Argentina's mid-year bonus tax calculation decision impacts workers' pay

Argentine employees are closely examining their pay stubs as the mid-year bonus, or 'aguinaldo,' arrives, with the method companies use to calculate income tax on this extra payment potentially affecting their net earnings. Employers have a choice between two methodologies for withholding the 'Ganancias' tax on the aguinaldo.

While both methods lead to the same final tax outcome, the timing of the adjustment can create a financial difference for the employee. One common practice involves employers adding a twelfth of the bonus to monthly salary calculations as an advance tax payment. However, this means employees are paying tax on income they haven't yet fully received, as the aguinaldo is paid in two installments, in June and December.

Sebastián Domínguez, CEO of SDC Asesores Tributarios, explained that this monthly withholding on a future payment can be disadvantageous. The difference between the actual bonus received and the sum of the monthly "advances" can lead to employees paying more tax upfront.

The alternative method involves an annual adjustment. Under this system, the company maintains the twelfth-part calculation throughout the fiscal year. The actual bonus payments are then added, along with their deductions, during the annual or final tax settlement. This approach allows the tax adjustment to be deferred. Domínguez noted that by deferring the adjustment, the employee receives the aguinaldo without additional withholdings at the time of payment. The final calculation, made with updated deductions and an inflation-adjusted scale for the first half of the year, may reduce or eliminate the tax on this difference.