Last week the Chamber of Deputies discussed and approved the Budget 2019. The approved text brings news in relation to the Project proposed by the Executive Power. While the negotiation and approval in the Senate remains, we report here the changes introduced in the Chamber of Deputies in relation to withholdings on the export of services.
- As part of the inclusion of services in the Customs Code “as if it were merchandise” the approved draft was ammended to include an express delegation of powers to the Executive Power to regulate everything related to the “export” of services.
- As a hopeful fact, the text approved by Deputies also empowers the Executive Power to indicate which provisions of the Customs Code do not apply to the “export” of services. Time will tell if this last faculty aims to exempt the services of the processes and procedures proper to the exportation of physical merchandise.
- The text approved by Deputies does not change the definition of the service exporter (the provider of the same) or the determination of the taxable value (the invoice or equivalent document).
- A very positive development is that the text approved by Deputies remedies an error (?) of the Executive Power proposal, by including a cap of twelve percent (12%) on export duties for those goods that were not subject to withholdings as of September 2, 2018, or that had a 0% rate for that date, meaning: services, copyrights and intellectual property.
- However, the limitation to 12% remains arbitrarily detrimental to the export of services in relation to the maximum established for physical goods in Decree 793/2018.
- For services, the limitation is established as a percentage of the exported value; and for physical merchandise as a fixed amount for each dollar exported.
- For services, the cap will be computed in the export currency; and for physical goods the limit is set in Pesos, which is why the devaluation will not impact the limit.
- In this way, even though the text approved by Deputies is more favorable than the text proposed by the Executive Power, it still constitutes a discriminatory treatment against the export of services. This situation can be remedied through the regulations delegated to the Executive Power, which is why efforts are expected from the chambers grouping service exporters.
- However, the limitation to 12% remains arbitrarily detrimental to the export of services in relation to the maximum established for physical goods in Decree 793/2018.
- The text approved by Deputies maintains the temporary validity until December 31, 2020.
- Finally, exceptions to the withholding of services exports to State owned companies science, technology and innovation activities, in a questionable exception that seems to contradict the argument that withholding tax is imposed on those who take advantage of the devaluation.
- The treatment of the Budget in the Senate is expected by mid-November.
If you want more information about this topic, or the text of the mentioned projects, contact Dr. Palico Millé at palico@mille.com.ar.