PARTNER, MAZARS IN ARGENTINA
"The confidence of the consumers increases day by day as the offer of service providers and digital good grows."
China is planning to put forward tax on multinational ecommerce companies (that have localised operations). Do you believe this as a growing trend in Argentina?
The rise of the digital age has generated enormous challenges for national economies and especially for those that face budgetary problems of fiscal deficit.The non-taxability of the digital economy in many countries that import digital goods and services tends to enhance budgetary imbalances, despite the fact that there is an increase in the consumption of the population, since this increase does not produce fiscal revenues for the State. That is why tax systems in Argentina are being adapted to include
digital economic activities.
The aim is not only to capture part of the income of foreign companies, but also to put the foreign company on equal terms with local merchants, given that if someone sells a product over the internet and does not pay any tax or just pay some, then it becomes an unfair competition for the merchant who cannot escape the tax burden of the State.
The law of tax reform promoted by the Argentine government in December, 2017 through Law 27, 430, establishes the obligation of digital service providers such as the popular Netflix or Spotify, as well as those of online games such as Playstation, and of any digital content (music, books, ringtones, among others), are reached by the VAT. Likewise, it is evaluating how to achieve these revenues with the Income Tax, but there are many technical issues that must be analysed to be able to advance in this area. For all the aforementioned, in Argentina this trend is becoming widespread and, from what we understand, would also be happening in Latin America.
Do you feel Argentinian consumer trust in online retailers is declining?
In Argentina, it is estimated that the digital economy represents 2% of GDP. The turnover for ecommerce in the country was 68,486 million ARS in 2015, amounted to 102,700 million ARS in 2016 and finally reached 156,300 million ARS in 2017, according to data from the Argentine Chamber of Electronic Commerce. This is a clear indication that the consumption of online goods and services is booming. The confidence of the consumers increases day by day as the offer of service providers and digital goods grows.
In Argentina, new companies, new alliances or mergers are continually appearing to satisfy customers‘ requests and needs. The companies dedicated to the sale of goods through the web have found strategic alliances by linking to new subjects that have created an entire platform dedicated to the delivery of said goods, either by agreeing specific
delivery points or even door to door. These new players in the economy invest large sums of money in creating platforms that keep the catalogs and stocks of goods sellers synchronised, allowing consumers to place their
This method grows by leaps and bounds, according to market studies. The trend of ecommerce in the country has a constant growth. Nine out of 10 people have bought online and five out of 10 did so in the last six months.
What effect do current tax systems / schemes have on ecommerce in Argentina?
Argentina opted for the so-called "destination country“, this implies that imported goods and services must pay the same internal taxes that are levied on nationals at the time of their "entry into the country for consumption“ (example: the Value Added Tax or VAT).
By emulating European Union legislation-which, in turn, follows the recommendations of the OECD- the new legislation for VAT (Law 27,430) establishes presumptions of effective use or exploitation for digital services:
a) The IP address of the device used by the customer or SIM card country code; or,
b) The billing address of the client; or,
c) The bank account used for the payment, the billing address of the customer that the bank has or the financial institution issuing the credit or debit card with which the payment is made.
The imposition in the place of consumption must, from an international point of view, lead to an equivalent load of these taxes on the same products in the same market. For this, exports must be exempted, reintegrating the fiscal credits associated with the inputs linked to them, and taxing the imports of goods and services. Once imported products and services are in the interior of the country, they have the same treatment as domestic ones.
Respecting this principle implies conferring neutrality to the tax, avoiding distortions in the conditions of competition and complying with the principle of efficiency in taxation. If this were achieved worldwide, each company would enter the corresponding tax only in the country where the service
is effectively consumed, thus avoiding double taxation. Likewise, the challenge for these new taxation schemes is to make the collection effective, and really capture the consumption of these services provided from abroad and used in our country, especially when it reaches
subjects that do not even have the obligation to present declarations.
For that reason, in Argentina, the obligation to enter the value-added tax applicable to digital services falls on the borrowers (that is, who receives the service). Likewise, in cases where there is an intermediary
intervening in the payment of the digital service, it will
assume the character of a collection agent. (ie, banks,
Would you say the Argentinian tax system is easy or difficult for foreign companies to adapt/incorporate?
Argentina‘s tax systems do not imply a great difficulty when it comes to incorporating them and adapting them to foreign companies.
If you have adequate advice, not only can you fulfill the obligation to comply with all fiscal obligations, but you can also carry out a proper „tax planning“ that allows companies to make use of all the tax benefits that are also available.