All ordinary business expenses such as compensation paid to employees (whether as salaries, bonuses, commissions, or otherwise), contributions to public pension funds, and expenses incurred for the employee’s welfare (e.g., medical coverage) may be deducted. Expenses relating to income that is partially taxable and partially non-taxable must be apportioned between taxable and non-taxable income.
Where the taxpayers are unable to provide documentation in support of the expenditure, such expenditure is non-deductible for tax purposes and subject to tax. Effective 1 March 2019, new rules are applicable for the reporting and payment of tax on expenditures without adequate documentation. Taxpayers are required to submit an affidavit on a monthly basis for expenditures lacking documentation through an "undocumented expenditure" link available on the government website. The determination of tax will be made on the basis of an affidavit and resultant taxes are required to be paid electronically.
Fees paid to directors and syndics (statutory auditors appointed by the shareholders) are deductible within certain limits to the higher of 25% of the company’s accounting profits or ARS 12,500 per member. Effective 1 January 2021, the deduction limit is increased to 40% where the fees are paid to women directors and to 60% where the fees are paid to a transgender person.
Interest is a deductible expense for Argentine income tax purposes. Nonetheless, thin capitalization rules apply to interest payable to "foreign related lenders" (as defined by statute) when the Argentine borrower’s debt-to-equity ratio exceeds 2:1 (see Sec. 13.2.).
Deductions for patent or trademark royalties are limited to 80% of the agreed compensation if paid to a foreign beneficiary. Any payment in excess of this limit is non-deductible. Fees paid to non-residents for technical, financial or any other kind of assistance are deductible to the extent they do not exceed one of the following limits:
- 3% of gross sales or income of the payor company, whichever serves as the contractual basis for payment of the assistance; or
- 5% of the amount actually invested in connection with or related to the assistance rendered.
Fines and other administrative, disciplinary and criminal penalties imposed by regulating agencies on banks, insurance companies and other financial institutions are non-deductible for tax purposes. Other non-deductible expenses include foreign exchange differences resulting from the use of an exchange rate that is different from the rate established by the government.
Argentina has amended the rules on the integral inflation adjustment such that for the first and second fiscal year beginning after 1 January 2019, one-sixth (1/6) of the adjustment for positive or negative inflation, as the case may be, is imputed in the same fiscal year of the adjustment, and the remaining five-sixths (5/6), is adjusted equally in the five subsequent fiscal years (previously it was one-third (1/3) per year).
However, the change for inflation adjustments does not prevent the calculation of the remaining thirds corresponding to previous periods which provided that inflation adjustments are to be imputed one-third (1/3) per year for the first, second, and third year beginning on or after 1 January 2018 when the variation of the Consumer Price Index (Índice de Precios al Consumidor - IPC) exceeds 55%, 30%, and 15%, for periods beginning on or after 1 January 2018, 2019 and 2020, respectively.
Other allowable deductions for income tax purposes include:
- Contributions to the Federal, provincial, or municipal governments and to specified tax-exempt entities up to an annual limit;
- Premiums paid on insurance policies covering income producing assets; and
- Bad debt provisions, and provisions made for compensation due upon dismissal of employees.
Payments made towards expenses incurred by resident entities to entities located in non-cooperative jurisdictions, which are deemed Argentine sourced, are deductible only if the payments are made by the due date for filing of tax return. The payments made after the due date for filing of tax return are deductible in the year of payment (see Sec. 13.5.).