The Argentine Federal Tax Agency (AFIP) on October 16 confirmed that the exemption from the banking transactions tax still applies for financial trusts that are provided relief under section 10(c) of the decree implementing the Banking Transactions Tax Law.
As previously reported, Decree 1207/08 abolished a preferential tax deduction that had been available for some closed-ended mutual funds and financial trusts as of August 1, restricting the regime to financial trusts related to infrastructure works to be used in the provision of public services. However, it was not clear what effect Decree 1207/08 would have on relief provided by section 10(c), under which financial trusts and closed-ended mutual funds are granted a tax exemption if they meet the requirements established in section 70.2 of the executive order implementing Argentina's Income Tax Law. (For prior coverage, see Doc 2008-17030 [PDF] or 2008 WTD 152-2 .)
Nota Externa AFIP 9/2008, published October 16 in Argentina's official gazette, confirms the exemption from the banking transactions tax still applies for a financial trust that meets the following requirements:
the trust is created with the sole purpose of carrying out the securitization of homogeneous assets;
the trust's underlying assets are not replaced with other assets;
the trust's term, in cases of underlying debt securities, is linked to the term for the final cancellation of the trust's assets or the underlying creditor rights;
90 percent of the trust's gross benefit is derived from income arising from the trust's underlying assets and its sale and some other temporary portfolio holdings; and
the trust's securities are offered publicly.Although Decree 1207/08 made financial trusts less attractive for structured finance purposes, financial trusts can still be beneficial. In general, individuals and foreign companies are still exempt from capital gains tax derived from the alienation of trust securities and from income tax on interest paid by the trust on debt securities. VAT exemptions are also still available. Also, thin capitalization rules and equalization tax regulations are not applicable to financial trusts under certain conditions.
posted by P. Sebastian Lopez-Sanson @ 8:22 AM
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