The Argentine Federal Tax Authority (AFIP) issued Regulation no. 4396/2019 (R 4396/19), which implemented a number of operational amendments and adjustments to the process by which employers assess, liquidate and withhold the Fourth Category Income Tax. Similarly, R 4396/19 introduced some specifications, clarifications and improvements regarding the calculation of withholdings, and as to payments resulting from mutual separation agreements.
Among the different matters R 4396/19 deals with, we note that employers shall be exempted, only once, from the obligation to assess and pay the tax for those cases where they have not withhold any tax from employees terminated during the absence of regulations since the enactment of the Tax Reform Law. We analyze this section of R 4396/19 separately on the other Labor Alert circulated today.
That being said, we highlight the following amendments implemented by R 4396/19:
As to the annual, final and informative report, R 4396/19 establishes that employers shall submit it electronically through the affidavit form F.1357 "Income Tax Liquidation - Fourth Category Employment Relationship". The online system substitutes the current report in paper that employers hand in to their employees (and not to AFIP). For those employees whose annual gross remuneration is fewer than ARS 1,000,000, the online submission is optional. In case they do not choose the online system, the employer shall hand in a copy of the report to the employee, and keep one copy in records for a possible AFIP's auditing.
Additionally, regarding the annual report, the due date is changed from February to April of the fiscal year following the assessed exercise. In this sense, the deadline to submit the annual report of the Fourth Category Income Tax shall be April's last business day.
On the other hand, once the annual, final or informative report is accordingly submitted, employees can check the affidavit form F.1357 and print it.
For those employees working as business brokers or traveling salespeople, the withholding cap regarding the wear-and-tear depreciation of their car and its purchasing interests is removed. It should be noted that until today this withholding had a cap equivalent to 40% of the exempted minimum. Likewise, R 4396/19 includes some clarifications as regards the depreciation method, in case the employee uses the car for personal purposes.
Moreover, the following options are added, among others: the possibility of deducting premiums paid to life insurance companies and savings premiums related to combined insurance; the purchasing of shares in mutual funds for retirement purposes; contributions to private retirement funds administrated by entities subject to the Argentine Superintendence of Insurance's control; and expenses for purchasing mandatory clothes and/or equipment for exclusive use at the working place that should be provided by the employer but were bought by the employee in accordance with the usage of the trade, and that were not refunded.
As regards transportation costs, travel expenses and similar compensations paid by the employer, please bear in mind that they are deductible up to a 40% cap of the minimum exempted income, in the amounts set by the applicable Collective Bargaining Agreement, or in the amount actually paid if not stipulated by CBA. According to R 4396/19, from now on, the employer shall automatically calculate this deduction, and the employee shall be exempted from reporting it through the Income Tax Registration System and Deductions Update (SiRADIG).