Understanding Small Contributor Withholding in Argentina

In Argentina, suppliers who are registered with the Public Income Federal Agency (Administración Federal de Ingresos Públicos [AFIP]) as small contributors do not need to have VAT (value-added tax) and profit withholdings deducted from the payments that you make to them. However, legal resolutions RG 2549/2009 and 2616/2009 require that in some circumstances, you must withhold the VAT and profit withholdings from payments made to small contributors.

You must withhold VAT and profit withholdings when:

• You cannot verify that the supplier is registered as a small contributor on the website provided by the AFIP for that purpose.

• The total of paid and unpaid invoices for a supplier who is set up in your system as a small contributor exceeds the established limits for transaction amounts during a 12-month period.

  The invoiced amount that causes the withholding requirement differs based on whether the supplier provides goods or services.

Note: This document refers to the time period for which you sum the paid and unpaid invoices as a 12-month period. However, the actual time period is often slightly less than a full 12 months.

If your suppliers are registered as small contributors, you must set up your system with additional information that the system uses as you calculate withholding and process payments to the suppliers. The information that you set up includes:

• Supplier setup to specify whether a supplier is a small contributor and whether the supplier provides goods or services.

• Annual limits on invoice amounts.

• Document types and tax rate areas to exclude from the calculations for the annual limits on invoice amounts.

  Some taxes are excluded from the annual limits, such as some cigarette, natural gas, and liquid fuel taxes.

• Additional processing options that the system uses when you run the Create Payment Groups program (R04570).

• Processing options for the Manual Payment – Withholding Registration - ARG program (P76A0461).

The system uses the additional information to determine the limits for the invoices in a 12-month period, how to process transactions when you use the automatic payment process and calculate withholding, and whether to validate small contributor information when you enter manual payments.

If a small contributor does not register with the AFIP and does not appear as a small contributor in the listings on the AFIP website, the legal resolutions require that you penalize the supplier and always apply the VAT and profit withholdings to the payments that you make to them. You set up data in the system for the small contributors that you cannot verify that causes the system to calculate the withholding amounts.