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  • Residence and basis for taxation

    In Argentina coexist three levels of taxation which are Federal, Provincial (state) and Municipal level.

    An entity is deemed as resident for tax purposes when it is incorporated in Argentina under the laws of Argentina. An Argentine individual is considered a tax resident unless he or she loses his tax residence status by choice, obtains legal residence in other country, or by fact, when the individual is outside the country for at least a twelve months period, with certain exemptions.

    Domestic 

    Local entities and resident individuals are subject to income tax on domestic and foreign source income.

    Foreign 

    Non resident entities or individuals are taxed on income of Argentine source. The tax applicable is the income tax that comprises corporate earnings and capital gains. In general, a local resident paying to a foreign entity or individual is obliged to withhold income tax. The withholding rate varies in connection with the type of the payment.

    Permanent establishments are taxed as local entities on income attributable to the permanent establishment.

    Income tax on indirect transfer

    Income tax on an indirect transfer may apply if a non resident entity is transferred provided that at least 30 percent of value of the entity is represented by assets located in Argentina and provided that the transferor owns at least 10 percent of the capital of such entity.

  • Taxable income

    Domestic

    In general the taxable income in the income tax for resident entities and resident individuals is equal to gross earnings minus deductions. In general, all expenses incurred to obtain, maintain and preserve taxable income are deductible unless expressly forbidden.

    Foreign 

    Non resident entities and individuals are taxed in the income tax on the incomes of Argentine source. The local resident paying to a foreign entity or individual is obliged to withhold the income tax at a 35 percent tax rate applied on a presumption of taxable income that varies in connection with the concept by which the payment is made. The presumption of taxable income can be from 35 percent up to 90 percent of the amounts paid.

    For incomes connected to the transfer of shares, bonds or titles, or incomes connected with the rental of real estate or the transfer of assets located in Argentina owned by a non resident, the non resident individual or entity is entitled to choose to apply the presumption of income or to present evidence of all the expenses incurred and deduct those expenses from the gross amount to be paid.

  • Tax rates

    Domestic

    Local entities are subject to an income tax rate of 30% for fiscal year 2019 and 25% as of fiscal year 2020.

    In general, local individuals are taxed at a progressive tax rate that goes from 5% to 35%, except for earnings with a fixed tax rate. Those are the following:

    • For local individuals the transfer of sovereign bonds, or any title is taxed at a 5% income tax rate if the title is issued in Argentine pesos, or 15% income tax rate if a share of a corporation is transferred, or if the title or sovereign bond is issued in Argentine pesos with adjustment clause or in foreign currency
    • The transfer of real estate by a local individual is taxed at a 15% of income tax rate
    • Interests of financial investments such as bank deposits, sovereign bonds, negotiable obligations, financial trusts and similar, issued in Argentine pesos without adjustment clause, are taxed at an income tax rate of 5%. The applicable tax rate is 15% when issued in Argentine pesos with adjustment clause or when issued in foreign currency
    • Dividends paid to a local individual are taxed at a 7% tax rate for fiscal year 2019 and 13% as of fiscal year 2020

    Foreign

    In general non resident entities and individuals are taxed at an income tax rate of 35% applied on the presumption of taxable income with effective tax rates of 12.5% up to 31.5% (see Taxable Incomes). Some concepts are not taxed at the general 35% tax rate and are taxed to an specific tax rate.

    • Transfer of sovereign bonds or any title (public or private) is taxed at a 5% income tax rate if the title is issued in Argentine pesos, or 15% income tax rate if the title is issued in Argentine pesos with adjustment clause, or in foreign currency. The transfer of shares of a local corporation is taxed at a 15% income tax rate. This assumes that the foreign beneficiary is in a jurisdiction considered as cooperative for tax purposes
    • Interests of financial investments such as bank deposits, sovereign bonds, negotiable obligations, financial trusts and similar, issued in Argentine pesos without adjustment clause are taxed at an income tax rate of 5%. The applicable tax rate is 15% when issued in Argentine pesos with adjustment clause or when issued in foreign currency. This provided that the foreign beneficiary is in a jurisdiction considered as cooperative for tax purposes
    • Dividends paid to a non resident individual or entity are taxed at a 7% tax rate for fiscal year 2019 and 13% as of fiscal year 2020

    The applicable tax rates can be lower if a double taxation treaty is applicable.

  • Tax compliance

    Local entities and individuals are obliged to fill tax returns at federal, state and municipal level depending on their activities. Tax returns mas be filled on monthly or yearly bases depending on the tax.

    Information regimes are applicable to certain activities.

    Advance payment regimes are applicable for some taxes.

  • Alternative minimum tax

    Not applicable for this jurisdiction.

  • Tax holidays, rulings and incentives

    Tax holidays

    Not applicable for this jurisdiction.

    Tax rulings 

    In some cases, taxpayers are entitled to present to the tax authorities a request for a ruling on a specific case. The ruling is binding for the consultant. 

    Tax incentives

    There are tax incentives at the federal, state and municipal level which target specific activities such as renewables and software services and development.

  • Consolidation

    Not applicable for this jurisdiction.

  • Participation exemption

    Argentina tax legislation does not provide for a participation exemption.

    Dividends paid by a local entity to another local entity are exempt from income tax. Dividends are only taxed when distributed to a local individual or to a foreign entity or individual.

  • Capital gain

    Capital gains are taxed by the income tax.

    Domestic and foreign, see Taxable income and Tax rates.

    Income tax or indirect transfer

    Income tax on indirect transfer may apply if a non resident entity is transferred provided that at least 30% of value of the entity is represented by assets located in Argentina and provided that the transferor owns at least 10% of the capital of such entity. When the transfer is carried on intragroup the income tax on indirect transfer is not applicable.

  • Distributions

    Distributions are taxed as dividends. Regardless of the tax residence of the recipient, dividends are taxed at a 7% tax rate for fiscal year 2019 and 13% as of fiscal year 2020.

    Domestic and foreign, see Taxable income and Tax rates.

  • Loss utilization

    Losses can be carried forward and can be offset with future profits for a five-year period.

    Losses considered to be of Argentine source can be offset only with profits considered to be of Argentine source. Losses considered to be of foreign source can only be offset of foreign source profits.

  • Tax-free reorganizations

    In Argentina it is possible to carry on an intragroup reorganization with no tax effects. Mergers, spinoffs or partial spinoffs are exempted from income tax, VAT and turnover tax if certain requirements are met.

    Income tax on indirect transfers can also be carried on with no tax costs if it is an intragroup transfer.

  • Anti-deferral rules

    According to CFC rules, the profits of a foreign entity directly or indirectly owned by a local entity or individual should be declared and taxed in the fiscal year of accrual in the following cases.

    • Trusts: When the trust is revocable, when the settlor is also the beneficiary, or when the resident individual or entity has full control of the trust
    • When the foreign entity is not considered a tax resident of the jurisdiction where it is incorporated
    • When:
      • The local individual or entity directly or indirectly owns at least 50% of the capital of the foreign entity
      • The foreign entity does not have sufficient structure to carry on its business or when at least 50% of the profits of the foreign entity are passive income
      • The taxes paid by the foreign entity in the country where it is incorporated are less than the 25% of the income tax that would be payable in Argentina (this requirement is deemed as occurred if the entity is incorporated in a non-cooperative jurisdiction)
  • Foreign tax credits

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

  • Special rules applicable to real property

    Domestic and foreign

    When a local entity or a non resident individual or entity sells or transfers real estate property located in Argentina, income tax is triggered.

    For resident individuals, if the real estate property that is being transferred has been acquired by the seller before January 1, 2018, no income tax is applicable, and the local individual must pay a special tax on transfer of real estate property. 

    There is the possibility of a tax deferral on the income tax applicable to the sale of a real estate property using a sale and replacement mechanism.

  • Transfer pricing

    Argentine transfer pricing rules apply to transactions between an Argentine party and a foreign related entity or any entity domiciled in a tax haven jurisdiction, a jurisdiction considered as non-cooperative, or that is subject to a privileged tax regime.

    Argentine transfer pricing rules follow arm's-length rule and follow the OECD guidelines with some divergences.

  • Withholding tax

    (see Taxable income and Tax rates.)

    Domestic

    Payments made by banks and financial institutions made to local entities or individuals in the case of interests on bank deposits or financial investments are subject to income tax withholding.

    Dividends paid by a local entity to a local individual are subject to income tax withholding. The tax rate applicable is 15%.

    Foreign

    Non resident entities or individuals are taxed on their income considered to be of Argentine source.

    The local payer is obliged to withhold the income tax at the time of the payment. Tax rates and presumptions of taxable income vary in connection with the type of payment made.

    Tax treaties may reduce or eliminate withholding of income tax.

  • Capital duty, stamp duty and transfer tax

    Capital gains are taxed by the income tax (see Taxable income and Tax rates.).

    Stamp duty or Stamp Tax is a provincial tax triggered by the entering of written agreements signed by both parties. The tax rate applicable varies in connection with the province and in connection with the agreement. Tax rates are of 0.2% up to 5% of the total amount of the agreement.

    There are legal mechanisms to avoid the payment of Stamp Tax by entering into an agreement as an offering letter.

    Transfers of shares, assets and real estate property are taxed under the income tax (see Taxable income and Tax rates.).

  • Employment taxes

    Employers must withhold income tax and social security contributions. Employers also must pay their share of social security contributions. These taxes are deductible by an employer for Argentine income tax purposes.

  • Other tax considerations

    Provincial taxes - Turnover tax

    Turnover tax or gross income tax is a tax collected by the provinces. The taxable event is the performance of commercial or industrial activity in the territory of the provinces. Tax rates can be 0.5% up to 6% in connection with the activity applied on the gross income. Some activities are charged with higher tax rates, such as online gambling which is taxed at a 15% tax rate in the Province of Buenos Aires.

    Every province has its own turnover tax. However, the turnover tax collected by each province are similar, although different tax treatments may result applicable for certain activities.

    Tax benefits

    For some activities there are special tax benefits at the federal level and provincial level.

    There are tax benefits for an investment in renewable energy, software production and services, investments in capital assets, biodiesel fuel and mining.

    The benefits may include partial or full exemptions, accelerated depreciation and drawback.

    VAT on the import of digital services

    Federal Government collects VAT on the importation of digital services. The taxpayer is the local resident unless the service provider has a fixed place in the Argentina. The tax rate is 21%.

    Double taxation treaties

    Argentina has signed tax treaties with Germany, Australia, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, United Arab Emirates, Spain, Finland, France, Italy, Mexico, Norway, Netherlands, United Kingdom, Russia, Sweden and Switzerland (all in force), and Turkey, China, and Qatar (signed but not yet in force).

  • Key contacts
    Augusto Nicolás Mancinelli
    Augusto Nicolás Mancinelli
    Of Counsel DLA Piper (Argentina) [email protected] T +5411 41145500 View bio
    Raúl Sanguinetti
    Raúl Sanguinetti
    Tax Partner Baker Tilly Argentina [email protected] T +54 (11) 5352 2400 View bio

Distributions

Argentina

Distributions are taxed as dividends. Regardless of the tax residence of the recipient, dividends are taxed at a 7% tax rate for fiscal year 2019 and 13% as of fiscal year 2020.

Domestic and foreign, see Taxable income and Tax rates.

Australia

Dividend distributions by companies are taxable for shareholders. Subject to integrity measures, Australian resident shareholders may be entitled to a tax credit for corporate tax paid by the company. Dividends to foreign residents are prima facie subject to withholding tax at 30%, which may be reduced under a tax treaty. Also, certain exemptions are available in domestic tax law (eg, for dividends paid out of taxed profits).

Capital distributions are taxable for shareholders to the extent they exceed the cost base of the shareholder's shares in the company.

Austria

Dividends paid to a domestic or non-domestic individual are subject to 27.5% income withholding tax rate (Kapitalertragsteuer). Austria's double tax treaties may provide for a reduced withholding tax rate, which could apply at source or by way of a refund procedure. Claiming the reduced rate may require certain documentation, including a residency certificate. Austrian dividends paid to resident individuals are not subject to further income tax if the 27.5% income tax has already been withheld at source.

Dividends distributed to domestic or foreign corporations are, in general, subject to 25% withholding tax. An exemption from withholding taxation of dividends distributed to an Austrian or EU parent company is applicable, provided that the following conditions are met:

  • the shareholder is a corporation resident in Austria or in another EU member state and
  • the shareholder has held at least a 10% interest for one year.

Additionally, withholding tax relief may be provided for recipients resident in countries with a Double Tax Treaty with Austria. Dividends paid to foreign corporations are only exempt from Austrian withholding tax if the activities of the foreign company go beyond those of a mere holding company, that staff is being employed and business premises are used.

If dividends are paid to domestic or non-domestic individual or corporate shareholders optionally by dissolution of the share premium of a company, there is no income withholding tax due. Such dividends are paid without source taxation and are treated as capital repayment (Einlagenrückzahlung).

Belgium

Distributions paid by a corporation to its shareholders are treated as dividends. Distributions that stem from paid-in capital, as defined under Belgian tax law, are, subject to certain conditions, not subject to income tax.

Brazil

Distributions paid by a Brazilian legal entity to shareholders are treated as tax-free dividends, regardless of where the shareholder is domiciled. As mentioned above, the Brazilian Government is studying possible changes to the rules regarding the payment exemption. 

Canada

Distributions paid by a corporation are generally treated as dividends of the payor corporation. Certain distributions on shares of a corporation, such as returns of capital (to the extent of the "paid-up capital" in respect of the relevant shares), may generally be returned to shareholders on a tax-free basis.

China

The part of the distribution equivalent to retained earnings is treated as a dividend; the remaining part is treated as return of capital, with any exceeding amount being treated as capital gain.

Colombia

Dividend taxation in Colombia depends on whether the dividends are paid from profits obtained before 2017.

Profits obtained before 2017

  • Dividends distributed out of profits taxed at the level of the distributing company do not trigger additional income taxes for the shareholder. Conversely, dividends paid out of profits untaxed at the company's level are taxed at the corporate income tax rate of 33%

Profits obtained as of 2017

  • Dividends paid from taxed profits from 2017 or later are taxed as follows:
    • Profits distributed to tax resident individuals are subject to a 0% or 15% dividend tax (if the dividend is equals to or exceeds 300 UVT – COP$10 million or US$3,262) If the dividends are paid out from profits untaxed at the corporate level, the applicable rate is the general corporate income tax rate plus 0% or 15%. Dividend tax is applicable on the amount of the dividend less the amount of the corporate income tax
    • Profits distributed to non-tax residents or permanent establishments in Colombia, are subject to a 7.5% dividend tax. If the dividends are paid out from profits untaxed at the corporate level, the applicable rate is the general corporate income tax rate of 33%, plus the 7.5% dividend tax. Dividend tax is applicable on the amount of the dividend less the amount of the corporate income tax
    • Profits distributed to Colombian entities are subject to a 7.5% dividend tax. If the dividends are paid out from profits untaxed at the corporate level, the applicable rate is the general corporate income tax rate of 33%, plus the 7.5% dividend tax. Dividend tax is applicable on the amount of the dividend less the amount of the corporate income tax

Dividend tax on local entities only applies on the first distribution of profits and can be creditable by the ultimate beneficial owner (individual tax resident or foreign investor).

Dividend tax on Colombian entities does not apply when the profits are distributed between local companies that are part of a business group registered before the Chamber of Commerce.

Colombian tax law provides that in order to determine the amount of profits that could be distributed as untaxed (or that are subject to the 0%, 7.5% or 15% withholding tax on dividends) a formula needs to be applied. In general, the formula provides that the result from subtracting each year's income tax from each year's taxable basis corresponds to the amount that can be distributed as untaxed dividends (or that are subject to the 0%, 7.5% or 15% withholding tax on dividends).

Finland

Distributions paid by a company to a shareholder are primarily regarded as dividends for tax purposes, but treatment under capital gain rules is possible under specified criteria. A transfer of funds from a shareholder to a company is generally tax exempt.

France

A participation exemption regime is available for eligible dividends. Non-eligible distributions are subject to corporate income tax at ordinary rates.

Germany

Qualifying dividends may be eligible for preferential treatment for the recipient.

Hong Kong

Dividends distributed by a Hong Kong company to its shareholders are tax exempt. No withholding tax is levied on the distributing Hong Kong company.

India

Distributions of dividends by a corporation are subject to dividend distribution tax in the hands of the corporation. Recipient non-resident is exempt from tax on dividend on which dividend distribution tax has been paid by the corporation.

Ireland

Dividends received by an Irish resident company from another Irish resident company are usually exempt from Irish tax, including dividend withholding tax. The 12.5%  corporation tax rate applies (on election) in respect of foreign dividends paid out of EU/treaty country trading profits where either the divided paying company:

  • Is resident in the EU/treaty country, or
  • Is a publicly quoted company or a 75% subsidiary of a publicly quoted company

Corporation tax at the rate of 25% applies to foreign dividends sourced from other companies or from non-trading profits.

Ireland provides for unilateral credit relief for foreign withholding tax and underlying taxes on dividends paid to an Irish resident company. A minimum shareholding of 5% applies. The foreign tax is available as a credit against Irish tax and where the foreign tax exceeds the Irish tax on the dividend, the excess can be pooled and offset against Irish tax on other foreign dividends received in the same accounting period. Any balance unused can be carried forward and used in subsequent accounting periods. This credit system often operates to eliminate any additional Irish taxes on the receipt of foreign dividends.

Israel

Dividends paid by an Israeli corporation to another Israeli corporation are not subject to tax if paid out of income that was subject to corporate tax at the regular rate.

Dividends paid by an Israeli corporation to an individual or to a foreign corporation are subject to tax at the rate of 25%, or 30% if the shareholder is (or was during the 12 months prior to the distribution) a "significant shareholder." A shareholder is generally considered a significant shareholder if he or she holds 10% or more of the economic or voting rights in the company.

Italy

As noted above, dividends from qualifying domestic and foreign shareholdings may be eligible for an exclusion from taxable income.

Japan

Distributions paid by a corporation are treated as dividends to shareholders, which are not deductible, unless a corporation fulfills requirements set forth under the Asset Liquidation Law or similar special laws.

Luxembourg

Not applicable for this jurisdiction.

Mexico

Dividends that come from the CUFIN account should not be subject to additional tax at the level of the Mexican entity distributing the dividend. Otherwise, they should be subject to a grossed up tax rate of 42.8%.

The Mexican Income Tax Law (MITL) does not provide ordering rules with respect to how CUFIN balances are considered with respect to dividend distributions. However, it is assumed that older balances should be distributed first.

Under the MITL in force until 2013, dividends received by an individual or a foreign shareholder from a Mexican entity were not subject to withholding tax. The 2014 Tax Reform introduced a new withholding tax of 10% on dividends, when distributed to a foreign shareholder or an individual. The new rules also broaden the definition of what should be considered a dividend, covering other transactions between the distributing company and its shareholders and/or related parties.

As part of the 2014 tax reform, CUFIN balances must be segregated between pre-2014 and post-2014 Mexican balances, in order to determine the potential impact from the 10% withholding tax introduced that year.

With respect to post-2014 CUFIN which could be distributed in the future, the domestic 10% dividend withholding tax may be reduced to under available Income Tax Treaties entered into by Mexico, to the extent that the requirements provided in the Treaty and the MITL are met.

For Mexican tax purposes, capital reductions are generally treated as a distribution in exchange for shares. The general purpose of these rules is to treat distributions made in a capital redemption as either a tax free return of capital or a deemed dividend or distribution of earnings.

Netherlands

Dividend distributions paid by a Dutch company or holding cooperative to its shareholders or members are in principle subject to Dutch dividend withholding tax. Dividend withholding tax can be reduced under the domestic dividend withholding exemption or under the application of a tax treaty. A return of paid up capital is, in principle, not subject to Dutch dividend withholding tax.

Norway

Please see Participation exemption. If the participation exemption regime does not apply, the dividends will be taxed at the ordinary corporate tax rate of 22%.

Poland

A participation exemption applies to qualifying dividends.

Portugal

Distributions paid by a corporation to its shareholders are treated as dividends.

Romania

Distributions of current profits and retained earnings paid by a corporation to its shareholders represent dividends. A distribution in excess of current profits and retained earnings may qualify as a return of capital (and should be carried out as a share capital reduction), non-taxable up to the contributions of each shareholder to the share capital of the distributing company. A distribution of new participation titles or an increase of their nominal value, as a result of an incorporation of reserves, benefits or share premiums are non-taxable for corporate income tax purposes.

Russia

Dividends received by a Russian organisation are taxed at a 13% corporate profits tax rate. If dividends are paid to a foreign organisation, they are subject to a corporate profits tax withholding at a rate of 15%, unless the relevant treaty relief is applied.

Under recent Tax Code clarification, a distribution received by a shareholder from exiting a subsidiary or as a result of the subsidiary's liquidation is classified as a dividend for tax purposes. If the withdrawal or liquidation results in a loss on an investment in subsidiary, this loss shall be treated as a tax deductible non-sales expense for corporate profits tax purposes.

These rules have also established that if a distribution is the result of voluntary reduction of the subsidiary's charter capital, the shareholder shall not recognize taxable income on the return of capital.

Singapore

A company may pay dividends to the extent it has distributable reserves. Such dividends are tax exempt to the shareholders.

South Africa

Distributions paid by a corporate are generally treated as a dividend to shareholders, unless the board of a corporate entity determines that the distribution results in a reduction of contributed tax capital. A return in capital in excess of a shareholder's tax base will normally be treated as a capital gain.

South Korea

Distributions paid by a corporation are treated as dividends to shareholders within the limit of the amount obtained by subtracting the amount of capital from the amount of net asset value on the balance sheet.

Spain

As a general rule distributions paid by a corporation are treated as dividends to shareholders to the extent of the current and accumulated earnings and profits. A distribution in excess is treated as a return on capital up to the limit of the shareholder's tax basis and thereafter is treated as taxable income.

Sweden

Distributions paid by a corporation to a shareholder are normally treated as dividends for tax purposes. A transfer of funds from a shareholder to a company will normally be treated as a conditional or unconditional shareholder’s contribution.

Switzerland

A federal 35% dividend withholding tax is levied at the source on the gross amount of dividend distributions made by Swiss companies. These withholding taxes can be reclaimed or be exempted at source depending on the applicable treaty.

Taiwan

For resident individuals, the gross dividend received may at the election of such individual either

  • be included in such individual's taxable income, whereby 8.5% of such dividend income will be treated as deductible amount (the maximum deductible amount is NT$80,000 for each household) or
  • be taxed separately on a flat rate of 28%, and excluded from such individual's taxable income

For non-resident shareholders, dividends received are subject to 21% withholding tax, absent an available tax treaty for a reduced rate.

The dividends received by a domestic company from its investment in another domestic company are not included in the first-mentioned domestic company's taxable income.

If a Taiwan company invests in foreign companies, dividends declared by such foreign companies must be included in the domestic company's taxable income, but any foreign tax credits may be used.

Turkey

The rate of the withholding tax applicable for international holding companies' dividend distributions (based on the profits derived from their foreign participations) to non-resident companies are subject to a withholding tax rate is 15%. This rate may be subject to reduction under an applicable double taxation treaty.

Ukraine

 Upon distribution of a dividend, a company may be required to pay advance corporate income tax on the dividend (ACIT) at 18% tax rate. ACIT is paid only if certain conditions are met and may further be credited against corporate income tax due for future periods.

United Arab Emirates

No specific tax rules apply in relation to distributions by UAE companies.

United Kingdom

Distributions paid by a UK company are generally treated as dividends to shareholders. UK company law forbids distributions which exceed accumulated realized profits and restricts a company's ability to repay capital, which generally requires a court order. A return of capital to shareholders is therefore unusual in the UK.

United States

Distributions paid by a corporation are treated as dividends to shareholders to the extent of the current and accumulated earnings and profits (E&P) of the payor corporation. A distribution in excess of current and accumulated E&P is treated as a return of capital to the extent of a shareholder’s tax basis and thereafter is treated as capital gain.

Zimbabwe

Interest paid on loans in excess of the stipulated debt to equity (gearing) ratio of three to one is regarded as a dividend distribution and the portion of the interest relating to such excess shall be subject to non-resident and resident shareholders' tax, as the case may be.