end with strong tax news.
As confirmed by two official sources, the Executive Power accelerated the times for present in Congress a bill to move forward with money laundering that will work as a kind of complement to the bilateral agreement that will come into effect on the first day of next year.
“The money laundering bill will be introduced in Congress this year. We do not know if it will be approved in December, but we want the entire package of measures to be completed by January 1, 2023 when the agreement with the United States begins to take effect,” said a senior official source. From another instance of the Government they confirmed that this initiative, which is given shape in the Palace of Finance, will have parliamentary status in the remainder of the year.
In the immediate future, tax news will have its epicenter this week at the AFIP. Official sources confirmed to LA NACION that the general resolution regulating the agreement signed by Massa will be published during these hours.
After the suspense, the doubts of tax experts and specialized tax lawyers, the Government will finally begin to reveal part of the fine print of the automatic financial exchange agreement that it signed with the US, what information will be provided and what will be, they believe in the Government, the “practical effects” of the sealed pact.
According to a memo to which he had access THE NATIONand that will be part of the resolution published by the AFIP in the next few hours, the agreement signed is a reciprocal IGA1. “Among the possible agreements to be concluded, it is the broadest in that there are commitments and obligations on both sides,” says the document, which also describes the background and the situation prior to the Fatca agreement signed last Monday by the Minister of Economy, Sergio Massa.
“Coherence is also expected in the application of Fatca to associated jurisdictions and the commitment of the United States to reach equivalent levels of information exchange with Argentina, as it does with the rest of the countries,” it adds.
The memo clarifies that The competent authorities are, for the US, the Treasury Secretariat, and for Argentina, the AFIP. “If all notifications and protocols are complied with, the agreement enters into force on January 1, 2023″, points out and completes, as Guillermo Michel had estimated last week, in an interview with Alejandro Fantino.
“The agreement includes all 50 North American states, including Delaware and South Dakota. The United States only excludes from its definition of territory: American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the United States Virgin Islands.” indicates the memorandum on the geographical scope of the agreement.
Point G of the memorandum to be published by the AFIP says that “Each party undertakes to obtain the indicated information, with respect to all declarable accounts and must exchange it annually automatically.” And then, specifically with the exchange, it explains that it collects certain information on “declarable accounts to Argentina in US financial institutions.” What type of information? Identification of the account holder, identification of the financial institution, gross amount of interest, dividends and other income from US sources received by Argentine residents in US accountssets the document.
Point four talks regarding the implications of signing Model 1 for Argentine Financial Institutions. There are three: the 30% withholding penalty would no longer apply; Now they will be under the supervision of AFIP, which is the one who must control the correct fulfillment of the obligations; and must not submit compliance (audit) certifications to the IRS.
In the transition, the confidential document explains, “they must report directly to the IRS in 2023 (March) as they had been doing for the 2022 fiscal period and for the following years directly to the AFIP on the platform indicated” and completes by saying that “This was communicated to the Argentine banks on December 6, 2022.”
The document that will be published by the AFIP in the next few hours specifically speaks of four implications for Argentine taxpayers. Namely:
1) Reciprocity: The United States will transmit information on subjects residing in Argentina.
2) The United States is committed to all countries with which it has entered into the Model 1 IGA Agreement to match the information it transmits with that it receives (mutual commitment to continue to improve the effectiveness of information exchange and transparency.
3) The United States transmits information where there has been US income (called chapter 3 income) received by a resident of the contracting country. Fundamentally, it will report “a financial account opened at a U.S. financial institution subject to reporting when:
a) In the case of a Deposit Account, the account holder is a human person residing in Argentina and more than $10 in interest is paid to said account in any calendar year; either
b) In the case of a financial account other than a deposit account, the account holder is a resident of Argentina, including entities that certify that they have fiscal residence in Argentina, with respect to the income paid or accredited, with a source in United States, which are subject to reporting under chapter 3 of subtitle A or chapter 61 of subtitle F of the United States Internal Revenue Code.
4) The most relevant may be custody accounts (where, for example, there are investments in the United States stock market, even through corporate or fiduciary structures).
1) In general, a person who is not a resident of the United States (in this case, an Argentine) pays taxes in that country for two types of income: One FDAP rent which is known as fixed, determinable, annual, periodic (FDAP) and which includes interest, dividends, rents, royalties, etc. Mainly, passive income is included; by disposition of interests in local properties and partnerships; and one ECI rent effectively connected to the conduct of a business in the United States (ECI).
For the payment of these taxes by non-residents, The United States generally applies a retention and information regime in charge of the North American subject that makes the payment. The AFIP document asks how the US withholding agent knows if it should withhold and how much. Answer that there “requires the identification of the non-American subject (in this case, Argentine) through the W8 form”, he estimated and explained that “there are five types of W8 forms (ie: BEN, BEN-E, IMY, ECI, EXP)”.
“An Argentine subject who receives FDAP income (for example, has an account with a broker in the United States and receives dividends from Apple shares) is identified under form W8-BEN. There he identifies himself as the owner of the account (account holder) and identifies himself as a subject residing in Argentina ”, was given as an example.
“The withholding agent of the United States (the financial institution that pays the dividends, and all the institutions that intervene until the payment of those dividends to the beneficiary subject), must report in March of every year to the IRS the income received by the subject Argentine and tax withheld”, clarified in the report and completed: “This is done through an informative electronic form called 1042-S. There it is identified that the Argentine individual received income consisting of dividends and that such amount of taxes was withheld.
“Likewise, that withholding agent must submit a 1042 tax return every year detailing the total income paid, and withholdings made. That statement must reconcile with all the 1042-S reported,” They said and completed: “It may also happen that the account holder is an entity (off shore company or trust). In these cases, the identification is generally made through the W8-BEN-E or W8-IMY form (in this case if you act as an intermediary). In those forms, the entity is specifically required to be classified for Chapter 3 purposes.
“For entities that are classified as non-US partnerships, certain types of non-US trusts and non-US transparent entities must also identify the residence of beneficial owners”, clarified regarding one of the most controversial points. “This is precisely what allows the withholding agent to apply the correct withholding at the source (it is not the same that the beneficiary is Argentine, with a 30% withholding, than a resident of a country like the Netherlands, who maintains a withholding minor by application of a CDI”, it was written and concluded: “That income of the final beneficiary will be reported by the withholding agent.”
