Hours before AFIP presented the resolution with which the memorandum signed between Sergio Massa and the US government for the exchange of undeclared financial information accounts in the country will come into force, the details of the initiative were known. clarion he was able to access a document which establishes that it is a “reciprocal agreement” between the two countries, implying that both parties have rights and obligations.
In a statement released by the Ministry of Economy, it was established that the agreement, which will enter into force on January 1, 2023, covers accounts located in 50 US states, including the tax havens of Delaware and South Dakota. The document explains that the competent authorities for the treatment of this measure are for the United States, the Secretary of the Treasury; and for Argentina, the AFIP.
“Each party undertakes to obtain the indicated information, with respect to all reportable accounts and shall automatically exchange it annually,” states the memorandum stipulating that the United States will provide Argentina with reportable account information to local tax authorities in financial institutions of that country, e.g the account holder, the financial institution in which it is located, the gross amount of interest and dividends and other associated income.
The document acknowledges that both countries had already signed a Financial Information Exchange Agreement (FATCA), albeit with different implications from the one that will come into force at the beginning of the year. In particular, in 2017 the Agreement between the Government of the Republic of Argentina and the Government of the United States of America for the Exchange of Information on Tax Matters (TIEA) entered into force.
Now, “There is a change in obligations regarding what they were fulfilling when Argentina didn’t have a deal,” the letter details and lists that, for example, “the 30 withholding penalty would no longer apply.” Also, Argentine entities they will remain “under the supervision of the AFIP, which is the one who must control the correct fulfillment of the obligations”.
For this reason, local banks “should not present certifications of compliance (audit) to the tax authorities”. The agreement provides a “transition” scheme for Argentine financial entities and stipulates that “They must report directly to the IRS in 2023 (March) as they did for the 2022 and subsequent tax years directly to the AFIP on the designated platform.”
What changes for Argentine taxpayers?
The document emphasizes the “reciprocity” of the new agreement, with which “the United States will transmit information on persons residing in Argentina”. In addition, the country “commits to all countries with which it has entered into the IGA Model 1 agreement to match the information it transmits with that it receives (mutual commitment to continue to improve the effectiveness of information exchange and transparency” .
Specifically, the pact requires the United States to report any “financial account opened in a reportable U.S. financial institution,” if it is a “deposit account whose owner is a resident of Argentina and in which more than $10 of interest on said account in any calendar year”. The same if it is a “Financial Account other than a Depository Account, the Account Holder is resident in Argentina, including Entities that certify their tax residence in Argentina, with respect to income paid or credited”.
The document points out that “the most relevant may be custodial accounts (where, for example, there are investments in the US stock market, including through corporate or trust structures).”
According to the Government, the practical effects for Argentine taxpayers are:
- In general, a nonresident of the United States (in this case an Argentinean) pays taxes in that country on two types of income: (1) FDAP income which is known as fixed, determinable, annual, recurring income (FDAP for its acronym in English) and which includesinterest, dividends, rents, royalties, etc. This mainly includes passive income); for disposition of interests in local property and partnerships; (2) ECI income actually associated with running a business in the United States (ECI).
- For the payment of these taxes by non-residents, the United States generally applies a withholding tax regime and information to be paid by the North American subject making the payment
Source: Clarin
