Digital currencies in the gross income tax of the province of Cordoba

The province of Córdoba, as a subnational jurisdiction of the Argentine Republic, from the 2021 annuity, [1]has made clarifications regarding the tax treatment that corresponds to dispense, in the tax on gross income, [2]to the so-called “digital currencies” and, also, for those subjects who intervene – directly or indirectly-with operations related to such currencies.

In this sense, it proceeded to include within its provincial legislation, [3]subsection j) of Article 178, which expressly provides that: “The following transactions carried out within the Province shall also be considered as activities covered by this tax…” the rendering of services related to “digital currencies”,[4] regardless of the requirement of regularity in the exercise of such activities.

It should be noted that the modification made only limited to the verification of the requirement of usual activity in a taxable event for the services of any nature related to, directly or indirectly, with operative related to “digital currencies”, and not for the other operations of marketing of goods or performance of services[5] with such currencies, which always have been -for the Treasury of the Province – reached by the tax on the Gross Income, to the extent that the conditions of taxability set out in article 177 of the Tax Code are applicable.

In the case of transactions carried out by entities that are domiciled, resident and/or created abroad –subjects not enrolled in the registry- and, as it was commented[6], the province established for the trade of services in general that the nexus or linkage of the taxable event and geographical scope to the configuration of the lien within its jurisdiction is produced by the economic use of the service, by who consume it and/or request it, or is using it (subject, property, people, things, etc) whenever these users are resident, domiciled or located in the territory of the province.

On the other hand, it is necessary to comment that the Province of Cordoba would have made a further advancement in the field of said tax, in the sense of considering the use of the aforementioned “digital currencies” – in the marketing of goods or the provision of services: as a payment in kind, and to have clarified, as indicated in the paragraphs above, the treatment that corresponds to those who are involved directly or indirectly with operations related to “digital currencies”.

Under this framework, article 113 bis of the regulatory decree of the code was adjusted,[7] in order to equate the scope of the term “digital currencies” for the purposes of the tax on gross income- even considering that there would be a difference between the different defined tax rates.[8]

In terms of the tax base, the modification maintains the general structure for the determination or quantification of the tax[9], the novelty being the fact of having received the “digital currencies” as a means, instrument, or object capable of being used in cancellation of operations since they prove to be susceptible of valuation.[10] In the context of taxation (development of economic activities), the value of the “digital currency” is conceived in the tax code as a “unit” used to quantify the tax obligation resulting from the development of the economic activity taxed, that is, under the regulation, the “digital currency” -per se – would not be taxed, much less to its holding.[11]

Article 197 of the Provincial Tax Code provides for the different cases of special tax bases whose determination must be made by difference between the sale and purchase price of the goods marketed. Through the modification under analysis, within Paragraph b) of the aforementioned article was included the usual activity of buying and selling “digital currencies “, and in such cases, they should be taxed by the” spread” of each operation.

Finally, it is worth commenting that, taxpayers and/or managers who develop activities related to digital currencies must consider-for the 2021 annuity -, the codification of activities and the tax rate that corresponds to each of them, depending on what is typified by the Tax Law n° 10.725, namely:

  • Code 649999-income derived from the sale of digital currency when they come from the exchange for the trade of goods and/or services. The transactions included in Article 197 (B) of the tax code are not included in this codification and aliquots. Aliquot 0.25%. In this case it is not a reduced aliquot.

  • Code 620900-the provision of services of any nature, directly or indirectly linked to operations related to digital currencies (paragraph j) of Article 178 of the tax code). Aliquot 4.75%. In this case it benefits from a reduced aliquot: 4%.[12]

  • Article 24 of the tax law 2021:

    • ♦ Point 12: the services intended to facilitate the management and/or exchange of digital currencies for fiat currencies of legal tender, other cryptocurrencies, or any type of goods –and vice versa-, through online platforms, websites, technological applications, devices and/or digital and / or mobile platforms or similar (cryptocurrency exchanges). Aliquot 4.75%. In this case it benefits from a reduced aliquot: 4%.
    • ♦ Point 13: purchase and sale of digital currencies (item B) of Article 197 of the Provincial tax code). Aliquot 6.50%. In this case it benefits from a reduced aliquot: 4%.



In conclusion

The Province of Córdoba, considering the reality and complexity of the different business and/or economic activities that may arise from the digital economy, would have made -in such a framework – progress in the field of the Gross Income tax, in the sense of equating the use of the aforementioned “digital currencies” -in the trading of goods or the provision of services: as a payment in kind in addition to having specified and/or contextualized the treatment that corresponds to those who are involved directly or indirectly with “digital currencies” related operations.

[1] Modification made to the Provincial tax code, by law N° 10.724 and according to the provisions of tax law n° 10.725-year 2021-.
[2] It is an indirect consumption tax levied on the usual and onerous development of economic activities, taking as taxable base the total amount of gross income earned in the tax period, with a multiphase and cumulative nature, and which represents the main source of financing of provincial governments.
[3] Law N° 6006, TO 2015 and its amendments.
[4] “j) the provision of services of any nature, directly or indirectly linked to operations related to digital currencies.The provision established in the preceding paragraph is not applicable for the income corresponding to the taxpayer or responsible, up to the amount or category of the simplified regime of the tax on gross income-small taxpayers – that, as the case may be, establishes the annual tax law for all of them; and provided that the activity is not developed in the form of a company and/or with a commercial establishment.”
[5] Commission agents, Exchanges, Traders, and other users.
[6] Digital economy and its taxation at the subnational level: the experience in the province of Córdoba (Argentina).” Perlati, Sebastián F.
Perlati, Sebastián F.; Michelini, Pablo A.: “Impuesto sobre los Ingresos Brutos. La comercialización de servicios realizados por sujetos domiciliados, radicados o constituidos en el exterior, en el ámbito de la Provincia de Córdoba”. Doctrina Tributaria ERREPAR (DTE) XXXIX. October 2018. Editorial Errepar.
[7] Decree n° 1205/15 and its amendments.
[8] Article 113 bis.- For purposes of the Tax on the Gross Income equipárese to “digital currencies”, the terms “virtual currency”, “cryptocurrencies”, “crypto assets”, “Tokens”, “stable coins” and other concepts that by their nature and/or characteristics constitute and/or involve a digital representation of value that can be the object of digital commerce and whose functions –direct and/or indirect –  constitute a medium of exchange, and/or a unit of account, and/or an asset.
[9] The total amount of gross income earned in the tax period from taxed activities.
[10] If digital currencies are received in cancellation of any transaction of commercialization of goods or services covered by the tax, the gross income will be constituted by the valuation of the product delivered, the lease, the interest or the service rendered, applying the prices, the interest rate, the rental value, official or current on the market, at the date the accrual is generated, which may not be lower than the market value -emerging from the supply and demand- in each digital currency site at the time the transaction is received, as the case may be, the transaction is performed or received, as the case may be.
[11] “Treatment of digital currencies in the gross income tax.” The case of the province of Cordoba.”. Sebastián F. Perlati and Pablo A. Michelini. Errepar. PAT XXVII. March 2021.
[12] Article 39 Law No. 10.725. In the case of taxpayers whose sum of tax bases, declared or determined by the Directorate for the fiscal year 2020, attributable to all activities developed, does not exceed the sum of $ 15,500,000.

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