Argentina: Rural Properties Treatment On Personal Assets Tax

The Argentina Supreme Court of Justice dismissed the extraordinary appeal filed by the Argentine Tax Authority in the "Gaviglio"¹ case.

Consequently the judgment through which the Court of Appeals in Administrative and Tax Matters² stated that rural properties owned by individuals or undivided estates were exempt from Personal Assets Tax became final.

This issue began with the introduction of Tax on Presumed Minimum Income by Law No. 25,063, published in December, 1998.

Law No. 25,063 also included an exemption for rural properties on Personal Assets Tax as follows: "Section 21: will be exempted from this tax: (...) f) rural property referred to in section 2, subsection e) of the Tax on Presumed Minimum Income Law (...)."

Meanwhile, section 2, subsection e) of the Tax on Presumed Minimum Income Law states that: "They are taxpayers: (...) e) individuals and undivided estates, owners of rural properties in relation to such properties (...)".

However, controversy arose regarding section 2 subsection c) of the Tax on Presumed Minimum Income Law: "They are taxpayers: (...) c) companies or individual exploitations located in the country, which belong to individuals domiciled in the country (...)."

In this legal context, there were two possible positions. One of them was to consider that the exemption from Personal Assets Tax referred to all rural properties owned by individuals or undivided estates, even to those which were currently exploited.³ The other one was to consider that the exemption only referred to rural properties that were not subject to exploitation of any kind.⁴

The Argentine Tax Authority, as expressed in External Note 5/2006, considered that rural properties owned by individuals and undivided estates were included in the Personal Assets Tax exemption if they were unexploited, leased or otherwise disposed of for rent (while framed within the provisions of section 2, subsection e) of the Tax on Presumed Minimum Income Law).

Meanwhile, if rural properties were used for exploitation of any kind, Personal Assets Tax exemption was not applicable, while this was the situation referred in section 2, subsection c) of the abovementioned law.

In the Argentine Tax Authority's stance, the exemption from Personal Assets Tax was determined by the purpose of those rural properties.

By solving the "Gaviglio" case, the Federal Court of Appeals backed its position in support of the exemption of rural properties regardless of the purpose they are assigned for, in the circumstance that the legislator "made no distinction about the purpose of the asset".

This ruling also emphasized that the aim sought by the legislator while establishing this exemption was to avoid double taxation, which would happen if the same property were taxed by both Personal Assets Tax and the Tax on Presumed Minimum Income.

The Argentine Tax Authority appealed this decision, but the Supreme Court of Justice dismissed the extraordinary appeal by means of Section 280 of the Civil and Commercial Procedural Code which provides that the Court may reject an appeal if "the issues settled were insubstantial or lacked significance."

Footnotes

^{1 "Gaviglio, Hilario José c/Dirección General Impositiva s/ recurso directo de organismo externo", issued on March 8, 2016.}

^{2 Judgment dated July 2, 2015 issued by the National Court of Appeals, Court room IV, in the "Gaviglio, Hilario José (TF30082-I) c/ DGI s/ recurso directo de organismo externo" case.}

^{3 In this sense, the Argentine Tax Court ruled the case "Gaviglio, Hilario José s/ Recurso de Apelación", judgment issued by court room C on March 18, 2013; also the case "Moralo, José Luis s/ Recurso de Apelación", judgment delivered by court room A, on May 17, 2012.}

^{4 Case "González, Camilo s/ Recurso de Apelación", ruled by the Argentine Tax Court, court room C, on April 14, 2009.}

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