Regime change for importers: alarm of companies facing a higher tax burden

The Argentine Industrial Union (UIA) today expressed “its concern about the resolution of the AFIP which once again the tax burden on the formal sector increases”, indicated in a regime change statement affecting importers.

Faced with the sharp drop in tax collection caused by the drought and the slowdown in activity, the Government resorted to seeking some $1 billion This way.

The Fiscal Policies Office of the UIA has detailed the consequences of the suspension of the VAT and Profit Exclusion Certificate for importers. Here are their conclusions:

• The AFIP Resolution n. the calculation of the VAT collection is temporarily limited. This entails the deferral of the calculation of the receipts for 9 months.

• The measure is unconsulted, surprising and widely affecting and reaching the productive sector because it makes it more expensive to supply imported goods and equipment, by increasing the financing needed to pay for such transactions, by accumulating the payment of receipts at the expense of working capital, without allowing said favorable balance to be computed with other taxes in the course of 2022, in an unfavorable global and domestic macroeconomic environment with credit restrictions, high exchange rate risk and high interest rates.

• It should be remembered that, in order to obtain such certificates, industries must have them Balances accumulated in favor of the equivalent of 20% of the average tax determined in the last 12 substitute declarations and meet all the requirements imposed by the AFIP. In other words, it affects industrial companies which already accumulate a substantial tax credit in their favour.

• Industries require financial burden exclusion certificates which, if they don’t have them, i Cumulative balances in favor of IRPEF and VAT. The Resolution raises concern for the impact on the financial burden of the industrial sector which entails the immobilization of working capital deriving from the application of the principle.

• The measure is not economically viable: it implies a 0-interest loan for 9 months from the Argentine importing companies to the Treasury for the equivalent of receipts of 26% of the value of imports for the next 9 months (20% VAT, 6% IIGG), thus affecting companies that need imported inputs for their production and/or make investments (since they are for mostly the ones who have these certificates).

• Conversely, the nine-month deferral for the calculation of advances upon importation, in a context of 100% annual inflation, entails the devaluation of the tax credit and, at the present value, increase the financial cost of imports.

• In macroeconomic terms, and according to the AFIP’s own estimates, the measure implies a definancing to companies for 979 billion pesos for the year 2023 which represents 1.1% of the 2022 GDP (current prices). The measure has a clear tax collection objective, affecting the competitiveness of production.

• The measure yes aaffects MPMIs because, in the first place, it directly affects the medium enterprises (paragraphs 1 and 2) affected by the measure. And secondly, because in general micro and small enterprises, while not importing directly, are mostly supplied through distributors who could be affected by this measure and could pass on the negative effects to them, making the supply of inputs more expensive and equipment. .

• The rule increases the tax burden on the formal sector of the economy, as these perceptions constitute a public burden higher than what companies would have to pay in installments, due to a collection system that does not take into account the balance in favor of the account tax of taxpaying companies. This new regulation further elevates Argentina to the top of the ranking of the most burdensome countries in the region and the world.

• It is believed that this rule affects the industrial sector of Argentina as a whole, while the imports used to fuel production correspond to raw materials, production factors and capital goods, essential for the continuity of the country’s industrial fabric and not with imports of consumer goods which are subsequently sold without added value.