ARGENTINA Law and Practice Contributed by: Juan McEwan and Agustín Lacoste, McEWAN
3.4 Exercising Control Over Irrevocable Planning Vehicles Exercising control over irrevocable planning vehicles (ie, if the settlor/founder retains extensive powers) would result in fiscal transparency (Section 130 of the ITL). Therefore, to attain the benefits derived from planning through these vehicles (concerning both tax - es and successions), high net worth individuals would be well advised to overcome their usual resistance to giving up control. 4. Family Business Planning 4.1 Asset Protection The most popular mechanism through which to seek When it comes to family-owned companies, it is com - mon for the founder to gift their shares/interest to their heirs, reserving the economic rights for themselves – and, in some cases, the political rights as well – until their death ( usufructo vitalicio ). In relation to this, and mainly when the family-owned company holds real property or rural land, tax-free reorganisation proce - dures are commonly used to split the shares/interest between the members ( escisión libre de impuestos ) so as to avoid any tax burden, provided the following requirements are met: • the owners are prohibited from selling the reorgan - ised entities within two years of the reorganisation; and • the owners are prohibited from changing their activities within two years of the reorganisation. For family-owned companies where a reorganisation procedure is not an option owing to the company’s particulars, further planning might be suggested to achieve not only an efficient succession on the prop - erty (shares of the family company) but also the sub - sistence of the family company throughout the gen - erations. A family business constitution ( protocolo de empresa familiar ) might be an effective way to future- proof a family business. asset protection is the trust. 4.2 Succession Planning
tina (due to various cultural factors) – may give rise to benefits concerning both taxes and successions. Irrevocable Fiduciary Structures It seems probable that there will be an increase in the implementation of irrevocable fiduciary structures for different reasons. First, high net worth families have entered the Tax Amnesty (Law 27.260), under which they declared the possession of national or foreign currency and other property located in the country and abroad. Consequently, high net worth individuals have since been affected by the increasing tax burden (regarding PIT, PAT and, recently, the ASE) and will seek tax-planning alternatives to ease this burden. All these factors will encourage high net worth families to analyse estate-planning alternatives. The efficiency of any structure will depend on the eventual terms of these upcoming amendments to tax laws. 3.2 Recognition of Trusts Argentina has not signed the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on Their Recognition. However, court precedents have recognised the existence and enforceability of for - eign trusts, provided that Argentine public order is not infringed (mainly, the forced heirship rules). This was then included in Section 2651 (e) of the CCCN. Argen - tina therefore recognises and respects foreign trusts. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation The tax consequence of a fiduciary of a foreign trust being an Argentine resident is that the trust would be considered a taxable entity for Argentine tax pur - poses. The tax consequences of a beneficiary of a foreign trust being an Argentine resident will appear exclusively upon receiving distributions from the trust (provided it is an irrevocable and discretionary trust). Please refer to 3.1 Types of Trusts, Foundations or Similar Entities for more on the attempt to change this situation. The tax consequence of either the beneficiary or the settlor of a foreign trust serving as a fiduciary is that the transparency rules would apply (Section 130 of the ITL) and the assets in the trust would be included in the settlor’s PAT return.
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