The Argentine Senate converted into Law the National Budget for the Fiscal Year 2019, without variations with respect to the draft approved by the Chamber of Representatives in relation to the inclusion of the export of services to the Customs Code and the imposition of Export Rights on them. Below is a summary of the relevant provisions:
- The export of services is incorporated into the Customs Code “as if it were merchandise”, through the inclusion of the export of services in subsection c) of Article 10 of the Customs Code. Previous amendments to the Customs Code had incorporated the import of services, copyright and intellectual property rights to this curious lot of intangible assets that the Customs Code considers “as if it were merchandise”, although in practical terms no progress was made in a customs treatment on them.
- The service providers or the right holders for services and rights listed in Section 2 of said article 10 will be considered as exporters.
- The amount arising from the invoice or similar document will be considered as a taxable value.
- The Executive Branch is empowered to set export rights with a maximum of 30%, which is applicable to all types of merchandise. In turn, a maximum cap of twelve percent (12%) is set on the export duties for those merchandise that were not subject to export tax as of September 2, 2018, or that had a 0% rate for that date, this limitation shall be applicable to services, copyrights and intellectual property.
- Once again, we point out that the text approved regarding the 12% cap is arbitrarily detrimental to the export of services in relation to the cap 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, therefore future devaluation will not impact the limit of the physical merchandise.
- It is expected that this situation will be corrected through the regulations delegated to the Executive Power.
- The approved text limits the temporary validity until December 31, 2020.
As of today, the Budget Law was not published in the Official Gazette nor has it been further ruled, which is why very relevant issues are still pending definition, such as:
- Beginning of its validity
- Final rate
- Definite determination of the top, and its currency
- Manner and time of payment, currency / exchange rate.
- Cases of non-payment, delay in payment
Beyond these uncertainties, service exporters must anticipate that export tax on services will be in effect by 2019, and will be a direct cost on their exports. Export taxes cannot be recovered by the exporter, nor credited by the client or the exporter.
In case you would like to have further information in this regard, please contact Dr. Palico Millé at palico@mille.com.ar.