Government agency ARCA (formerly federal tax agency AFIP) announced that importers will no longer have to pay 95% of the PAIS tax in advance in order to access U.S. dollars to pay for goods and services. The decision aims to reduce importers’ costs and lower the implicit exchange rate associated with foreign trade.

The PAIS tax, created in late 2019 during Alberto Fernández’s administration, applies to all U.S. dollar transactions. Milei’s administration increased it from 7.5% to 17.5% in December and then rolled it back in September for imports and transportation. 

It should be noted that this fiscal relief for importers does not include dollar payments done via credit card, which remain taxed at 30% of the PAIS tax. This means that the 7.5% reduction and the elimination of the advanced payment of 95% announced on Monday will not affect dollar operations through credit cards or “dólar ahorro” (dollar purchases for savings bought in banks) as it only affects foreign trade and the importation of goods and services.  

What changes for importers?

The government eliminated a regulation mandating importers to pay 95% of the PAIS tax for goods and services in advance because the PAIS tax itself is set to disappear by the end of December. 

This decision has two implications: 

1. Imports will become cheaper because importers will no longer have to pay the tax in advance.

2. The exchange rate for imports will be lower, which in turn will also make the price in pesos of imported goods drop. 

Imports in Argentina are paid 30 days after the transaction due to Central Bank limits to access to foreign exchange. Given that the PAIS tax will be gone by the time these payments are due, it would be illogical to demand the advance now. The elimination is part of the government’s efforts to improve economic conditions. 

What will happen with dollar purchases via credit card?

It is still unknown what will happen with the so-called “tourist dollar,” the rate that Argentines get when traveling abroad. Its current rate is AR$1,640 per U.S. dollar, a value projected to go down to AR1,300 by January once the PAIS tax is no longer charged. 

This means that, with no PAIS tax in January, it will be more convenient for Argentines who travel abroad to use actual tender for their purchases instead of their credit cards. In the informal market, individuals can obtain an exchange rate of AR$1,100 per U.S. dollar, while credit cards will charge AR$1,300 per dollar. 

Eliminating the PAIS tax will make the so-called “tourist dollar” cheaper. This could lead Argentines abroad to spend more, causing a deficit in the foreign exchange balance by altering the dollar balance sheet. 

Originally published in Ámbito