What is the status of the tax following the Senate’s rejection and potential consequences if the Government is unable to reverse it?

The Government is calling on Deputies to ratify the original Profits project that did not pass in the Senate. Although the “fiscal package” was mostly approved in the Senate, the section regarding Income Tax (employee retention) did not receive the Upper House’s approval. The Government aims to have workers in a dependent relationship without minor children and earning over $1,800,000 gross monthly (around $1,500,000 net) or more than $2,200,000 gross ($1,950,000 net) with 2 children pay income tax. This includes all worker payments such as overtime and bonuses in the tax calculation.

The law currently in effect, the Massa law, has a non-taxable minimum of 15 SMVM (Minimum, Vital and Mobile Wage) at January values, which is approximately $2,340,000 and is set to increase to more than $3.5 million in July. It is estimated that about 800,000 currently exempt workers from Profits tax will once again have to pay the tax in varying percentages from 5 to 35%. The project also ratifies the tax relief that was applied between October 1 and December 31, 2023, with no retroactive withholdings.

According to tax expert Fernando López Chiesa, the ratification of Decree 473/2023 is crucial to avoid tax debts for employees for the last months of 2023. If Deputies stick to the original project, some benefits like the 22% increase for Patagonian workers and deductions for mortgage interest could be voided. The non-taxable minimum for autonomous workers is different, at $1,159,138 for singles without children and $1,644,327 for married individuals with 2 children.

For retirees and pensioners, the Earnings exemption remains at 8 minimum assets, which is $1,655,448 in June. A new aspect of the project is that it includes all worker payments in a dependent relationship in the tax base, without exemptions except for specific cases like oil workers under law 26,176.