Expenses necessary to generate, maintain, and preserve taxable income, and related to the company activity, are usually tax deductible, with a few exceptions, to the extent they are fair and reasonable.
Depreciation and depletion
Depreciation is generally computed on a straight-line basis over the technically estimated useful life of the assets or, alternatively, over the standard useful life (e.g. machinery and equipment: ten years; furniture: ten years). Depreciation of buildings and other construction of real estate is 2% per annum on cost (on a straight-line basis), unless it can be proved that useful life is less than 50 years.
Depreciation of automobiles whose original cost exceeds ARS 20,000 is not deductible. Related expenses (gasoline vouchers, insurance, rentals, repairs and maintenance, etc.) are deductible up to an amount of ARS 7,200 per automobile per year.
Conformity between book and tax depreciation is not required.
Profit or loss on the sale of depreciated property is determined with reference to cost less depreciation, and is included in ordinary taxable income.
Percentage depletion is available for natural resources (mines, quarries, woods).
The amortisation of goodwill cannot be deducted for CIT purposes. At the moment of sale, the taxable gain will be calculated by deducting the cost expenses (purchase price).
With regards to self-developed goodwill, at the moment of sale the cost will be the amount of expenses incurred in obtaining it, provided it was not deducted for CIT purposes before.
Research and development (R&D)
R&D expenditures (for the development of intangible assets) may be deducted when they are incurred or amortised over not more than five years, at the option of the taxpayer. Expenditures for R&D in connection with the creation of fixed assets form part of the assets' cost and are amortised over their useful lives.
The amortisation of brands and licences acquired can be deducted if they have a limited term of duration.
Start-up expenses may be deducted when incurred or amortised over not more than five years, at the option of the taxpayer.
The tax law establishes a restriction on the deductibility of interest and foreign exchange losses arising from debts of a financial nature contracted by taxpayers with controlling/related entities for CIT purposes (see Thin capitalisation in the Group taxation section).
The deduction of accounting bad debts is not allowed for tax purposes. However, if the debts fulfil certain characteristics (i.e. bankruptcy, prescription, among others), and with the corresponding supporting documentation, they can be deducted.
When made to societies and associations expressly exempt from assessment of CIT, donations are admissible deductions at up to a maximum of 5% of the donor’s net taxable profits, provided certain requirements are fulfilled.
If adequately documented, representation expenses are permissible deductions at up to 1.5% of the amount of salaries accrued during the fiscal year. According to the Regulatory Decree, representation expenses are payments made in order to represent the company in the market, to improve and maintain its relationship with suppliers and clients, etc.
Amounts up to the greater of 25% of after-tax profit or ARS 12,500 per individual are deductible in the financial year to which they apply, provided they are approved and available for the director before the due date of the tax return or in a later year of payment.
Fines and penalties
In relation to deductibility of penalties to determine net taxable income, taxpayers are not allowed to deduct sums paid on their own account corresponding to penalties, litigation costs, penalty interest, and other costs derived from tax obligations.
Except for CIT and the tax on minimum notional income, all taxes are deductible.
Net operating losses
Net operating losses may be carried forward for five years. Loss carrybacks are not permitted. Furthermore, foreign-source losses must be offset against income from similar sources.
Losses on derivatives transactions with speculative purposes can only be used to offset income from the same types of transactions.
Payments to foreign affiliates
Transactions between related parties should be at arm’s length (see Transfer pricing in the Group taxation section for more information). This principle is extended to transactions with companies that are not located in jurisdictions considered to be ‘cooperative’ for tax transparency purposes or located in a tax haven. Payments to foreign affiliates or related parties and companies located in a tax haven or a non-cooperative jurisdiction that represent income of Argentine source are tax deductible, provided they are paid before the due date for filing the tax return and the corresponding withholding is paid to the tax authorities. Otherwise, they would be deducted in the fiscal year in which they are paid.