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  • Residence and basis for taxation

    A company will be treated as an Argentina resident if it is formed in an Argentina jurisdiction.

    Domestic 

    Resident companies, defined as those companies which are incorporated under the laws of Argentina, and permanent establishments of foreign companies, are subject to income tax on their worldwide income. A credit method for taxes paid on foreign source income is provided in the Argentine Income Tax Law to avoid double taxation if certain criteria are met.

    Foreign 

    Non-resident companies with business income and no local presence in Argentina are subject to tax on their Argentine source income. Different effective withholding rates apply depending on certain factors, including if a double tax treaty is applicable.

  • Taxable income

    Domestic

    The taxable income of a corporation in Argentina is equal to all gross income minus applicable deductions.

    Foreign 

    Not applicable for this jurisdiction.

  • Tax rates

    The income tax rate is 30% for fiscal years beginning in 2018 and 2019 and 25% starting in 2020.

  • Tax compliance

    Corporations and foreign company branches are required to make 10 monthly prepayments of tax, as from the 6th month of the fiscal year. Prepayment amounts are generally based on the tax paid in the preceding fiscal year.

  • Alternative minimum tax

    Not applicable for this jurisdiction.

  • Tax holidays, rulings and incentives

    Tax holidays

    Not applicable for this jurisdiction.

    Tax rulings 

    In certain cases, taxpayers may request a private letter resolution that applies only to the specific problem That action is called "binding consultation" and is mandatory for the applicant.

    Tax incentives

    Not applicable for this jurisdiction.

  • Consolidation

    Not applicable for this jurisdiction.

  • Participation exemption

    If the property requirements are met, a deduction will be applied for dividends received from national corporations.

  • Capital gain

    Capital gain recognized by a company is taxed at the same rate as ordinary income.

  • Distributions

    The distributions paid by a corporation are treated as dividends for the shareholders. Dividends are taxable a rate of 13% (7% for use that will pay 30%).

  • Loss utilization

    Generally, losses may be carried forward for relief against future profits for a maximum of 5 years from the year in which the loss is incurred. Losses in respect of certain items, however, may only be offset against the same type of income. Carry-back of losses is not permitted.

  • Tax-free reorganizations

    Qualifying corporate formations, combinations and divisions may be tax-free for a participating corporation and its shareholders.

  • Anti-deferral rules

    Not applicable for this jurisdiction.

  • Foreign tax credits

    Subject to limitations, foreign tax credits are available for foreign taxes paid.

  • Special rules applicable to real property

    Not applicable for this jurisdiction.

  • Transfer pricing

    In general, the principles of independence are applied to transactions between related entities. The rules of Argentina are similar in many respects to the OECD guidelines.

  • Withholding tax

    Dividends, royalties, etc 

    Withholding tax applies to dividends, royalties, interest, rents and other passive-type income paid by a domestic corporation to a non-resident person, subject to reduction or elimination by an applicable income tax treaty.

    Service fees

    Not applicable for this jurisdiction.

  • Capital duty, stamp duty and transfer tax

    Stamp tax is charged on the value (as defined) of a number of specific transactions, including transfers of real estate, written contracts and deeds. Rates vary depending upon the jurisdiction.

  • Employment taxes

    Employers must withhold federal income tax. Employers also must pay social security tax and Medicare tax in respect of compensation paid to employees. These taxes are deductible by an employer in Argentina.

  • Other tax considerations

    Tax incentives for businesses

    Tax benefits are granted to encourage expenditures on scientific research and development in targeted industries, such as the software industry. The types of benefits for qualifying businesses can cover a wide range. Examples include profits, tax relief and reductions in social security contributions.

    Employment promotion

    Qualifying employers may benefit from the following reductions in employer social security contributions:

    • Up to 7 employees: 50%
    • Up to 15 employees: 100% in the first year of employment and 75% in the second year
    • 16 - 80 employees: 50% in the first 2 years of employment

    Renewable energy investment

    Companies investing in the generation of electricity from renewable sources may benefit from tax incentives such as accelerated depreciation, early reimbursement of VAT, 10-year carry forward of losses, exemption from minimum presumptive income tax for the first 8 years, and exemption from taxes on income or dividends on profits or dividends reinvested in new infrastructure projects.

    Micro, small and medium enterprises (MSMES)

    Qualifying MSMEs carrying out a productive investment between July 1, 2016 and December 31, 2018 may benefit from tax incentives, including a 10% tax credit on the value of the investment, deferred payment of income tax and early reimbursement of VAT.

    Other tax incentives

    Many provinces also offer incentives to invest, build and expand within their jurisdiction, and to encourage job creation. Incentives may include exemptions from certain provincial and municipal taxes, reduced public utility charges and infrastructure support.

  • Key contacts
    Raúl Sanguinetti
    Raúl Sanguinetti
    Tax Partner Baker Tilly Argentina [email protected] T +54 (11) 5352 2400 View bio

Residence and basis for taxation

Argentina

A company will be treated as an Argentina resident if it is formed in an Argentina jurisdiction.

Domestic 

Resident companies, defined as those companies which are incorporated under the laws of Argentina, and permanent establishments of foreign companies, are subject to income tax on their worldwide income. A credit method for taxes paid on foreign source income is provided in the Argentine Income Tax Law to avoid double taxation if certain criteria are met.

Foreign 

Non-resident companies with business income and no local presence in Argentina are subject to tax on their Argentine source income. Different effective withholding rates apply depending on certain factors, including if a double tax treaty is applicable.

Australia

A resident company is a company that is incorporated in Australia. It also includes a company that carries on its business in Australia and either its central management control is in Australia or its voting power is controlled by shareholders resident in Australia.

Domestic 

A resident company is subject to income tax on all of its income and capital gain from sources anywhere in the world.

Foreign 

A non-resident company is generally taxed only on income from Australian sources and capital gains recognized on taxable Australian property. A network of Double Taxation Agreements (DTA) operates to modify these rules including reducing the rate of withholding taxes.

Austria

A corporate entity is treated as a domestic entity for corporate income tax purposes if its registered seat or the effective place of management is located in Austria.

Domestic

Global income of a domestic entity generally is subject to Austrian taxation.

Foreign

Only certain income of legal entities which are neither seated in Austria nor have their effective place of management in Austria is subject to corporate income tax in Austria. Such income would be treated as connected with Austria under the applicable rules.

Belgium

Domestic

According to Belgian tax law, a corporation is resident of Belgium if it has its legal seat, main establishment or place of effective management in Belgium.

Foreign

Non-resident entities can be subject to Belgian non-resident income tax if they gather income that is sourced in Belgium or income that is connected with a Belgian establishment (or a permanent establishment in case a double taxation treaty is in place).

Brazil

Domestic

A legal entity incorporated under Brazilian legislation will be treated as a domestic legal entity.

A Brazilian national is automatically a resident while legally domiciled in Brazil or, if not domiciled in Brazil, upon his or her election to be treated as a resident for tax purposes.

Foreign

In principal, foreign legal entities are not subject to Brazilian taxes except when carrying out activities in Brazil through a permanent establishment.

Foreign individuals are considered residents for tax purposes from the moment they enter the country to work under an employment contract. Foreign individuals appointed to management positions in Brazilian companies (officers) are required to obtain a permanent work permit and a visa.

Non-resident individuals and legal entities who render services to a Brazilian party are subject to Brazilian withholding income tax received from Brazilian sources. Other taxes may apply depending on the transaction at hand.

Canada

A corporation formed in a Canadian jurisdiction is treated as a Canadian resident corporation for Canadian tax purposes. Also, a corporation formed outside of Canada can be treated as a resident of Canada if its central "mind and management" is in Canada, subject to any relief provided under an applicable tax treaty.

Domestic

A resident corporation is subject to Canadian tax on its worldwide income. A Canadian-resident corporation generally is not subject to Canadian tax on the income of its foreign subsidiaries unless an anti-deferral provision applies (eg, the foreign accrual property income rules).

Foreign

Non-resident corporations are not generally subject to Canadian income tax except on:

  • Income earned from carrying on business in Canada
  • Income arising on the disposition of taxable Canadian property, and
  • Certain types of cross-border payments subject to non-resident withholding taxes

Income tax treaties can reduce or eliminate these taxes.

China

A resident enterprise is an enterprise established in China under the laws of China or an enterprise that is established under the laws of a foreign country (region) but that maintains its place of effective management in China.

Domestic

A resident enterprise is subject to enterprise income tax in China on its worldwide income.

Foreign

A non-resident enterprise is subject to enterprise income tax in China only if:

  • It has derived China-sourced income by an establishment or place in China, or it has income incurred outside China but effectively connected with its establishment or place in China or
  • It has derived China-sourced income even if it does not have an establishment or place in China, or the income is not effectively connected with its establishment or place in China

Finland

Domestic

Companies incorporated in accordance with Finnish legislation are subject to tax in Finland (unlimited tax liability).

Foreign

Foreign companies are subject to tax in Finland only to the extent specified in Finnish tax legislation (limited tax liability).

France

A company is a resident of France if it has its legal seat or place of effective management in France. As a general rule, the corporate income tax base is territorial.

Domestic 

Profits of a resident corporation generally are subject to French corporate tax only if derived from a business operated in France (including any capital gains, dividends and interest derived from French or non-French investments), real estate assets located in France or activities taxable in France pursuant to a double tax treaty.  Resident corporations can be subject to tax in France on foreign source income under anti-avoidance rules (eg, CFC rules).

Foreign

Foreign corporations are not subject to French corporate tax unless they have in France:

  • an autonomous establishment
  • a dependent agent empowered to act on behalf of the corporation or
  • a complete cycle of activity.

For residents of tax treaty countries, these concepts generally are superseded by the permanent establishment  rules set out in the applicable double tax treaty.

Germany

A corporation that has either its registered seat or its effective place of management in Germany will be treated as a resident corporation.

Domestic 

A resident corporation is subject to German tax on its worldwide income. A resident corporation generally is not subject to German tax on the income of its foreign subsidiaries unless an anti-deferral provision applies (ie, the CFC rules).

Foreign

A non-resident corporation is taxed only on its German source income, as defined in German tax law and applicable double taxation treaties.

Hong Kong

Residence is generally not relevant for Hong Kong tax purposes.  Rather, the basis for taxation is whether or not a person carries on a trade or business in Hong Kong. Nevertheless, the concept of residence can be relevant for the purposes of Hong Kong tax treaties as well as certain exemptions (such as the offshore fund profits tax exemption). In such case, Hong Kong would follow the common law tests of residential ties for individuals and management and control for other entities. 

Domestic

Hong Kong has a territorial system of taxation without a general definition of income. Generally, only:

  • Profits arising in or derived from Hong Kong from a business carried on in Hong Kong
  • Employment remuneration for services rendered in Hong Kong, and
  • Income from real properties situated in Hong Kong can be subject to tax

Any other item of income is exempt from tax.

Foreign

There is no special regime for non-residents. A Hong Kong branch of a foreign corporation is treated the same way as a locally incorporated company and is subject to similar corporate and tax obligations as a resident company.

 

India

A corporation formed in an Indian jurisdiction is treated as a domestic corporation.

Domestic

A domestic corporation is subject to Indian tax on its worldwide income. A domestic corporation generally is not subject to Indian tax on the income of its foreign subsidiaries unless it is deemed to have a permanent establishment in such a country.

Foreign

Foreign corporations are not subject to Indian tax except on:

  • Income arising from an Indian trade or business
  • A permanent establishment or
  • Corporations wholly managed and controlled from India

Tax treaties can reduce or eliminate these taxes.

Ireland

A company incorporated in Ireland on or after 1 January 2015 is regarded as tax resident in Ireland, unless a tax treaty provides otherwise.

Domestic 

An Irish resident company is subject to Irish tax on its worldwide income and gains.

Foreign

A non-Irish resident company is not subject to Irish tax on income unless it carries on a trade in Ireland through a branch or agency or it receives income from Irish sources (eg income from the rent of Irish properties). A non-Irish resident company is not subject to Irish tax on capital gains unless it makes a disposal of:

  • Irish land
  • Irish minerals or mining rights
  • Unquoted shares deriving their value from (1) or (2) above, or
  • Irish situate assets which at or before the time when the gains accrued were used in or for the purposes of a trade carried on by the company in Ireland through a branch or agency

Israel

A corporation is considered an Israeli resident, for tax purposes, if it is incorporated in Israel, or if its business is managed and controlled in Israel.

Domestic

An Israeli resident corporation is subject to Israeli tax on its worldwide income, including capital gains. A foreign tax credit may be granted for tax paid in other jurisdictions.

Foreign

A nonresident corporation is subject to tax in Israel on its Israeli source income, including capital gains from dispositions of Israeli assets. Israeli source income also includes income attributed to business activity carried out in Israel. If a nonresident corporation is entitled to the benefits of a treaty for the avoidance of double taxation, the threshold regarding the level of business activity in Israel is raised and requires the existence of a permanent establishment in Israel.

Italy

A corporation is considered to be resident in Italy if it has its legal seat, its place of management or its main business activity therein for the major part of the fiscal year. A foreign corporation can be deemed to be resident in Italy when it owns a controlling participation in an Italian company and:

  • is controlled, even indirectly, by resident entities or
  • the board of directors (or similar body of management) is mainly formed by Italian resident directors

Domestic

Resident corporations are taxable in Italy on their worldwide income. Italian permanent establishments of foreign entities are subject to taxation in the same manner as domestic corporations.

Foreign

Foreign corporations may be subject to Italian taxation on corporate income that is considered Italian source. Tax treaties can reduce or eliminate these taxes. Specific anti-deferral provisions apply to foreign-controlled companies.

Japan

A corporation having its head office or main office in Japan will be treated as a domestic corporation.

Domestic

A domestic corporation is subject to Japanese corporate tax on its worldwide income.

Foreign

A foreign corporation is subject to Japanese corporate tax only on income derived from sources in Japan;. However, tax treaties can reduce or eliminate these taxes. If a foreign corporation has a permanent establishment in Japan, such foreign corporation is subject to Japanese corporate tax on income attributable to its permanent establishment in Japan.

Luxembourg

A company is considered as a resident if its legal seat or central administration is in Luxembourg.

Domestic

A resident company is taxed on its worldwide income, unless a double tax treaty provides for an exemption.

Foreign

A non-resident company is only taxed on Luxembourg-source income.

Mexico

Legal entities that are residents of Mexico are subject to Mexican taxation. For this purpose, legal entities that have their effective seat of management in Mexico are considered to be residents of Mexico. Resident taxpayers are subject to Mexican income tax with respect to income from whatever source derived.

Domestic

An entity resident in Mexico for tax purposes is subject to Mexican taxation on its worldwide income, regardless of the source of income.

Foreign

Foreign entities are subject to Mexican taxation when:

  • They have a permanent establishment (PE) in Mexico
  • Do not have a PE in Mexico, but income is generated from a Mexican source, or
  • Have a PE in Mexico, but income is not attributable to the PE

Whether Mexican source income exists or not depends on the nature of the income received, and Income Tax Treaties entered into by Mexico may be able to reduce or eliminate Mexican taxes.

Netherlands

A corporation that is effectively managed in the Netherlands will be treated as a resident corporation. Companies incorporated under Dutch law are deemed to be residents of the Netherlands.

Domestic

A resident company is subject to income tax on all its income and capital gain from sources anywhere in the world. Under the Worldwide tax system, however exemptions may apply for certain income from shareholdings and permanent establishments.

Foreign

A non-resident company is generally taxed only on its Dutch source income. A network of Double Taxation Treaties operates to modify these rules including reducing the rate of withholding taxes.

Norway

Domestic

Companies are considered tax resident in Norway if they are:

  • Established and registered in Norway
  • Have its place of effective management in Norway

Foreign

Foreign companies not tax resident in Norway, may have limited tax liability in Norway if they:

  • Conduct or participate in business activities in Norway
  • Operate or manage business activities from Norway
  • Make employees available to others in Norway
  • Own real estate or other property in Norway

Poland

Subject to the application of a relevant tax treaty, companies having their legal seat or place of management in Poland will be treated as a domestic corporations (tax resident in Poland).

Domestic

A domestic corporation is subject to Polish tax on its worldwide income. A domestic corporation generally is not subject to Polish tax on the income of its foreign subsidiaries unless controlled foreign corporation (CFC) rules apply.

Foreign

Foreign corporations are taxable on their Polish-source income only. Tax treaties can reduce or eliminate these taxes.

Portugal

An entity is treated as a domestic entity for corporate income tax purposes if its registered seat or the effective place of management is located in Portugal.

Domestic

A domestic entity is subject to Portuguese corporate tax on its worldwide income.

Foreign

A foreign entity is subject to Portuguese corporate tax on:

  • Income from business carried on through a Portuguese permanent establishment, and
  • Portuguese-source profits income

Romania

Any Romanian legal entity, a legal entity set-up under the European law having its legal seat in Romania or a foreign legal entity having its place of effective management in Romania will be treated as residents in Romania for tax purposes.

Resident

An entity which is a resident for tax purposes in Romania is subject to Romanian corporate income tax on its worldwide income.

Foreign

Foreign legal entities are generally subject to Romanian tax if:

  • They have a permanent establishment in Romania
  • They derive income from the transfer of a real estate property located in Romania or from the disposition of any rights related to such real estate property or from the exploitation of natural resources located in Romania or
  • They derive income from the transfer of the participation titles in a Romanian legal entity

Tax treaties can reduce or eliminate these taxes.

Russia

An entity is treated as a tax resident for corporate profits tax purposes if it is registered as a Russian legal entity in accordance with Russian law. Likewise a foreign entity whose place of effective management is located in Russia is treated as a tax resident for corporate profits tax purposes (unless otherwise established by an applicable double tax treaty).

Domestic

A resident company (both Russian and foreign entities are recognized as Russian tax residents) is subject to the corporate profits tax in Russia on its worldwide income.

Foreign

A non-resident company is subject to corporate profits tax in Russia only on income derived through a Russian permanent establishment or on passive income derived from a Russian source.

Singapore

A company is resident in Singapore for income tax purposes if control and management of its business is exercised in Singapore.

In general terms, control and management of a company's business is vested in its board of directors, and the place of control and management of the company is where the directors meet to make policy-level decisions for the company.

Singapore adopts a territorial basis of taxation, ie, only income accrued in or derived from Singapore, or received in Singapore from outside Singapore, is assessable to income tax in Singapore.

Income is assessed on a preceding year basis. For example, income derived in the financial year ended in 2017 will be assessable to income tax in the Year of Assessment (YA) 2018.

South Africa

A company incorporated in South Africa (SA) will be treated as a tax resident, subject to an applicable treaty.

Resident corporates

A SA corporate resident is subject to SA tax on its worldwide income.  A SA corporate resident is generally not subject to SA tax on the income of its foreign subsidiaries until it is repatriated, unless the Controlled Foreign Corporation (CFC) rules apply.

Foreign corporates

Foreign corporates generally are not subject to SA tax except on:

  • income derived from a trade carried on through a permanent establishment in SA
  • income derived from a source in SA and
  • capital gains from the disposal of SA assets as contemplated in SA's domestic legislation

Tax treaties can reduce or eliminate these taxes.

South Korea

A corporation formed in a ROK jurisdiction will be treated as a domestic corporation.

Domestic

Domestic corporations are obligated to pay corporate tax for all income generated domestically and in foreign countries.

Foreign

Foreign corporations are obligated to pay corporate tax for income from domestic sources.

Spain

A corporation will be tax resident in Spain if:

  • It has been registered under Spanish laws
  • It is domiciled in Spain, or
  • Its center of effective management is located in Spain

Domestic

A resident corporation is subject to Spanish tax on its worldwide income. A resident corporation generally is not subject to Spanish tax on the income of its foreign subsidiaries unless an anti-deferral provision applies (ie the CFC rules).

Foreign

Foreign corporations are not subject to Spanish tax except on:

  • Income effectively connected with the conduct of Spanish trade or business
  • Taxable income under the Spanish CFC rules, or
  • “Look-through” entities

Tax treaties can reduce or eliminate these taxes.

Sweden

Domestic

Companies that are registered in Sweden or, if no registration is made, are domiciled in Sweden are regarded as unlimited tax liable in Sweden.

Foreign

Companies that are not considered unlimited tax liable in Sweden are treated as limited tax liable in Sweden.

Switzerland

Domestic

Corporate taxpayers are resident under Swiss domestic tax laws if either their statutory seat or effective management is in Switzerland.

Foreign

Non-resident companies may be subject to Swiss corporate taxation if they:

  • Are partners of a business partnership in Switzerland
  • Have a permanent establishment in Switzerland
  • Own Swiss real estate
  • Have claims secured by a mortgage on Swiss real estate, or
  • Act as brokers for Swiss real estate

Taiwan

A company formed in Taiwan will be treated as a Taiwan company.

Domestic

A Taiwan company is subject to Taiwan income tax on its worldwide income.

Foreign

A company with its head office outside Taiwan (including a foreign company with a branch office in Taiwan) is considered a foreign company for tax purposes, though the Taiwan branch itself is considered as a domestic profit-seeking enterprise.

Turkey

A company will be treated as a Turkey resident if its legal seat or place of management is in Turkey.

Domestic 

A resident company is subject to corporate tax on its worldwide income and gains.

Foreign

A non-resident company is subject to tax on its Turkish-sourced income.

Ukraine

All companies incorporated in Ukraine are considered residents for corporate income tax purposes (incorporation principle).

Foreign companies as well as their representative offices registered in Ukraine are treated as non-residents for corporate income tax purposes.

Domestic 

Residents are taxed on their worldwide income. Residents may also use some simplified tax regimes envisaging lower tax rates.

Foreign

Non-residents are taxed on Ukraine-sourced income. Permanent establishments of non-residents are taxed in part on profits attributable to their activities in Ukraine under local rules.

Double tax treaties can reduce or eliminate taxation provided relevant conditions envisaged therein are met.

United Arab Emirates

Companies incorporated in the UAE are considered to be tax residents. For the application of any of the UAE's Double Tax Treaties, a company can obtain a Tax Residency Certificate, provided it meets the relevant conditions.

United Kingdom

A company will be treated as a UK resident if it is formed in a UK jurisdiction or managed and controlled (at the board level) in the UK.

Domestic 

A resident company is subject to UK corporate tax on its worldwide income and gains (subject to relief for any tax paid on the same income or gains in other jurisdictions). The company may elect to leave out of account all profits and losses arising from branches outside the UK.

Foreign

A non-resident company is not subject to UK tax except on:

  • Income from a business carried on through a UK permanent establishment
  • Other UK source income, but only to the extent of any withholding tax borne by that income (see Taxable income), and
  • Capital gain on arising on disposals of certain UK assets only (see Capital gain)

United States

A corporation formed in a US jurisdiction will be treated as a domestic corporation.

Domestic

A domestic corporation is subject to a modified territorial tax regime on US-source income and certain earnings related foreign entities. For tax years beginning in 2018, a domestic corporation is generally not subject to tax on income of its foreign subsidiaries unless the global intangible low-taxed income (GILTI),  or another anti-deferral provision applies (ie, the CFC or PFIC rules).

Foreign

Foreign corporations generally are not subject to US tax except on

  • income effectively connected with the conduct of a US trade or business and
  • certain FDAP (fixed or determinable annual or periodical gains, profits and income, which is generally passive) income from US sources

Tax treaties can reduce or eliminate these taxes.