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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

Tax-free reorganizations

Argentina

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.

Australia

Tax-free reorganization provisions include CGT exemptions, exemptions for intra-group transactions in a consolidated group and a stamp duty exemption for corporate reconstructions.

Austria

According to the provisions of the Austrian Reorganization Tax Act (Umgründungssteuergesetz), reorganizations of partnerships and corporations may be carried out tax-neutrally under certain conditions. In the case of cross-border reorganizations, it is especially essential that a possibly existing right to tax of the Republic of Austria continues to exist. If the requirements of the Reorganization Tax Act are (intentionally) not fulfilled, the reorganization is tax effective (which could be useful in specific situations).

Belgium

Qualifying reorganizations (merger, demerger, partial demerger, contribution of a universality of goods or a business line) involve the direct transfer of all assets and liabilities from the transferor to the receiving company.

Subject to certain conditions, national and EU cross-border reorganizations can be performed under a tax neutral regime under which capital gains would not be taxed. The regime provides for restrictions on the transferability of certain deductions (eg, tax losses) from the transferor to the receiving company

Brazil

The recognition of gains or losses in reorganizations can be structured at cost and deferred.

Canada

Certain qualifying corporate reorganizations, combinations and divisions may be eligible to be executed on a tax-deferred basis for federal tax purposes, subject to the detailed statutory restrictions in the Income Tax Act (Canada). Certain special rules apply to cross-border reorganizations.

China

Reorganizations (eg, equity purchases, asset purchases, mergers or splits) may be subject to "Special Tax Treatment" (tax deferral) upon meeting certain substantive and procedural conditions. Additional restrictions are applicable to cross-border reorganizations.

Colombia

There are tax-free reorganizations (in-kind contributions, mergers and spin-offs) if they comply with certain legal requirements.

Law 1943, 2018, introduced the indirect tax regime in Colombia. According to this regime, indirect sales of Colombian assets through the sale of foreign entities will be subject to income tax or capital gain tax, whenever Colombian assets represent more than 20% of the total assets of the foreign entity being sold considering book value and/or commercial value of such assets.

Income tax or capital gain tax shall be determined as if the Colombian asset is sold directly. If the seller fails to comply with its tax duties under this tax regime, the subsidiary in Colombia and the purchaser will be jointly liable.

This tax regime is not applicable when the shares or rights in the foreign entity are listed in a stock exchange market and there is not a beneficial owner holding more than 20% of the outstanding shares or rights of the foreign entity.

Finland

Finnish implementation of EU merger directive covers tax-exempt mergers, full and partial divisions, transfers of business and share exchanges. A wide-ranging case law exists.

France

For all types of restructurings (eg, mergers, spin-offs or partial spin-offs), a favorable tax regime may apply if the assets are transferred under special valuation rules.

Germany

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

Hong Kong

Ad valorem stamp duty is payable for the transfers or sales of shares or immovable property in a reorganization (see Stamp duty). Stamp duty relief for intra-group reorganization is available subject to certain conditions.

India

Qualifying corporate formations, combinations and divisions may be tax-free to a participating corporation and its shareholders, except to the extent of any non-qualifying property received.

Ireland

Relief from stamp duty and CGT is available on certain intra-group reorganization transactions.

Israel

Tax-free mergers and spin-offs are achievable provided that certain conditions are satisfied. Some of the tax-free reorganizations are subject to a pre-ruling from the Israel Tax Authority.

Italy

Group reorganizations are ordinarily tax neutral for the corporations involved. Special rules apply to cross-border reorganizations.

Japan

If a corporation transfers its assets to another corporation pursuant to a corporate division, a merger, an investment in kind, a dividend in kind or a share transfer (reorganization), and the reorganization is a “qualified reorganization” for corporate tax purposes, the recognition of the gains and losses on the transfer of the assets will be deferred.

Luxembourg

Luxembourg tax law provides with the tax neutrality for a company reorganization in the following cases:

  • Modification of the corporate form of an entity into another corporate form
  • Merger or demerger of resident companies or EU resident companies
  • Exchange of shares when the acquiring company gets the majority of voting rights in the acquired company or increases the majority of voting rights already held

Mexico

As mentioned before, the transfer of shares in a Mexican company generally constitutes a taxable event. However, in the case of a domestic corporate reorganization, it may be possible to obtain a ruling from Hacienda, authorizing the transfer of the shares at tax basis, and thus avoiding a gain on the transfer. This type of ruling is allowed only where the seller is a Mexican resident and the transaction can be carried out with prior approval if the transfer is made in exchange for shares of another Mexican entity. A two-year holding period requirement and various reporting requirements must be met.

In the case of a group restructuring where the transferor is a foreign resident, it is possible to transfer the shares of a Mexican subsidiary and defer the income tax due until those shares leave the group. However, a ruling (ie GRA) must be issued by Hacienda before the transfer is made, and a notice has to be filed each year informing that the shares remain within the group.

Certain Income Tax Treaties entered into by Mexico provide an exemption for capital gains tax derived from corporate reorganizations. However, there are requirements that should be met in order to qualify for a tax free reorganization, and procedural fillings must be made with Hacienda before the transaction is carried out.

Netherlands

Tax-exempt mergers, demergers and tax-exempt contribution of assets are available, in each case provided the specific requirements are met. In addition, the consolidation regime can be used to transfer assets or liabilities between group companies without giving rise to tax consequences. Special rules apply to cross-border reorganizations.

Norway

Merger and demergers may be carried out without triggering any adverse tax consequences.

Poland

Based on the EU Mergers & Acquisitions Directive, mergers, divisions and share-for-share swaps may be tax-neutral provided that certain conditions are met and they are conducted for economic reasons. Otherwise, they result in taxation.

Portugal

Group reorganizations are ordinarily tax neutral.

Romania

Qualifying mergers, spin-offs, as well as the transfer of business lines made in exchange for shares may be tax-free to a participating corporation and its shareholders, provided that such operations are not tax driven. Similar tax neutrality rules apply to cross-border reorganizations involving EU companies.

Russia

Reorganizations are subject to general profits tax rules. Generally, it is possible to carry out a reorganization in a tax neutral way. However, Russian anti-abuse tax rules must be observed to secure a tax-free reorganization for both the participants and the companies going into the reorganization.  

Singapore

Not applicable for this jurisdiction.

South Africa

Qualifying corporate reorganisation, formations and dividends can be implemented on a tax-free basis, provided all of the requirements are satisfied. Limited rules apply for foreign corporate reorganisations.

South Korea

Not applicable for this jurisdiction.

Spain

A special Spanish tax regime is applied to corporate reorganizations such as mergers and spin-offs. This regime establishes a tax deferral scheme for these transactions.

Sweden

It is possible to transfer assets or a business at tax book value without triggering exit taxation.

Mergers and demergers may also be carried out without triggering any adverse tax consequences.

Switzerland

Provided certain prerequisites are met, reorganizations are possible on a tax-neutral basis, as long as the applicable tax accounting values of assets and liabilities remain the same and the assets remain taxable in Switzerland after reorganization.

Taiwan

Qualified M&A transactions may be afforded tax-free treatment according to the Business Mergers and Acquisitions Act.

Turkey

Not applicable for this jurisdiction.

Ukraine

A reorganization of a Ukrainian resident company is generally tax neutral. Tax attributes should also be generally transferable to successor entities within reorganizations.

United Arab Emirates

Not applicable for this jurisdiction.

United Kingdom

Many forms of group reorganization can be achieved on a tax-free basis, due to a combination of reliefs, principally an automatic deferral of corporation tax on transfers of capital assets (including shares) between two UK resident group companies, and relief where shares are transferred in consideration of an issue to the transferor of shares or loan notes in the transferee.

United States

Qualifying corporate formations, combinations and divisions may be tax-free to a participating corporation and its shareholders, except to the extent of any non-qualifying property received (ie, "boot"). Special rules apply to cross-border reorganizations.

Zimbabwe

Companies pay no capital gains tax when transferring capital assets between companies under the same control under a scheme of reconstruction.