It will not be easy for the Argentine government to implement the FATCA agreement. On a closer inspection, there are critical issues that may arise in implementing the operational terms of the agreement with the United States.
FATCA came into force on 1ᵒ January without going through the traditional legislative process; this is by virtue of the power to sign agreements on the exchange of information delegated to the local Enforcement Authority (“Autoridad de Aplicación”) by article 101 of law 11683.
The Argentine Congress was therefore not involved but FATCA is not just a simple agreement for the transfer of financial information; it also provides relevant tax implications.
For example, there is a 30% withholding tax on income from transactions that would otherwise be exempt or subject to a different rate. A “trespass” on a tax issue legally reserved to Argentinean legislature (Congreso Nacional).
In similar cases, US has usually signed double taxation agreements with single countries to give legal support to the 30% withholding tax.
However, Argentina does not yet have a double tax treaty with the United States, so anyone subject to the withholding tax – for example, on interest and dividends from investments – could object, invoking the violation of Argentine constitutional law.
With reference to the exchange of information, FATCA stands in continuity with an earlier US-Argentina agreement dating back to 2016. Therefore, the Argentine Federal Tax Agency (AFIP) has already experimented an internal practice to manage the practical and technical aspects, so local information systems should not encounter any particular problems in implementing the new FATCA obligations.
On the contrary, much more important will be the issue of data protection, which is still hot from the sensational data leak that took place in 2016, when the media reported detailed information on assets transferred abroad by taxpayers.
The FATCA agreement signed between the US and Argentina requires the two countries «…to have safeguards to ensure that information received under this agreement remains confidential and will be used only for tax purposes… ». This obligation also stems from the TIEA (Tax Information Exchange Agreements) in force between the two countries and local data protection laws.
A potential leak of information could therefore lead not only to the immediate unilateral suspension of the FATCA agreement, but also allow Argentine taxpayers to appeal to the Argentine courts to enforce the right to confidentiality of their tax data.
Information must be submitted by financial institutions by 30 June of the year following the one to which the report relates. The AFIP will then send the information to the US Internal Revenue Service (IRS) by 30 September of each year; similarly, the Agencia Federal will receive from its US counterpart the tax information on Argentines who own assets in the North American country.
The information required by the Fatca agreement are:
– Identification of the account holder
– Account number
– Identification of the financial institution
– Gross amount of interest or dividends paid on the account
– Gross amount of other sources of income credited to the account