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  • Residence and basis for taxation

    In Argentina coexist 3 levels of taxation: federal, provincial (state) and municipal level.

    An entity is deemed resident for tax purposes when it is incorporated in Argentina under the laws of Argentina. An Argentine individual is considered a tax resident unless they lose their tax residence status by choice, obtain legal residence in other country or by fact, when the individual is outside the country for at least a 12-month 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 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 on income of Argentine source by way of income tax. The local resident paying to a foreign entity or individual is obliged to withhold the income tax at a 35-percent (or 15-percent for some gains as capital gains) 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 100 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 percent for the fiscal year 2020 and 25 percent as of the fiscal year 2021.

    In general, local individuals are taxed at a progressive tax rate that goes from 5 percent to 35 percent, 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-percent income tax rate if the title is issued in Argentine pesos, or 15-percent income tax rate if a share of a corporation is transferred, or if the title or sovereign bond is issued in Argentine pesos with an adjustment clause or in foreign currency except an exemption results applicable.
    • The transfer of real estate by a local individual is taxed at a rate of 1 percent of income tax.  

    Foreign

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

    • Transfer of sovereign bonds or any title (public or private) is taxed at a 5-percent income tax rate if the title is issued in Argentine pesos, or 15-percent income tax rate if the title is issued in Argentine pesos with adjustment clause, or in foreign currency except an exemption results applicable. The transfer of shares of a local corporation is taxed at a 15-percent income tax rate. This assumes 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-percent tax rate for the fiscal year 2020 and 13 percent as of the fiscal year 2021.
    • 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 the federal, state and municipal level depending on their activities. Tax returns must be filled on a monthly or yearly basis 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 on indirect transfer

    Income tax on 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. 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-percent tax rate for the fiscal year 2020 and 13 percent as of the fiscal year 2021.

    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 5-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 an 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 percent 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 percent 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 percent 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 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 7 percent for the fiscal year 2020 and 13 percent as of FY 2021.

    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 percent up to 5 percent 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 province. The taxable event is the performance of commercial or industrial activity in the territory of the province. Tax rates can be 0.5 percent up to 6 percent 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-percent tax rate in the Province of Buenos Aires.

    In some provinces, turnover tax is also applicable to the import of digital services.

    Every province has its own turnover tax. However, the turnover tax collected by each province is similar, although different tax treatments may be 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

    The federal government collects VAT on the importation of digital B2C services. The taxpayer is the local resident unless the service provider has a fixed place in the Argentina. The tax rate is 21 percent.

    PAIS Tax

    The PAIS tax is applicable to the purchase of foreign currency by resident individuals. It is also applicable when a local individual pays for services to a foreign entity using their credit/debit cards. The tax rate is 30 percent, or 8 percent when the service being paid is already taxed with the VAT on digital services.

    Double taxation treaties

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

  • Key contacts
    Augusto Nicolás Mancinelli
    Augusto Nicolás Mancinelli
    Partner DLA Piper (Argentina) [email protected] T +5411 41145500 View bio

Loss utilization

Argentina

Losses can be carried forward and can be offset with future profits for a 5-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 an offset of foreign-source profits.

Australia

Company tax losses can be carried forward indefinitely, subject to satisfying certain loss utilization tests.

From January 1, 2021, eligible companies with annual turnover of less than AUD5 billion may also carry-back tax losses from the 2019-20, 2020-21, or 2021-22 income years to offset previously taxed profits in the 2018-19 or later income years, subject to satisfying the relevant requirements and integrity measures.

Austria

Tax losses (resulting from operating revenues) may be carried forward for an indefinite period of time and may be offset against both trading income and capital gain. However, for corporations, only 75 percent of current income may be offset against tax losses brought forward; thus, 25 percent of current income is invariably subject to tax.

This limitation does not apply to individuals. Excess tax losses can still be carried forward. Loss carrybacks are not permitted.

Belgium

Losses may be carried forward indefinitely, but their use in a given tax year is limited to EUR 1,000,000 plus 70 percent of the taxable basis in excess of EUR 1,000,000. Any carried-forward tax losses that cannot be used due to this limitation may be further carried forward indefinitely. The remaining 30 percent of the taxable basis in excess of EUR 1 million will be subject to normal corporate income tax rates.

Brazil

Under the actual profits method, net operating losses generated in a given period/year can be used to offset up to 30 percent of the taxable income the accrued on the subsequent period/year.

Canada

Non-capital losses may generally be carried forward 20 taxation years and back 3 taxation years, subject to certain loss limitation rules. Net capital losses may generally be carried forward indefinitely and back 3 taxation years, subject to certain loss limitation rules.

Chile

Net operating losses may be carried forward indefinitely, unless changes in the ownership structure of a company with tax losses occur, in which case tax losses will be forfeited. Carryback only applies when a company with losses receives dividends from a subsidiary. Carryback will terminate progressively from 2020 until 2024.

China

Loss can be carried forward for 5 years in general, and may be extended in limited scenarios.

Colombia

Utilization of tax losses depends whether such losses were obtained before 2017:

  • Tax losses generated before 2017 can be offset with ordinary taxable income obtained in any of the subsequent fiscal years.
  • Tax losses generated as of 2017 can only be offset with ordinary taxable income obtained in the twelve subsequent fiscal years.

Carry-back of losses is not permitted. Capital losses cannot be offset against ordinary income.

Finland

Tax losses can be carried forward up to 10 years. Changes in the ownership of a company with tax losses carried forward results in forfeiture of tax losses, but Finnish tax authorities may, upon application, grant an exception to utilize the losses.

France

Operating losses can be carried forward without time limitation but with a utilization cap per financial year of EUR1 million plus 50 percent of the taxable profit of the current financial year. Losses can be carried back only for the previous financial year, with a EUR1 million cap.

Germany

Carryforward: Losses may be carried forward indefinitely.

Carryback: Losses up to an amount of EUR1 million can be offset against the profits of the preceding year. Losses for trade tax purposes cannot be carried back.

The maximum amount limits for loss carrybacks have been increased from EUR 1 million to EUR 5 million for losses from the years 2020 and 2021. After the fiscal year 2021, the old limits will apply again.

Minimum taxation: 40 percent of the income exceeding EUR1 million cannot be sheltered by tax loss carryforwards, but instead is subject to taxation at regular rates.

Hong Kong, SAR

Losses attributable to the operation of the trade, profession or business carried on in Hong Kong can be carried forward indefinitely to offset against future assessable profits until fully utilized. Where a taxpayer carries on multiple trades, profession or businesses in Hong Kong, the losses in one can be utilized against the profits of the other.

However, losses cannot be carried back to offset against assessable profits in prior basis periods.

Hungary

Tax losses may be carried forward for 5 years from the year in which they incurred. Losses carried forward from previous tax years may only be used to offset 50 percent of the current year’s profit. Losses must be deducted in the order they were sustained. Losses generated by the last day of the 2014 tax year which have not yet been used can be utilized in line with the provisions effective on December 31, 2014 and are available to be utilized by December 31, 2025.

India

Business or Profession losses may be carried forward 8 years. However, unabsorbed depreciation may be carried forward indefinitely. Short-term loss may be set off against both short term and long term capital gain. However, long-term loss may be set off only against long term gain.

Ireland

Relief for trading losses is available by way of set-off against all other relevant trading income of the company in the same period and of the immediately preceding accounting period of equal length. Relevant trading losses can also be used to shelter foreign dividends which the company elects to tax at 12.5 percent. Any remaining trading losses can be set-off against all other income and profits of the company in the accounting period and in the immediately preceding accounting period of equal length on a value basis. Unused trading losses may be carried forward indefinitely for offset against future income of the same trade.

A member of a group of companies may surrender current year trading losses to another group member. A number of conditions must be met for group relief to be available (eg, corresponding accounting period, 75-percent subsidiaries and tax resident in a member state of the EU).

Israel

There are different utilization rules for current and carried-forward net operating losses and capital losses. Both capital losses and net operating losses which were not utilized in the current tax year may be carried forward indefinitely. Carry back of losses is not available.

Italy

Tax loss can be carried forward without any time limitation, but can be used to offset only up to 80 percent of taxable income. Tax losses incurred in the first 3 years of activities can be used to entirely offset subsequent years' taxable income. Tax losses cannot be carried back.

Japan

Net operating losses may be carried forward 10 years. Only small and medium-sized enterprises with capital of JPY100 million or less and whose parent's capital is less than JPY500 million can carry back its losses to the preceding year. Also, except for small and medium-sized enterprises, the utilization of the net operating loss carried forward is subject to the following caps: 80 percent of the taxable income for the fiscal years beginning on or after April 1, 2012; 65 percent for the fiscal year beginning on or after April 1, 2015; 60 percent for the fiscal year beginning on or after April 1, 2016; 55 percent for the fiscal year beginning on or after April 1, 2017; and 50 percent for the fiscal years beginning on or after April 1, 2018.

Luxembourg

Carryforward: Losses generated from January 1, 2017 can be carried forward for a maximum period of 17 years.

Point of interest: Losses generated before this date are not subject to these limitations and may be carried forward indefinitely.

Carryback: Not applicable for this jurisdiction.

Mexico

Net operating losses can be carried forward 10 years, but no carryback is allowed.

Mozambique

Tax losses assessed in a certain financial year are, in general, deductible from the taxable profits, if any, of 1 or more of the 5 subsequent financial years.

Netherlands

Tax losses can be carried 6 years forward and 1 year back. Grandfathering treatment permits a 9-year Carry-forward for tax losses realized prior to 2019. Significant changes of ownership of a company may result in the tax losses being restricted.

The Dutch government has announced a proposal to limit the utilization of tax losses as of January 1, 2022. Under this proposal, the utilization of tax losses will be limited to 50 percent of the taxable profits. However, tax losses up to EUR 1 million may still be utilized in full. In conjunction with the limitation on the utilization of tax losses, the carry-forward period will be made indefinite (as opposed to 6 years). The carry back period will remain 1 year.

Norway

Unused losses may be carried forward without limit. Disallowed interest deductions (see Taxable income) can be carried forward for 10 years.

Poland

Losses may be carried forward for 5 years. The deduction may not exceed 50 percent of loss incurred in a given year but, in addition to the 50-percent limit, a PLN5 million loss may be settled in 1 of 5 years. Losses cannot be carried back. Losses incurred from a given source (capital gain or other sources) may be settled only with income from that source.

Starting from 1 January 2021, losses of a taxpayer which acquired an enterprise/organized part of enterprise or took over another entity (via a merger) cannot be deducted:

  • if the scope of the core business activity carried out by the taxpayer differs from the scope of the core business activity which had been conducted by the taxpayer before the acquisition (merger), or
  • when at least 25 percent of shares of the taxpayer are held by entity or entities which did not have these rights at the end of the tax year in which the taxpayer incurred loss.

Portugal

Net operating losses can be carried forward 5 years but can be used to offset only 70 percent of the taxable income.

The time limitation applicable to agricultural, commercial or industrial entities qualified as micro, small and medium-sized enterprises is 12 years.

Due to the Covid-19 pandemic, the following additional rules on net operating losses were approved:

  • Net operating losses generated in 2020 and 2021 by taxable persons whose main activity is of a commercial, industrial or agricultural nature can be carried forward for a 12-year period (counted as from 2022), irrespective of the taxable persons qualification as a micro, small or medium-sized enterprise
  • Net operating losses generated in 2020 and 2021 may be used to offset 80 percent of the taxable income (instead of 70 percent)

Romania

Fiscal losses can be carried forward for seven consecutive years and offset against future profits. Losses can also be transferred within reorganization processes, such as mergers, spin-offs, etc.

Russia

Russian tax rules allow tax losses to be carried forward for an unlimited period, but for financial years from 2017 to 2021, the taxpayer may reduce the tax base by such losses to the amount of no more than 50 percent.

Losses from the sale of securities may be credited only against future income from the sale of the same type of securities. Losses from the disposal of fixed assets are recognized evenly over the remaining useful life of the assets.

Singapore

Unabsorbed losses, capital allowances and donations may be:

  • Carried forward indefinitely (except for donations which can only be carried forward for up to 5 years), provided that the shareholding composition of the shareholders and their respective shareholdings of the ultimate holding company remain substantially (ie, 50 percent or more) the same on the relevant dates. For utilization of unabsorbed capital allowances, there is an additional condition that the company must continue to carry on the same trade
  • Carried back for set-off against income earned in the immediate preceding year, also subject to the substantial shareholders' test being met. The amount that can be carried back is capped at S100,000.
  • Transferred to eligible related companies under the group relief system

South Africa

Net operating losses and assessed losses of a corporate may generally be carried forward indefinitely. However, a corporate will lose its right to carry forward an assessed loss to a subsequent year of assessment if it fails to carry on a trade during a specific year of assessment.

Legislative changes have been proposed that may impact a corporate’s ability to utilize the whole assessed loss in a given tax year.

South Korea

Net operating losses can be carried forward 10 years.

Spain

Net operating losses (NOLs) can be carried forward with no time limit. However, the following limitations apply:

  • Companies with net turnover in the previous fiscal year of less than EUR20 million can only offset NOLs up to the limit of 70 percent of the net taxable income
  • Companies with net turnover in the previous fiscal year between EUR20 million and EUR60 million can only offset NOLs up to the limit of 50 percent of the net taxable income, and
  • Companies with net turnover in the previous fiscal year of more than EUR60 million can only offset NOLs up to the limit of 25 percent of the net taxable income

Nevertheless, NOLs up to EUR1 million can be offset with no limit.

Sweden

Tax losses may be carried forward indefinitely. Changes in the ownership of a company with tax losses carried forward may result in the tax losses being permanently or temporarily restricted.

Switzerland

Unused losses can be carried forward 7 years for corporate income tax purposes.

Taiwan, China

Tax losses (for Taiwan companies and Taiwan branch offices of foreign companies) may be carried forward for 10 years if such company meets certain conditions. Losses may not be carried back.

Turkey

Net operating losses can be carried forward for 5 years but cannot be carried back with the exception of the company's liquidation.

Ukraine

Declared losses may be carried forward without limitations.

United Arab Emirates

 Branches of foreign banks may carry forward losses for a limited number of years, depending on the Emirate of establishment. For other companies, loss utilization is not applicable in the UAE.

United Kingdom

Trading losses can be carried forward indefinitely and can be carried back 1 year (or in certain limited circumstances up to 3 years). Trading losses can also be surrendered between group companies (provided, in the case of losses arising prior to April 2017, that they are utilized in the year in which they arose). However the use of carried forward trading losses is limited to the first GBP5 million of taxable profit (per group) plus 50 percent of profits in excess of GBP5 million.

United States

Generally, net operating losses arising in tax years beginning before 2018 may offset 100 percent of taxable income, and may be carried back 2 years or forward 20 years. Net operating losses arising in tax years beginning 2018 or later may offset up to 80 percent of taxable income in the year applied, with excess losses carried forward indefinitely. Special rules apply to net operating losses under the CARES Act.

Zimbabwe

Any assessed loss may be carried forward for a maximum of 6 years from the year of assessment in which the assessed loss was first incurred. The only exemption to this general rule is assessed losses incurred from mining operations, which may be carried forward for an indefinite period.