Approval of the Fiscal Innocence Act
Tax Law and White Collar & Corporate Crime Departments Report |Approval of the Fiscal Innocence Act.
On December 26, the National Congress approved the “Tax Innocence” Act. The statute has not yet been promulgated or regulated by the Executive Branch.
Below is a brief summary of its key features:
Reform of the Tax Criminal Regime – “Fiscal Innocence”
The recent reform of the Tax Criminal Regime introduces highly relevant modifications that directly impact criminal tax liability, thresholds for punishability, criteria for filing criminal complaints, statutes of limitations, and regularization mechanisms. Below are the main changes and their practical impact for taxpayers and companies.
Significant update of criminal thresholds
The reform substantially increases the minimum amounts from which tax crimes are configured, raising the objective condition for criminal punishability-the threshold from which a tax evasion can be considered criminal-and reducing the criminalization of lower-level tax disputes.
Express limitation on filing criminal complaints
Specific scenarios are established in which the tax authority may not file a criminal complaint, particularly where reasonable interpretive criteria, technical differences, or well-founded taxpayer regularization exist.
Extinction of criminal action through regularization
Full regularization of the tax obligation, including principal, interest, and penalties, extinguishes the criminal action, prioritizing the reparation of fiscal damage over criminal prosecution. It applies without penalty one time only when regularization occurs prior to the complaint, and with a 50% surcharge in initiated proceedings and up to 30 days after formal indictment.
It should be clarified that the spontaneous filing of an original or amended tax return before notice of the start of an audit exempts the case from a criminal complaint.
Reduction of statutes of limitations
Limitation periods are harmonized and reduced, bringing many cases to five (5) years, improving the defensive position in long-running cases. The timing criteria for tax and criminal prosecution are unified.
Automatic updating of amounts
The specified amounts will be adjusted annually based on the variation of the UVA, preventing their obsolescence.
Application of the more lenient criminal law
Although not expressly contained in the enacted rule, the new provisions may be applied to ongoing criminal cases when they are more favorable to the defendant under the principle of the “more lenient criminal law,” enabling requests for extinction of criminal action, dismissals, or closure of proceedings.
Modifications to the Fiscal Procedure Law (Law 11,683 – “LPF”)
The amounts corresponding to formal sanctions are updated, as follows:
-The minimum annual gross income amount for application of the aggravated sanction set out in the unnamed article’s fourth paragraph (repeated non-compliance with requests), added after Article 39 of the LPF, is updated from ARS 10,000,000 to ARS 10,000,000,000.
-The minimum amount for application of the closure sanction under Article 40 of the LPF is updated from ARS 10 to ARS 20,000.
-The general statute of limitations regime of the LPF is modified. The general prescription for taxes and fines, in the case of registered taxpayers and unregistered taxpayers who are not required to register or who, being required to register, spontaneously regularize their situation, remains five years. A reduced three-year period is introduced where the tax return is filed on time and without significant discrepancies. For unregistered taxpayers, the ten-year period is maintained.
A “significant discrepancy” is defined when: (i) the detected difference is equal to or greater than 15% of the declared tax; (ii) the difference exceeds the criminal threshold; or (iii) the challenge is based on the use of fake invoices or documents and there is an increase in the determined tax, or a reduction in the loss carryforward or in the taxpayer’s declared tax credit.
Reforms to the Civil and Commercial Code of the Nation and other provisions
The power of the provinces, the Autonomous City of Buenos Aires, and municipalities to regulate tax prescription is repealed. In such cases, the prescription period will be governed by the provisions of Law 11,683 (Fiscal Procedure) at the national level.
In the following cases, the statute of limitations for social security resources is reduced to:
(i) 3 years in the case provided for in Article 24 of Law 23,660 on Health Insurance Funds; and (ii) 5 years in the case provided for in Article 47 of Law 23,661 of the National Health Insurance System and in Article 16 of Law 14,236 of the National Institute of Social Security.
The reductions apply when the taxpayer has filed the return on time-or has disclosed the obligation through settlements or other instruments serving the same purpose-and, where applicable, has regularized the resulting balance, provided that the collecting entity does not challenge such filings by detecting a significant discrepancy between the declared information and the information available in its systems or provided by third parties. A significant discrepancy will be deemed to exist when at least one of the following conditions is verified:
(i) a difference in contributions and/or employer contributions of no less than 15% from the amount declared by the obligor;(ii) the difference between the declared contributions and/or employer contributions and the amount resulting from the challenge exceeds the sum set forth in Article 5 of the Tax Criminal Regime established by Title IX of Law 27,430 (ARS 7,000,000, an amount to be adjusted annually based on the variation of the Purchasing Value Unit); or (iii) as a consequence of a challenge based on the use of fake documentation, there is an increase in the amounts owed.
Optional simplified income tax return regime
An optional simplified mechanism is established for filing the Income Tax return for individuals and undivided estates that, in the period and during the previous two fiscal years, have annual income (taxable, exempt, and non-taxable) of up to ARS 1,000 million and assets (taxable, exempt, and non-taxable for the Personal Assets Tax) of up to ARS 10,000 million.
This regime has the following features:
-Liberating effect of payment for the period involved: once accepted, the simplified return proposed by ARCA will have a liberating effect with respect to the Income Tax and the corresponding fiscal period, unless it is later verified that significant income was omitted, an improper deduction was computed, and/or fake invoices or documents were used.
-Presumption of accuracy (fiscal lock) for Income Tax and Value Added Tax returns for non-prescribed periods, unless the simplified return for the last declared fiscal period is challenged and a significant discrepancy is detected.
A significant discrepancy will be deemed to exist when at least one of the following conditions is verified: (i) an increase in tax owed to the authority or, as applicable, a reduction in tax losses or tax credits, by a percentage not less than 15% with respect to what was declared by the taxpayer; (ii) if the difference between the declared tax and the tax resulting from the challenge exceeds the amount established in Article 1 of the Tax Criminal Regime, included in Title IX of Law 27,430 (ARS 100 million, updated annually based on the UVA variation); (iii) if the challenge made by the tax authority due to the use of fake invoices or other documents results in an increase in the tax balance owed to the Treasury or, as appropriate, a reduction in tax losses or tax credits, provided that the taxpayer does not amend the challenged tax return on that ground and does not pay the resulting tax difference, plus interest.
For purposes of assessing whether a significant discrepancy exists in relation to the Income Tax and Value Added Tax, the presumptions of the fiscal procedure law regarding unjustified increases in assets will not apply.