Decree 42/2021 regulated the Solidarity and Extraordinary Contribution (“Tax on Large Assets”)

On January 29, 2021 Decree 42/2021 (the “Decree”) was published in the Official Gazette. The Decree regulates the Solidarity and Extraordinary Contribution established to “mitigate the effects of the pandemic”.

The Decree establishes the following:

How the shares or participations in the capital of the companies shall be valued?

The subjects mentioned in the Solidarity and Extraordinary Contribution Law may choose to consider

• the difference between the assets and the liabilities of the company corresponding to December 18, 2020 according to the information resulting from a special balance prepared on that date, or

• The net equity of the Company for the last business year closed before the indicated date.

If in this case, the contribution to be paid is not thrown, it must be valued in the terms of point (a).

Those shareholders or participants who have modified their participation percentage between the closing date of the last financial year before 12/18/2020 and this date will not be able to chose this option.

If the same subject has participation in different entities, the choice of one of these options will be applicable to the entirety of their shareholding or participation in the capital of the companies.

Consideration in direct and indirect participations

Assets contributed to trust-type structures, trusts or similar both in direct and indirect participations up to the third degree must include this tax as a taxable base.

Appointment of a proxy

Residents abroad must appoint a sole proxy to comply with this contribution.

Household goods

Household goods (established in the Personal Property Law) will not be part of the taxable base of the extraordinary contribution.

Repatriation

The repatriation period must be computed in administrative business days.

The repatriation of financial assets, by 30%, in order not to pay the aggravated rate, must remain deposited until December 31, 2021 in bank accounts in the name of the holder or may be used to:

• purchase of argentine pesos in the single and free exchange market through the bank
• acquisition of negotiable obligations issued in national currency
• purchase of instruments in argentine pesos destined to promote productive investment established by the Executive Power
• contribution to the companies owned by the holder. In this case, dividends or profits may not be divided until December 31, 2021.

Consideration of financial assets

Financial assets are not considered corporate and/or equivalent holdings when the entities or companies are incorporated, domiciled, established or located abroad, in a direct or indirect way, and they mainly carry out operating activities, understanding that said requirement is met when their income does not come from a percentage higher than 50% of passive income; except that the participation does not exceed 10% of the equity of the entity.

Credits and guarantees, rights and/or derivative financial instruments, affected to hedging operations that are closely linked to economic-productive activity and/or are intended to preserve the working capital of the company in that the subjects reached by the extraordinary contribution have participation will not be considered as financial assets.

In the case of credits and all types of foreign law susceptible of economic value, those credits and/or foreign rights related to foreign trade operations carried out within the framework of operational activities are not considered included.

Role of the Federal Administration of Public Revenue (“AFIP”)

The Decree entrusts the AFIP with the implementation of “information regimes in order to collect the pertinent data for the timely detection of operations that may configure an evasive scheme or are intended to the avoidance of the payment of the contribution ”in the 180 days prior to the entry into force of the law.

Finally, with the publication of the Decree, AFIP was effectively empowered to notify those subjects reached by the tax.