From Next Monday, The PAIS Tax Will Cease to Exist: How It Affects Travelers and Tour Operators
Beginning next week, the PAIS tax on card purchases of foreign currency – chiefly used for international travel and expenses – will be abolished, as confirmed by the Ministry of Economy. However, the 30% perception of Income Tax (Ganancias) will continue to apply. To maintain this surcharge, which influences the official exchange rate, the Agency of Revenue and Customs Control (ARCA) has published a new resolution.
This development is crucial for those planning international trips, individuals closely monitoring dollar fluctuations, and tour operators who must now adapt their systems promptly ahead of the upcoming holidays. These businesses are mandated to clearly indicate the final cost and added taxes on their invoices.
Earlier this month, LA NACION reported that the Ministry of Economy had decided to maintain the 30% perception of Income Tax, but ARCA needed to issue a new resolution to confirm this surcharge and preserve the highest official dollar rate. This resolution was published overnight in the Official Gazette.
The determination of the official exchange rate occurs amidst volatility in the ‘free’ dollar market, with both the blue, MEP, and CCL exchange rates showing recent increases. Previously, the spread between the official and alternative exchange rates narrowed to less than 5%. Economy Minister Luis Caputo recently suggested that increased travel abroad may be contributing to this trend, given the advantage of purchasing dollars at higher unofficial rates to cover travel expenses.
The rise in unofficial exchange rates reduces the gap with the official rate, which is the highest in the market. This development is significant, as the Central Bank, led by Santiago Bausili, relies on the use of ‘free’ dollars for travel expenses, as they do not deplete international reserves like the official rate does.
The PAIS tax, which has been in effect since 2020, will no longer be collected on goods passing through customs. Although it was initially planned to prorogue the tax, the government has decided not to do so. However, the tax’s abolition will also eliminate the perception of Income Tax on these transactions. ARCA has now published a resolution to retain this perception, ensuring it is distinct from the previously diluted PAIS tax.
The government’s decision to abolish the PAIS tax could see the official exchange rate hover around $1350, maintaining its position as the most expensive option in the market. Nevertheless, the narrowing gap with alternative exchange rates may incentivize travelersto opt for unofficial currency purchases or ‘stop debit’ transactions, where they pay their outstanding balances in foreign currency using dollars obtained from ‘free’ markets, such as MEP, or through informal cash purchases.
In October, Argentines spent a net USD 562 million on international travel and other expenses using cards abroad. However, approximately half of these transactions were subsequently settled directly using foreign currency, reducing the net impact on the currency market and international reserves, according to a BCRA report.
Travelers and tour operators must adapt to these changes, reformatting their systems and adjusting their strategies in response to the PAIS tax’s abolition and the continued application of the Income Tax perception on international transactions.
