The PAIS tax on imports and the principle of legality

By Decree 377/2023, the National Executive Branch made official the extension of the PAIS tax to the purchase of foreign currency for the import of a series of goods and services. In this way, the scope of the tax is generalized, with certain exceptions that were imposed by Law 27.541. (1). Consequently, the tax will apply to the purchase of imported goods, including those goods that enter the Free Trade Zone and Special Customs Area of ​​Tierra del Fuego.

Although the decree in its considerations indicates that article 35 of Law 27.541 lists the operations covered by the aforementioned tax, specifying, in its subsection a), that it includes the purchase of bills and foreign currency - including traveler's checks - for hoarding or without a specific destination linked to the payment of obligations, made by residents in the country, in some way, clarifying that it is not the import that is taxed, but the purchase of bills to make that operation of goods and services, since whoever has dollars may use them without paying this tax; certainly, we observe that definitive imports find, in their final settlement, an additional tax.

Importation and the new tax

If we assume that the taxable event in imports is the entry of merchandise for an indefinite period into the customs territory; this, in accordance with articles 635 and 636 of the Customs Code (2), added to the fact that, the taxable moment -in general terms-, is the import request - officialization of the import clearance (3)– act that will determine the date of occurrence of effects that relate to the regime to be applied, the rate, the taxable base and the exchange rate, and the importer must agree to the obligation to enter - pay - the taxes that apply to such instance, the latter in accordance with what is mandated by article 91 bis (4) of decree 1001/82, it is eloquent that, if another tax such as the one called PAIS for definitive import merchandise is added to the taxes that tax imports, we are in the presence of a tax that falls on the act of importing.

Let us bear in mind that any import action, that is, the ability to bring merchandise into the customs territory for it to circulate freely within the national territory, requires that it be prior to an international commercial transaction, which is based on a purchase-sale contract that requires payment for the amount purchased in order to allow the acquisition of this merchandise. Therefore, at the time of the request for entry into the territory, the State will carry out inspections regarding the correct payment of the obligations determined by the regime to be applied, in line with the time period in which such request for entry arises - taxable moment - and after confirming the due fulfillment of all the obligations arising from such regime, the release to the place will be authorized by Customs, in accordance with the provisions of article 231 of the Customs Code. In this sense, there will be no possibility of importing merchandise without the due payment of all taxes that tax traceability in all these stages necessary to enable the availability of the merchandise in the territory by the importer.

Having said this, it is eloquent that if a tax is added to this traceability that directly encompasses the action of importing, without prejudice to its imposition regarding the purchase of foreign currency to proceed with payment abroad, there is a tax that ultimately entails its obligation to comply with prior to being able to obtain availability of the merchandise, being irreversible to conceive the definitive import.

The similarity of budgets for taxing imports

The PAIS tax is closely related to imports. This is justified by the fact that it is a tax that affects the import of goods, since it is a tax that requires similar budget audits to those that respond to the application of customs duties. Namely:

Taxable event: : It applies to definitive imports, that is, in order to be required to pay the PAIS tax, it must necessarily be a definitive import. In terms of the Customs Code, it responds to the entry of merchandise for an indefinite period of time into the customs territory. Indeed, Article 3 of Decree 377/23 establishes that the imports referred to in the aforementioned sections b) and e) include: i) definitive import destinations for consumption, including those perfected in the Province of Tierra del Fuego, Antarctica and the South Atlantic Islands; ii) the introduction of merchandise into the free zone area, including that corresponding to the Province of Tierra del Fuego, Antarctica and the South Atlantic Islands; and (iii) temporary import suspension destinations carried out under the terms of Decree No. 1330 of September 30, 2004 and its amendments or Decree No. 688 of April 26, 2002 and its amendments, in both cases, except that the price of the operation that originated the import is paid after the liquidation of the foreign currency for the definitive export for consumption related to it or that they are financed with pre-financing or advance payment from abroad.

Commodity: : As is the case with the import duty, it covers all goods that are subject to import into the customs territory on a definitive basis. Specifying that section e) of article 2 of Decree 377/23 states that the importation of goods included in the Common Nomenclature of Mercosur (NCM), with the exception of: (i) those whose tariff items are included in section b) of the first paragraph of this article or are the following: 2710.12.59, 2710.19.21, 2710.19.29, 2710.19.31, 2710.19.32, 2713.20.00, 3811.21.10, 3811.21.50, and 3811.90.90; (ii) inputs and intermediate goods directly linked to basic food basket products as established by the Ministry of Economy, through the Secretariats with competence in the matter and the Public Revenue Administration; and (iii) other goods linked to energy generation, in the terms established by the Energy Secretariat of the Ministry of Economy.

Tax base: The amount will be subject to the value of the merchandise in customs that turns out to be the object of a commercial transaction and an obligation to pay abroad. This is stated in article 2 of Decree 377/23. For the purposes of this section, the tax referred to in article 35 of the law will be determined on the total amount of the transaction for which banknotes and foreign currency are purchased, not having to consider for these purposes, if applicable, the amount of the services that are subject to the tax in accordance with the provisions of sections c) and d) of this article. The rate established in article 39 of Law No. 27.541 will be reduced to seven point five percent (7,5%).

Passive subject: Payment of the tax for the obligations mentioned in all the sections of the first paragraph of this article will be the responsibility of the purchaser or borrower, but the entities detailed in section a) of article 37 of the law must act as collection and settlement agents." (according to article 3 of Decree 377/23).

Therefore, the tax that is based on the amount to be paid abroad, receives for its determination the presence of similar requirements to those that are verified for customs duties -import duty-. This, without prejudice to the fact that its scope is added for those Free Trade Zone and TAE operations, cases in which they simply awaken an extension for their affectation, but even so, it does not reverse the support that this tax for its inspection finds similar budgets to that of the import duty. In short, it can be said that if there is no import there will be no motivation to be before the obligation of this tax.

Irregular tax

From here, we observe two relevant issues:

1) Impact on Article 75 of the National Constitution

Starting from the fact that the Executive Power, in relation to this tax, has imposed a new taxable event, now affecting imports. That is, applying this tax to the acquisition of foreign currency for the payment of imports, which was not specified by Law 27.541, and although the law delegates (5) in the PEN to extend this tax to other "operations", by highlighting that it may "incorporate new operations to the list stated in article 35, to the extent that they imply the acquisition of foreign currency directly or indirectly", certainly, such action favors the creation of a new taxable event - a substantial element in tax matters - which essentially rests in the exclusive power of the National Congress, and cannot be the object of delegation, not even in the orbit of what is called "improper delegation."

Indeed, the Law that gave rise to this tax defined its scope to the acquisition of foreign currency by identifying the operations for such purpose, with which the type of “operation” turns out to be a prerequisite within the fact generating the obligation. Therefore, if it is not identified, it will not result in the requirement of this tax for the sole acquisition of foreign currency. Ultimately, the fact generating the obligation to pay the tax rests on two essential elements: “the acquisition of foreign currency” and “the operation”. In the absence of one of them, there is no fact that gives rise to the obligation to pay. In this sense, any extension of operations must come from a Law, not being a power of the Executive, as previously indicated, not even by delegation.

The Supreme Court of Justice has upheld this in different decisions, highlighting the ruling on Camaronera Patagónica (6) by which it was pointed out that "the principle of legality or reservation of the law is not only a formal legal expression of taxation, but constitutes a substantial guarantee in this field, to the extent that its essence is given by the representativeness of the taxpayers. In this sense, this principle of constitutional roots covers both the creation of taxes, rates or special contributions as well as modifications to the essential elements that make up the tax, that is, the taxable event, the rate, the subjects affected and the exemptions. (Rulings: 329: 1554). Likewise, the highest Court of the Nation indicated that, “The principle of the reservation of law in tax matters also does not give way if action is taken through the mechanism of legislative delegation provided for in Article 76 of the Constitution. Indeed, this Court has also been forceful in holding on this point that "there can be no doubt that the substantial aspects of tax law have no place in the matters for which the National Constitution (art. 76) authorizes, as an exception and under certain conditions, the legislative delegation to the Executive Branch" (Rulings: 326:4251).

Consequently, if it is taken into account that Law 27.541 in its provisions has not established as a generating fact the obligation to pay this type of tax with respect to imports (in the terms established by Decree 377/23), the PEN would be prohibited from imposing it.

Remembering that the rule only establishes the following as an action that requires payment:

• Purchase of foreign currency notes and currencies - including traveler's checks - for hoarding or without a specific purpose linked to the payment of obligations under the terms of the regulations in force in the exchange market, carried out by residents in the country. 
• Currency exchange carried out by financial institutions on behalf of and at the order of the purchaser, tenant or borrower, for the payment of the acquisition of goods or services and rental of services carried out abroad, which are paid for using credit, debit and purchase cards included in the system provided for in Law 25.065 and any other equivalent means of payment determined by the regulations, including those related to cash withdrawals or advances made abroad. Also included are purchases made through portals or virtual sites and/or any other method by which operations are completed, through remote purchases, in foreign currency.
• Currency exchange carried out by financial institutions for the payment, on behalf and at the order of the contractor resident in the country, of services provided by subjects not resident in the country, which are paid through the use of credit, purchase and debit cards, included in the system provided for in Law 25.065 and any other equivalent means of payment determined by the regulations;
• Acquisition of services abroad contracted through travel and tourism agencies -wholesalers and/or retailers- in the country.
• Acquisition of land, air and water transportation services for passengers destined for outside the country, to the extent that the cancellation of the operation requires access to the single free exchange market for the purpose of acquiring the corresponding currencies under the terms established by the regulations.

Consequently, although Article 41 of Law 27.541 delegates to the Executive Branch the power to incorporate new operations to the list stated in Article 35, to the extent that they involve the acquisition of foreign currency directly or indirectly, and to identify, where appropriate, new collection agents to those stated in Article 37. This does not authorize the Executive Branch to be given the authority to create new events that may be subject to a tax.

Therefore, we consider that the Executive Branch, through Decree No. 377/23, has given rise to a fact that was not expressly covered by a tax, an attribution that is proper to the National Congress, which would make this tax imprecise due to the absence of the budgets that determine the nature of legality required by our National Constitution.

2) Contrast with the principles of the GATT Agreement

Secondly, we believe that this tax is contrary to the rates of duties applied and taxes of any kind levied on imports or exports or in connection with them, possibly leading to it being a restriction on the guarantee of trade facilitation agreed upon by the Member countries in the GATT Agreement.

It should be remembered that international trade is based on actions that involve parties from different nations and this leads States to accept the need to harmonize operational, tax and customs mechanisms that enable a predictable framework to facilitate safe global commercial interaction. Therefore, we dare to say that International Trade revolves around the World Trade Organization (WTO), being the core from which the rules that will serve to guide trade between countries flow and that respond to the guidelines and agreements agreed upon by its Members, whose objective is to protect and support the activities of producers of goods and services, exporters and importers.

In this sense, the GATT Agreement is based on precise points, which can be summarized as follows:

• Economic development;
• The removal of quantitative restrictions on imports;
• Reduction of tariffs;
• The mandatory validity of tariff concessions;
• Action programme to promote the development of international trade;
• Reducing administrative barriers to trade.

Thus, Member countries commit their actions to striving to reduce trade obstacles, in short, to overcome customs barriers, preventing them from being externalized in the traceability of an international commercial operation.

Accordingly, the Agreement provides that, the contracting parties recognize that taxes and other internal charges, as well as laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products and internal quantitative regulations requiring the mixing, processing or use of certain products in specified quantities or proportions, should not be applied to imported or domestic products so as to protect domestic production. Clarifying that, products from the territory of any contracting party imported into the territory of any other contracting party shall not be subjected, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Furthermore, no contracting party shall otherwise impose internal taxes or other charges on imported or domestic products contrary to the principles set forth in paragraph 1 (above). (7)

Demonstrating that there is an express recognition of the need for effective cooperation between Members regarding issues relating to trade facilitation and compliance with customs procedures aimed at harmonizing this to become a reality and not merely an action of guidelines that in practice resonates contrary to these premises.

In this line, the Members (8) taking into account the negotiations initiated under the Doha Ministerial Declaration; recalling and reaffirming the mandate and principles contained in paragraph 27 of the Doha Ministerial Declaration (WT/MIN(01)/DEC/1) and in Annex D of the Decision on the Doha Work Programme adopted by the General Council on 1 August 2004 (WT/L/579), as well as in paragraph 33 of and Annex E of the Hong Kong Ministerial Declaration (WT/MIN(05)/DEC); Desiring to clarify and improve relevant aspects of Articles V, VIII and X of GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit, agreed through Section I, Article 1 that each Member shall promptly publish the following information, in a non-discriminatory and easily accessible manner, to enable governments, traders and other interested parties to become acquainted with it: (9)on:

a) Import, export and transit procedures (including procedures at ports, airports and other points of entry) and the required forms and documents.
b) The rates of duties and taxes of any kind levied on or in connection with importation or exportation.
c) Duties and charges levied by or on behalf of government agencies on or in connection with importation, exportation or transit.
d) The rules for the classification or valuation of products for customs purposes.
e) Laws, regulations and administrative provisions of general application relating to rules of origin.
f) Restrictions or prohibitions on import, export or transit;
g) Provisions on penalties for violation of import, export or transit formalities.
h) The appeal or review procedures.
i) Agreements or parts of agreements with any country or countries relating to import, export or transit.
j) Procedures relating to the administration of tariff quotas.

Based on this, each Member must not only try to avoid the application of measures that hinder international trade, but if any of these are applied, they must be duly introduced in a procedure that exposes their knowledge by the rest of the Members.

Dr. Juan Patricio Cotter points out that, “States parties to a treaty in force cannot invoke norms of internal law to excuse non-compliance with their obligations. The treaty must be complied with, regardless of the state of internal law. A State cannot invoke its own Constitution to avoid the obligations imposed on it by international law or treaties in force. Likewise, when the execution of a treaty makes it necessary to adopt measures of internal order, such as the sanction or modification of a law, not providing the necessary means to comply with contractual obligations makes the State internationally responsible.” (10)".

On the other hand, it should be remembered that, although the Executive Branch, by Article 41 of Law 27.541, would have delegations to expand those operations to be covered by this type of taxes and without prejudice to what is indicated regarding the affectation of the principle of legality according to Article 75 of the National Constitution, there is also a limit in this case, which are the International Agreements, which are part of the positive law of our nation, and the provisions established in terms of customs taxes and/or restrictions cannot be omitted. This is not only due to the need to achieve a correct and predictable functionality of trade, but also by application of the Argentine legal system. Remembering that the legal pyramid that mandates the system of priority of the norms instituted by the National Constitution in its Article 31, and that since the last constitutional reform of 1994, it is established that international treaties have a higher hierarchy than the laws. Hierarchy that the Supreme Court of Justice of the Nation was already aware of in 1992 when considering the Vienna Convention.

Conclusion

The mere statement of conceiving this tax applicable to the purchase of dollars does not specify the fact that generates the obligation to pay, since as indicated, the fact to produce the effect of enforceability must conceive specific guidelines that align with the definitive import; therefore, if it is intended to generate the imposition of this type of tax on payments that result in imports, the National Congress should be resorted to in order to establish a new fact that imposes such a tax.

Likewise, when taxing imports by means of a tax that will be levied on payments made abroad, due compliance with the agreements that Argentina has known how to commit itself to as a Member of the World Trade Organization must be safeguarded. Given that the development of actions aimed at normalizing situations that are in a state of emergency cannot be sustained in violation of International Agreements, or even by putting these universal frameworks that happen to be the fundamental basis of international trade in conflict.

Therefore, adding a tax to imports, even through a framework of indirect affectation, contradicts the principles governed by the Agreement, which must be a fundamental basis for any regime that seeks to be established in internal positive law, especially when these regulatory guidelines may bring about stages of a nature that contradict those principles on which the precepts of trade facilitation are based.

Ending with those words from Dr. Juan Patricio Cotter (11), arguing that "there is no possible success outside of respect for the law."

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 Highlighted

1. Law 27.541 – Article 36: The jurisdictions and entities included in paragraphs a) and b) of article 8 of Law 24.156 and its amendments, and any other entity exclusively owned by the National State and its equivalents in the provincial States, the Autonomous City of Buenos Aires and the municipalities, are not covered by this tax. The following operations will also not be covered by this tax: a) Expenses related to health benefits, purchase of medicines, acquisition of books in any format, use of educational platforms and software for educational purposes; b) Expenses associated with research projects carried out by researchers working within the scope of the National State, provincial States, the Autonomous City of Buenos Aires and the municipalities, as well as universities and institutions that are part of the Argentine university system; c) Acquisition abroad of equipment materials and other goods intended for fire fighting and civil protection of the population by entities recognized in Law 25.054 and its amendments.

2. Customs Code – Article 635: Import duty applies to imports for consumption. Article 636: Imports are for consumption when the goods are introduced into the customs territory for an indefinite period of time.

3. Law 22.415 – Article 637: 1. The import duty established by the regulation in force on the date of: …b) the registration of the corresponding application for import destination for consumption shall apply…”

4. Art. 91 bis.- For the purposes of the provisions of article 789 of the Customs Code, in import operations the payment of the customs tax obligation must be made prior to the registration of the corresponding request for customs destination, in accordance with the amount arising from the declaration committed by the interested party, without prejudice to the subsequent readjustment that the customs service may require as a result of the examination of the documentation or the verification of the merchandise. (Article incorporated by Decree No. 249/91 BO 8/2/1991).

5. Article 41.- The following powers are delegated to the National Executive Branch:

a) Incorporate new operations to the list stated in article 35, to the extent that they involve the acquisition of foreign currency directly or indirectly, and identify, where appropriate, new collection agents to those stated in article 37.

6. SCJN ruling – Camaronera Patagónica SA v. Ministry of Economy and others s/ amparo, April 15, 2014.

7. Gatt Agreement – ​​PART II – Article III – National treatment in internal taxation and regulation.

8. Annex to the Protocol of Amendment to the Marrakesh Agreement Establishing the World Trade Organization – Trade Facilitation Agreement – ​​Preamble.

9. Section I, Article 1- Publication and availability of information.

10. Dr. Juan Patricio Cotter, Customs Law – Volume I – Ed. Abeledo Perrot – page 536.

11. Dr. Juan Patricio Cotter, Managed foreign trade. Notes on SIRA, Customs News, 17.03.2023.