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In July 2009, the Argentine Supreme Court of Justice ruled that the government must allow companies to adjust for inflation when calculating taxable income in times of economic crisis. In re Candy SA, the justices held that tax rules prohibiting the company from adjusting for inflation in 2002, when inflation skyrocketed to more than 100%, constitutes unlawful confiscation by the government because it is collecting taxes on phantom corporate income.
Baker & McKenzie tax partners Joaquín Kersman and Marcos Gómez Martín explain the SCJ’s decision in a publication on the enforceability of the Inflation Adjustment Mechanism. The decision granted the plaintiff’s amparo action — one brought to protect constitutional rights — and opened the door to a significant amount of litigation.
As Mr. Kersman and Mr. Martin discuss, companies may now file claims to recover excess income taxes paid as of 2004 in accordance with the statute of limitations. In their article, the partners give clients practical advice on the effect of the court’s ruling on their businesses and the process for filing claims. They, like many members of the Firm, have extensive experience providing companies with pragmatic, effective counsel in cases involving the effects of inflation on corporate taxation.