Argentina: Boosting take-home pay by exempting most employees from income tax

Employer Action Code: Monitor

In advance of general elections in Argentina for the presidency and Congress in October 2023, Economy Minister (and presidential candidate) Sergio Massa announced a government decree to temporarily increase the minimum income threshold for personal income tax (PIT) liability so that 99% of employees will not be subject to income tax in the fourth quarter of 2023. The lower house of Congress has approved draft legislation to make the change permanent (effective January 1, 2024), and it is awaiting consideration in the upper house.

Key details

• The minimum income threshold for PIT will increase from 700,870 to 1.7 million Argentinian pesos per month (roughly equal to USD 5,000 at the time of the decree) as of October 1, 2023. Note: This new limit is based on 15 times the monthly minimum wage (SMVM – salario mínimo, vital y móvil).
• Under the draft bill to make the change permanent, the PIT system would be replaced by a “schedular tax” system under which taxpayers would receive an income tax exemption on annual salaries (and pensions) of up to 180 times the SMVM, roughly equal to around USD 60,000 at the time of the announcement.
• The amount of the exemption would be indexed twice a year, in January and July. No other deductions would be available. Schedular tax rates would be progressive, ranging from 27% to 35% on annual income exceeding 180 times the SMVM.

Employer implications

The government estimates that only around 90,000 employees nationally (less than 1% of all employees) will be subject to PIT for the fourth quarter of 2023 and would be subject to the proposed schedular tax system. With annual inflation at 124% as of August 2023, the highest it’s been since 1991, permanently eliminating PIT liability for most employees would put more money in the hands of workers; however, any such relief is expected to be short-lived, as inflation shows no signs of easing. Prospects for passing the legislation to adopt a schedular tax system are also unclear at this point given the uncertain outcome of the upcoming elections for the current ruling party.

Contact

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Mariano Thompson

Director, Integrated & Global Solutions

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