President-elect Mauricio Macri announced that those who earn a salary below AR$30,000 will not have to pay income taxes on their end-of-year bonuses (aguinaldo) in December. Yay.
In Argentina, end-of-year bonuses are part of an overall bonus that adds up to be the equivalent of one month’s salary. As established by the Law of Labor Contracts, the December 18th end-of-year bonus is one of the two payments, the other being on June 30th.
In addition to this fiscal Christmas gift (say that quickly three times), Macri also announced that he would submit a bill to Congress to modify the existing tax brackets. The objective is to raise the tax floor, or the non-taxable minimum, to AR$30,000: today it stands at AR$11,275.
“This law will reverse the harmful effect that inflation has had on thousands of employees that are now paying a tax that they shouldn’t be paying or a tax rate that has nothing to do with their purchasing power,” he wrote on Facebook.
The new law, if approved, would be enacted on January 1st, 2016.
Argentina’s income tax floor was last reformed in 2013 and has not been modified since. Given that the inflation rate has risen significantly since then, the income tax has become a contentious issue, leading to major union strikes, for example. For more information on the income tax in Argentina, check out our very own Demian Bio’s handy guide.
The idea of raising the tax floor to AR$30,000 was actually vocally pursued by Macri’s former presidential contender, Victory Front’s (FpV) Daniel Scioli. Macri was more lukewarm on the subject: in fact, his future Labor Minister Jorge Triaca had confirmed that the end-of-year bonus would not be exempt because the “numbers are very tight.” However, they have apparently changed their mind and opted to exclude the bonus from December’s income tax, but opted to do so within a specific tax bracket.