Technical update

AFIP establishes an on-going reduction system to employee income taxes

Our Argentina HR & Payroll Services expert Hernan Kogan explains the General Resolution No. 3770 regulation, published in the Official Report on 7th May, 2015 by the Federal Administration of Public Revenue (AFIP, by its acronym in Spanish). 

Throughout the General Resolution No. 3770 regulation the Federal Administration of Public Revenue (AFIP) establishes an on-going reduction system to income taxes at the time of changing, with retroactive effects to January 2015, the amount of applicable deductions (article No. 23 of the Tax Law) for certain retired employees or employees under a direct employer-employee relationship.

In summary, you can find below the descriptions of the different scenarios related to the employees which are under a direct employer-employee relationship:

a)      Employees performing duties between January and August 2013:

Higher monthly remuneration, normal and usual, which is accrued between January and August 2013

Higher monthly remuneration, normal and usual, which is  accrued from January 2015

Implications

Up to $ 15.000

Not relevant

Excluded from Income Tax

Higher than $ 15.000

        and up to $ 25.000

Not relevant

Increase of personal tax deductions remains

Decree 1242/2013, increase escalation according to RG (AFIP) 3770 is added

Higher than $ 25.000

Up to $ 15.000

Excluded from Income Tax

Higher than $ 15.000

and up to $ 25.000

Increase of personal tax deductions remains

according to Decree 1242/2013, increase escalation according to RG (AFIP) 3770 is added

Higher than $ 25.000

Without benefit. Personal tax deductions are applied in force from March 2013

b)      Employees which start activities under an employer-employee relationship (any employee) from September 2013:

Remuneration pertinent to the month in which activities where started as an employee

Higher monthly remuneration, normal and usual accrued from January 2015

Implications

Up to $ 15.000

Not relevant

Excluded from Income Tax

Higher than $ 15.000

And up to $ 25.000

Up to $ 15.000

Excluded from Income Tax

Higher than $ 15.000

and up to $ 25.000

Increase of personal tax deductions remains

Decree 1242/2013, increase escalation according to RG (AFIP) 3770 is added

Higher than $ 25.000

Increase of personal tax deductions remains

according to 1242/2013

Higher than $ 25.000

Up to $ 15.000

Excluded from Income Tax

Higher than $ 15.000

up to $ 25.000

Personal tax deductions are applied Decree 1242/2013, and increase escalation according to RG (AFIP) 3770 is added

Higher than $ 25.000

Without benefit. Basic personal tax deductions are applied valid from March 2013

c)      Employees working in areas located near the Patagonia (Southern region of the Republic of Argentina):

Higher monthly remuneration, normal and usual, accrued from January 2015

Implications

Up to $ 15.000

Excluded from Income Tax

Higher than $ 15.000 and up to 25.000

Increase of personal tax deductions remains

 Decree 1242/2013, increase escalation according to RG (AFIP) 3770 is added

Higher than $ 25.000

Increase of personal tax deductions remains

according to 1242/2013

Note that, with the purpose of identifying the higher monthly normal and usual remuneration, it is precise to consider the concepts which shall be accrued, at least, during 75% of the related months.

If a retained tax valid from 2015 arises due to the application of the suggested scheme, the employer must pay back to the employee the corresponding amount through five monthly instalments, equal and consecutive.

This is a very brief summary of the regulation to which we have made reference to, having also based this summary on the complementary information that is available in the AFIP webpage: http://www.afip.gob.ar. In order to avoid any confusion, it is highly recommended to read the RG (AFIP) 3770 in its full version which can be found at the following link: http://www.infoleg.gob.ar/infolegInternet/anexos/245000-249999/246584/norma.htm.

Note: all rates are expressed in Argentinean pesos (ARS).