Among its considerations is the project called “Personal Income Tax Law” mentions that the effect of the measures adopted during the last months of 2023, among which are those derived from Law No. 27,725, have had as a direct consequence a decrease in the fiscal resources of the National State, raising the already high levels of deficit existing, which is intended to be mitigated by taxing those subjects who demonstrate sufficient contributory capacity to be covered by the tax, always respecting the progressivity that is the guiding principle of the norm.
Let us remember that Law No. 27,725 approved on September 28, created the Cedular Tax on Higher Income and significantly reduced the universe of employees who would be covered by the tax starting in the 2024 fiscal period. So those who earn up to $2,340,000 in January do not pay tax, which would be the equivalent of the 15 SMVM (Minimum, Vital and Mobile Wage) in force since December 2023.
In summary, the project sent to Congress provides the following, with effect from January 1, 2024:
– HE annuls the reform to the tax law introduced by Law No. 27,725.
– The exemptions applicable to the Christmas bonus and bonuses for productivity, cash failure, or concepts of a similar nature are maintained, expanding the universe of benefited employees. providing that it will have exclusive effect for subjects whose gross monthly remuneration does not exceed the equivalent sum of $1,250,000 (applicable to the bonus exemption) and $2,500,000 (applicable to the second mentioned exemption).
– Personal deductions are increased (non-taxable income, special deduction, family responsibilities) by more than 420% compared to the amounts applicable from January 2023.
– Using the same percentage of the 420%the amounts of the sections of the progressive scale that are applied to calculate the tax are updated.
– Both personal deductions and the progressive scale will be adjusted by calendar quarter, that is, the first day of January, April, July and October of each year, as of April 1 of fiscal year 2024, inclusive, by the coefficient that arises from the variation of the CPI provided by the INDEC.
At the close of the annual fiscal period, the update provided for October of each year must be considered in order to determine the amount of the personal deductions eligible and the scale in the annual fiscal period in question. On that occasion, the withholdings made in excess, if applicable, They must be returned in the modalities and deadlines established by the Federal Administration of Public Revenues (AFIP).
– The validity of the benefits is ratified granted during the last months of 2023 to employees, in such a way that no withholding amount would be generated for said periods.
– In addition to the quarterly automatic update, Legislative delegation is planned so that the Executive Branch can increase the amounts of the exemptions during the 2024 fiscal perioddeductions and progressive tax scale.
– A annual automatic update of the deduction for life and retirement insurance.
Thus, as of the reform proposed by the Executive Branch, a single employee who did not have other deductions beyond the basic ones (social security contributions, non-taxable minimum and special deduction) and, for example, earn a gross salary in January of $1,300,000, you would be taxed approximately $2,700, an amount that would already include the “advance” payment of the bonus tax. That is, the effective tax rate would be 0.21%.
At this salary level, an employee who had family responsibilities would not pay any tax, while a married worker with two children would only begin to pay tax when his gross monthly salary approaches $1,600,000.
Going to the highest salary bands, we find that for a gross salary in January 2024 of $1,980,000, in the case of the single person he would be paying approximately $144,600 while the married person with two children would pay $53,700, which represents an effective tax rate of 7.3% and 2.7%, respectively.
Finally, it is worth mentioning that the project – in the same line as Law No. 27,725 – maintains the elimination of the increased special deduction and increased special deduction “by table”, institutes that were in effect until the fiscal period 2023 and that sought to free certain salary bands from the tax, generated distortions in the calculation of the tax, affecting its progressivity, an issue that this new text would seek to avoid.
Andrés Tellado Cañás, partner of Tax & Legal, Labor and Social Security at KPMG Argentina).
by Andrés Tellado Cañás
