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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

Transfer pricing

Argentina

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.

Australia

"Arm's length" principles are applied to transactions between related parties under an international agreement. Australian rules are similar in many respects to the OECD guidelines, with certain material differences such as the Commissioner's reconstruction powers.

In addition to satisfying transfer pricing documentation requirements, multinational entities with an annual global income of AUD 1 billion or more are required to provide the ATO with three statements (a master file, a local file and a country-by-country (CbC) report) within 12 months after the end of their income tax year. These statements require multinationals to report details regarding their international related party dealings, revenues, profits and taxes paid by jurisdiction. These measures took effect from income years commencing on or after January 1, 2016.

Austria

Transfer pricing documentation based on the OECD Transfer Pricing Guidelines (Master file, local file, country-by-country report) must be prepared and submitted with the Austrian tax authorities according to the Austrian Transfer Pricing Documentation Law. The size of required documentation depends on the turnover of a corporate entity.

Belgium

Belgium generally adheres to the OECD transfer pricing guidelines. The arm's length principle therefore constitutes a basic transfer pricing principle in Belgium. Advance pricing agreements (whether unilateral, bilateral or multilateral) may be obtained.

Brazil

Brazilian transfer pricing rules apply to  transactions between a Brazilian party and a foreign related entity or any entity domiciled in a tax haven jurisdiction or subject to privileged tax regime. In general, Brazilian transfer pricing rules follow arm's-length principles but deviate significantly from the OECD guidelines as it provides for only certain methods and fixed statutory margins. The legislation allows taxpayer to freely choose the method as there is no best method rule and no functional analysis required.

Canada

Arm's-length principles generally are applied under Canadian tax law to transactions between related entities. The applicable Canadian rules are similar in many respects to the OECD guidelines, with certain material differences.

China

Related party transactions must be conducted on an arm's-length basis. Otherwise, the Chinese tax authorities may make an adjustment within ten years.

Enterprises reaching certain thresholds must prepare contemporaneous transfer pricing documentation, including a country-by-country report as applicable.

Colombia

Colombia's transfer pricing regime is based on the OECD guidelines and is applied to transactions between related companies. Taxpayers subject to the transfer pricing regime must consider and follow commercial standards, under which a transaction between related parties must satisfy the conditions that would have been used in comparable transactions with unrelated parties.

Finland

The Finnish transfer pricing rules are based on the “arm’s-length” principle and the OECD guidelines. Documentation requirements apply to cross-border transactions with affiliated companies.

France

The French legislation does not make any specific references to what are acceptable transfer pricing methodologies. In practice, however, the methodologies stated in the OECD guidelines are employed in most cases.

Germany

Transactions between affiliated parties will give rise to income adjustments to the extent that such transactions are not conducted at "arm's-length." Additionally, transactions with a foreign affiliated party are subject to extensive documentation requirements.

Hong Kong

Hong Kong has adopted the "arm's length" standard and follows the OECD guidelines generally. Hong Kong's tax treaties follow the OECD Model Tax Convention on Income and on Capital.

Recently, the Hong Kong government has gazetted the Inland Revenue (Amendment No.6) Bill to meet the international standards promulgated by OECD in BEPS Action Plan. The Bill also proposes significant legislative amendments to the transfer pricing rules in Hong Kong.

India

Transfer Pricing must be conducted on an arm's-length basis and computed using any of the following methods:

  • Comparable uncontrolled price method
  • Resale price method
  • Cost plus method
  • Profit split method
  • Transactional net margin method or
  • Any other method that takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts

It is possible to enter into unilateral/bilateral advance pricing agreements with the tax authorities.

Ireland

Transfer pricing rules are applied on an "arm's-length" basis to transactions involving Irish trading companies. Irish transfer pricing rules follow OECD principles. Arrangements concluded before July 1, 2010 are excluded from the transfer pricing rules under grandfathering provisions. The transfer pricing rules are currently under review and it is expected that under new rules they will extend to non-trading transactions.

Israel

Israel applies arm's-length principles to transactions between related entities. The Israeli rules correspond to the OECD guidelines.

Italy

"Arm's-length" principles generally apply to international transactions between related entities. Italian tax rules make reference to the OECD guidelines.

Japan

When a corporation sells to, purchases from, provides services for or carries on other transactions with a foreign related person with which it has a special relationship, and its taxable income is less than the amount calculated under “arm’s-length” principles, these transactions will be deemed to have been conducted at “arm’s-length” prices, and the differential amount either will be included in, or will not be deductible from, the taxable income of the corporation.

Luxembourg

According to the Luxembourg transfer pricing legislation, transactions between related parties (both located in Luxembourg as well as where one party is taxed in a foreign jurisdiction) have to be governed by the "arm's length principle." This obliges the taxpayer to report in its tax return either an upward or downward adjustment of profits whenever transfer prices do not reflect the arm's length principle. The Luxembourg tax authorities may request from the taxpayer all facts relevant for verifying a tax liability. Therefore, the taxpayer should provide all necessary supporting documentation to facilitate the task of tax authorities.

Moreover, a company may request an advance pricing agreement (APA) from the Luxembourg tax authorities. Fees apply, varying from EUR 3,000 to EUR 10,000 (depending on the complexity of the matter).

Mexico

Mexico has transfer pricing rules. Acceptable transfer pricing methods include the comparable uncontrolled price method, the resale price method, the cost-plus method, the profit-split method, the residual profit-split method and the transactional net-margin method. In certain cases, specific appraisals are used. Transactions between related parties are subject to greater scrutiny, and there are several informative tax returns on related parties transaction that must be filed. It may be possible to reach transfer pricing agreements in advance with Hacienda. These agreements may apply for a period of up to five years.

Beginning in 2016, certain Mexican taxpayers must file additional transfer pricing documentation, including a Master File and Country-by-Country Reports, as recommended by Action 13 of the Base Erosion and Profit Shifting report.

Debt-to-equity rules

Interest deductions may be disallowed if the debt to equity ratio exceeds 3 to 1 on loans with foreign related parties. There are some exceptions to these rules, based on the type of activities that would be funded in Mexico.

Netherlands

"Arm's-length" principles are applied under Dutch law to transactions between related entities. Dutch rules are in accordance with OECD guidelines.

Norway

The Norwegian transfer pricing rules are based on the arm's length principle and the OECD guidelines. Documentation requirements apply to cross-border transactions with affiliated companies.

Poland

Arm's-length principles are generally applied to transactions between related entities. The Polish rules generally follow the OECD guidelines.

Portugal

"Arm's length" principles are applied to transactions between related entities. The Portuguese rules generally follow OECD principles.

Romania

Arm's-length principles generally are applied under Romanian law to transactions between related entities. The Romanian rules are similar in many respects to the OECD guidelines, with certain differences. Specific transfer pricing documentation should be prepared by Romanian corporate tax residents for transactions with related parties with annual values exceeding certain thresholds.

Russia

Related party and certain unrelated transactions must be conducted on an arm's-length basis. Russian rules are similar in many respects to the OECD guidelines, with certain differences.

The tax authorities may request transfer pricing documentation within the framework of a transfer pricing audit, but not earlier than June 1 of the calendar year following the year in which the controlled transaction was performed.

There are also reporting requirements for taxpayers who will be required to submit a notification on controlled transactions. Notifications are to be submitted by May 20 of the year following the reporting calendar year.

From January 1, 2019, only domestic transactions between Russian companies that apply different tax rates of corporate profits tax or special tax regimes shall be subject to the transfer pricing rules, and only if income earned (or cost incurred) from these related party transaction(-s) exceeds RUB 1 billion per year.

For cross-border related party transactions, a threshold of RUB 60 million was introduced for transfer pricing purposes. There was no threshold established for cross border operations in the period from January 1, 2014 until January 1, 2019.

CBC

In December 2017, Russia adopted the law on the tiered approach for transfer pricing documentation in accordance with OECD BEPS Action Plan 13.

This approach applies to multinational enterprises groups (MNE) with a consolidated income of or exceeding RUB 50 billion.

Singapore

The arm's length principle should be adopted for transfer pricing between related parties. Taxpayers should prepare and keep contemporaneous transfer pricing documentation to demonstrate that their related party transactions are conducted on an arm's-length basis, if the value of transactions exceeds certain de minimis amounts.

Singapore has also adopted country-by-country reporting.

South Africa

Arm's-length principles are generally applied under SA law for transactions between related parties. The SA rules follow the OECD guidelines.

SA is a signatory to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

South Korea

Where the price of an international transaction in which either party to the transaction is a foreign related party is lower or higher than the arm's length price, the tax authority may determine or rectify the tax base and tax amount of a resident (including a domestic corporation and a domestic place of business) based on the arm's length price.

Spain

Arm's-length principles generally are applied under Spanish law to transactions between related entities. The Spanish rules are in accordance with OECD guidelines.

Sweden

The Swedish transfer pricing rules are based on the “arm’s-length” principle and the OECD guidelines. Documentation requirements apply to cross-border transactions with affiliated companies.

Switzerland

“Arm’s-length” principles generally apply. Switzerland uses the methods published in the OECD Transfer Pricing Guidelines and has no detailed transfer pricing legislation.

Taiwan

Certain transactions between related parties (eg, where there is direct or indirect "substantive management control," material influence or control over a board of directors) must be conducted on "arm's-length" terms.

Turkey

Turkish tax regime generally adopts the "arm's-length" principles for transactions realized between related entities.

Ukraine

Ukrainian rules are based on OECD guidelines. Arm's length principles are generally applied under Ukrainian tax law to qualifying controlled transactions.

The following transactions may be qualified as controlled:

  • With related non-residents
  • With non-resident commission agents
  • With non-residents registered in "low-tax" jurisdictions (the list of such jurisdictions is approved by the government)
  • With non-residents of certain legal organizational forms (eg, pass-through entities such as UK LLP, Danish KS, etc.) which do not pay corporate income tax or are not tax residents in the country of incorporation (the list of legal forms is approved by the government)

United Arab Emirates

Not applicable for this jurisdiction.

United Kingdom

Arm's-length principles generally are applied under UK law to transactions between related entities. The UK rules generally follow OECD principles.

United States

Arm's-length principles generally are applied under US law to transactions between related entities. The US rules are similar in many respects to the OECD guidelines, with certain material differences.

Zimbabwe

The arm's-length principle is applied under Zimbabwean law to transactions between related entities. The Zimbabwean rules are similar in many respects to the OECD guidelines, with certain material differences, although the OECD guidelines are used to interpret Zimbabwean law as regards to transfer pricing.