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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.
    • Dividends paid to a local individual are taxed at a 7% tax rate for fiscal year 2020 and 13% as of fiscal year 2021.

    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 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 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% 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 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% 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.

    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

Withholding tax

Argentina

(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.

Australia

Dividends, royalties and interest 

Generally, a 30-percent withholding tax rate applies to dividends (unless an exemption is available under domestic law (for example, dividends paid out of taxed profits – or DTA) and royalties and 10 percent for interest, which may be exempted under Australia's domestic law or reduced under a DTA.

Service fees

Generally, no withholding tax applies to service fees, unless the services fees are regarded as royalties.

Austria

In regards to dividend distributions, see the explanations above. In regards to interest, no withholding tax becomes due in Austria, as long as the beneficial payee is a corporate entity or an individual, resident in a state with whom Austria has automatic exchange of information (otherwise withholding tax of 25 percent or 27.5 percent may become due). Royalties are subject to 20-percent withholding tax, subject to tax treaty limitation or limitation according to the EU Interest and Royalty Directive.

Belgium

Dividends, royalties, interest, etc.

A 30% withholding tax applies to the payment of dividends, royalties and interest. Domestic law provides for reduced rates and exemptions in certain circumstances. The applicable rate may further also be reduced under an applicable double taxation treaty.

Service fees

Withholding tax may under specific conditions apply to service fees paid to non-residents, subject to certain conditions.

Brazil

In general, payments made to non-residents are subject to WHT in Brazil. As a general rule, payments to non-residents for services rendered to Brazilian residents and payments to non-resident individuals as work compensation are subject to the general WHT at a 25% rate.

However, interest, royalties and other fees that are not paid in connection to the provision of services are taxed at a 15% rate.

The WHT shall also be levied at a 15% rate over the provision of technical services, administrative assistance and other similar services, which do not involve transfer of technology.

Note that payments made to entities located at low tax jurisdictions are subject to the WHT at a 25% rate.

Tax treaties may reduce or eliminate WHT.

Other taxes may be imposed on the local source of payment depending on the nature of the transaction.

Canada

Dividends, royalties, interest, rents, etc

A 25% withholding tax applies to dividends, certain royalties, interest payments to non-arm's length persons, rent and certain other payments made by a resident corporation to a non-resident person, subject to reduction under an applicable income tax treaty.

Service fees

Withholding tax may apply to certain payments in respect of services rendered by a non-resident, particularly where the services are rendered in Canada, subject to reduction under an applicable income tax treaty.

Chile

The general WHT rate is 35 percent for payments to non-domiciled, non-resident individuals or entities. Such WHT shall be withheld by the payer.

A reduced rate may apply under certain conditions or to certain types of services or if a double tax treaty applies.

Stamp tax 

The stamp tax taxes documents or transactions involving a money lending operation (eg, loans, promissory notes, any other document event those dematerialized issued).

The stamp tax rates are:

  • 066 percent of the document´s face value for every month or fraction of a month lapsed between its execution and maturity, and may not exceed 0.8 percent.
  • 332 percent of the document´s face value for the documents payable on demand or without a maturity date.

Non-payment of the stamp tax bans the execution of the debt before the Chilean Courts.

 

China

Dividends, royalties, interest, rents, etc

Chinese payers have the legal obligation to withhold tax when remitting dividends, royalties, interest, rents and other payments to foreign recipients.

Service fees

Service fees are subject to income tax in China if the foreign recipient has created an establishment or place (or a Permanent Establishment in a tax treaty context) in China. Where applicable, a Chinese payer of service fees may also be designated as the withholding agent by the PRC tax authority.

Colombia

Payments to non-tax residents are subject to withholding tax at the following rates:

  • 20% for personal services, fees, royalties, lease and any other payment for the use of intellectual property
  • 20% for technical services, technical assistance and consultancy, either rendered in Colombia or abroad
  • 20% on interest payment for loans with a term less or equal to one year
  • 15% on interest payment for loans with a term exceeding one year or financial lease payments
  • 5% on interest payments on cross-border loan agreements that have a term equal to or greater than eight years and financing government/private-run infrastructure projects under the conditions set in Law 1508 of 2012
  • 10% on capital gains
  • 15% on other income not previously classified

Withholding tax rate on payments made to non-tax residents can be reduced under double taxation treaties.

Finland

Dividends, royalties, interest, rents, etc

 

Under the general rule, dividend and royalty payments to a foreign company is be subject to 20-percent withholding tax.

Withholding tax is not levied on a dividend payment to a company within the EU if such company holds more than 10 percent of the shares in the paying company and fulfills the requirements in the EU parent subsidiary directive.

Withholding tax is also not levied on royalty payments paid to a company within the EU in accordance with the EU directive on the condition that the 25-percent direct or indirect holding threshold is met.

Finland does not levy withholding tax on interest except on a few rare occasions.

Special withholding rates apply to foreign persons working in Finland – for example, sportsmen and artists.

Finland has a treaty network with over 70 countries. The tax treaties typically lower the applicable statutory rates depending upon the type of income. Withholding tax for foreign companies on Finnish dividends under the respective tax treaty is typically – but not always – 5 percent when the recipient holds at least 25 percent of the shares of the company making the payment.

Service fees

Typically exempted from Finnish withholding tax.

France

Withholding tax may be reduced or eliminated by applicable tax treaties or EU directives. An increased withholding tax rate of 75 percent is levied on dividends, interest or royalties paid to a beneficiary or on an account located in a non-cooperative state or territory.

Dividends, interest, etc.

As a general rule, dividends paid to non-residents are subject to a 12.8-percent withholding tax for individuals or 30-percent withholding tax for companies. The Finance Act for 2018 provides that the withholding tax applicable to companies on dividend payments will be aligned to the French corporate tax rate as of January 1, 2020 (see Tax Rates). Therefore, except for companies having a turnover equal or exceeding EUR250 million, the withholding tax rate on dividends paid as from January 1, 2020 is 28 percent.

Generally, no withholding tax is levied on French-source interest, provided it is arm's length.

Royalties and service fees

As a general rule, a withholding tax may be levied, at the same rate as the standard corporate income tax rate, on royalties and service fees paid to non-residents. See Tax Rates above.

Germany

Dividends, royalties, interest, rents, etc.

Dividends paid to non-resident companies: Generally, a rate of 26.375 percent applies (ie, 25 percent withholding tax, or WHT, plus 5.50 percent solidarity surcharge on WHT, although exemptions may be available under the EU Parent-Subsidiary Directive, if applicable). There is a reduction of WHT under most German tax treaties for qualified dividends. In addition, on the basis of domestic law, foreign corporations may claim a refund of 40 percent of the WHT, subject to certain substance requirements.

Interest paid to non-resident companies: Generally, there is no WHT, although certain exceptions apply.

Patent royalties and certain copyright royalties paid to non-resident companies: Generally, 15.825 percent WHT applies. Exemptions may be available under the EU Interest-Royalties Directive, if applicable. There is a reduction of WHT under most German tax treaties.

Service fees

Not applicable for this jurisdiction.

Hong Kong, SAR

Dividends, royalties, interest, rents, etc 

Hong Kong does not impose withholding tax on dividends, interests or rents. The only withholding tax is on any payment made to a nonresident for the use of, or the right to use, certain intellectual property in Hong Kong, or outside Hong Kong where the payments are deductible for the taxpayer. The general tax rate is 16.5 percent on the assessable profits. When the payment is derived from an associate and the relevant intellectual property has once been owned by any Hong Kong taxpayer, the assessable profits are deemed to be 100 percent of the payment; in other circumstances, the assessable profits are generally deemed to be 30 percent of the payment. A double taxation arrangement may provide for a lower rate.

Service fees 

Not applicable for this jurisdiction.

Hungary

Dividends, roytalties, interest, rents, etc.

There is no withholding tax on dividends, interests and royalties paid to resident and nonresident companies.

Dividends, including advance dividends, paid to individuals are taxed at the rate of 15 percent. Double taxation treaties operate to modify these rules, including reducing the rate of withholding taxes.

Service fees 

Not applicable for this jurisdiction.

India

Withholding tax at differing rates applies to royalties, interest, fees for technical services and other income paid by a domestic corporation to a foreign person, subject to reduction by an applicable income tax treaty.

Ireland

Dividends, royalties, interest, rents, etc.

Withholding tax applies in Ireland at a rate of 20 percent (increasing in 2020 for distributions to 25 percent). However, a number of domestic exemptions exist to remove the withholding obligation.

In the case of dividends, exemptions include where dividends are paid to:

  • A company or person resident in an EU/treaty country and not under the control of Irish residents
  • A company that is not resident in an EU/treaty country but is controlled by a person(s) who is/are resident in an EU/treaty country and which person(s) is/are not under the control of a person(s) not resident outside an EU/treaty country, or
  • A listed company or a 75-percent subsidiary of a listed company.

Withholding taxes apply to the payment of patent royalties. An exemption from withholding tax exists for certain patent royalties paid to persons resident in the EU or a double tax treaty country. It is also possible to pay patent royalties to non-Irish, non-treaty persons free from withholding tax in certain circumstances.

A number of exemptions apply in relation to the payment of interest, such as:

  • Interest paid by a company (in the ordinary course of a trade or business) to a company resident in an EU/treaty country (other than Ireland) where that jurisdiction imposes a tax which generally applies to interest receivable from foreign territories (except where such interest is paid to that company in connection with a trade or business which is carried on in Ireland by that company through a branch or agency)
  • Cross-border interest payments between associated companies in the EU (25-percent ownership is required or at least 25 percent of each company is owned by a third company)
  • Interest paid to another Irish resident company where both Irish resident companies are members of the same group (51-percent relationship required)
  • Interest paid by a company to an approved pension scheme and
  • Interest paid on a quoted Eurobond.

Withholding tax must be deducted from rental payments made to non-residents unless the landlord uses an Irish resident agent to whom the rents are paid.

Service fees

Not applicable for this jurisdiction.

Israel

Dividends, royalties, interest, rents etc.

Israel imposes extensive tax withholding requirements according to which almost any payment is subject to tax withholding unless a valid certificate is obtained from the tax authorities. For example, dividends are subject to tax withholding at the rate of 25%-30% and interest paid to a foreign corporation is subject to tax withholding at the corporate tax rate (currently 23%).These rates may be reduced under an applicable treaty.

Service fees

Withholding tax may apply to certain payments for services rendered by a non-resident, particularly where the services are rendered in Israel.

Italy

Dividends, royalties, interest, rents, etc.

Dividends paid to foreign entities are subject to ordinary withholding tax at the rate of 26 percent. Dividends paid to EU countries and EEA "white-listed" countries subject to corporate tax in their country of residence are subject to 1.20-percent withholding tax. A tax treaty can reduce the above mentioned rate.

Exemption from withholding tax is provided under the EU Parent-Subsidiary Directive on dividends paid to qualifying shareholders. Among the other requirements, the participation must be at least equal to 10 percent and must be held for at least 12 months.

Interest paid to non-resident entities is subject to 26-percent withholding tax. A tax treaty can reduce the abovementioned rate. The Interest and Royalties directive provides for an exemption on interest and royalties paid to qualifying EU shareholders or affiliate entities.

Royalties are subject to 30-percent withholding tax, generally applied on 75 percent of the amount of the royalties. Tax treaties and the EU Interest and Royalties directive can reduce or eliminate the withholding tax.

Service fees

In principle, no withholding tax is applied on service fees.

Japan

Dividends, royalties, interest, rents, service fees, etc

Items of income (including dividends, royalties, interest, rent and service fees) paid to a foreign corporation are generally subject to Japanese withholding income tax at a rate of 20.42% (15.315% for bond interest). However, double tax treaties may grant a special concession to a resident individual or a resident corporation in a foreign jurisdiction. Some double tax treaties provide that a person with dual residence may be determined to be a person with single residence by mutual agreement between competent authorities. In order to enjoy benefits under double tax treaties, an application form must be filed with the relevant tax office before the first payment between parties is made.

Luxembourg

Dividends, royalties, interest, rents, etc.

Dividends paid to a non-resident company generally are subject to withholding tax at 15%, unless the rate is reduced under a tax treaty.

No tax is withheld on dividends paid to a qualifying company under EU parent-subsidiary directive (2003/123/CE), except if the transaction qualifies as an abuse of law under the general anti-abuse rule. The benefits of the directive have been extended to parent companies resident in non-EU tax treaty countries (under certain conditions).

Luxembourg does not levy withholding tax on royalties.

Luxembourg does not levy withholding tax on interest, except for interest payments to Luxembourg resident individuals, in certain cases. Nonetheless, profit-sharing bonds and debt instruments with remuneration linked to the issuer's profits are taxed as dividends (15%), and interest payments can be requalified into dividends (and are then subject to a 15% withholding tax) where a Luxembourg company is over-indebted in light of thin capitalization rules or where a Luxembourg company does not comply with transfer pricing regulations.

Interest payments made by Luxembourg resident paying agents to Luxembourg resident individuals are subject to a 20% WHT. There is an exemption from WHT if the amount due does not exceed €250. Where interest payments are made or credited by foreign paying agents located in a member state of the EU or in a state of the European Economic Area, the Luxembourg resident taxpayer may opt for a 20% WHT.

Service fees

Luxembourg does not levy withholding tax on service fees.

Mexico

Dividends, royalties, interest, rents, etc

  Rates (percent) under Domestic Provisions
Paid on Negotiable Instruments 10 (a)(b)
Paid to Banks 10 (a)(c)
Paid to Reinsurance Companies 15 (a)
Paid to Machinery Suppliers 21 (b)
Paid to Others 35 (a)
Royalties  
From Patents and Trademarks 35 (a)
From Know-how and Technical Assistance 25 (a)
From Railroad Cars 5 (a)
Dividends after 2013 10 (d)
Branch Remittance Tax after 2013 10 (d)

(a) This is a final tax applicable to nonresidents. Payments to tax havens are generally subject to a 40% withholding tax. (b) This rate can be reduced to 4.9% if certain requirements are met. (c) A reduced rate of 4.9% is granted each year to banks resident in treaty countries. (d) This tax applies to dividends paid out of profits generated after 2013.

Income Tax Treaties

These withholding rates may be reduced to under available Income Tax Treaties entered into by Mexico, and to the extent that the requirements provided in the relevant Income Tax Treaty and the MITL are met.

Service fees

Income received by a foreign resident from rendering services in Mexico may be subject to a 25% withholding tax rate under domestic rules. However, Income Tax Treaties may reduce or eliminate this rate, under specific circumstances. It is important to consider potential VAT implications.

Mozambique

Dividends, royalties, interest, rents, etc.

Under the terms of the generally applicable legislation, namely the IRPC Code, income of non-resident entities without permanent establishment in the national territory is taxed through definitive withholding tax at a single flat rate of 20 percent, with few exceptions such as income from rendering of telecommunications and international transport services, as well as assembly and installation of equipment made by such entities, which are subject to a single flat rate of 10 percent.

The domestic withholding tax rate may be reduced if a tax treaty applies.

 

Service fees

Withholding tax may apply to certain payments in respect of services rendered by a non-resident, particularly where the services are rendered in Mozambique, subject to reduction under a tax treaty where applicable.

Netherlands

Dividends, royalties, interest, rents, etc

A 15-percent withholding tax applies to dividends paid by a domestic corporation to a person or entity. A domestic dividend withholding tax exemption applies on dividends paid to EU/EEA parent companies and parent companies in a third country that has concluded a tax treaty with the Netherlands that contains a dividends clause, unless anti-abuse provisions apply.

Double taxation treaties operate to modify these rules, including reducing the rate of withholding taxes.

Withholding tax is generally reduced to 0 percent if the corporate shareholder has an interest of 5 percent or more in the subsidiary (domestic and EU/EEA), in line with the Parent-Subsidiary Directive.

As of January 1, 2021, the Netherlands will levy a conditional withholding tax of 21.7 percent on outbound payments of interest and royalties to low-tax jurisdictions and in abusive situations.

Service fees

Not applicable for this jurisdiction. 

Norway

Dividends, royalties, interest, rents, etc 

Dividends

Under the general rule, a dividend payment to a foreign shareholder will be subject to 25-percent withholding tax.

Dividend payments to corporate shareholders resident in the EEA are exempt from withholding tax, provided that the shareholder conducts a real business activity in the relevant jurisdiction. Otherwise, the rate may be reduced under an applicable tax treaty.

Dividend payments to shareholders resident outside the EEA are subject to 25-percent withholding tax, unless the rate is reduced under an applicable tax treaty.

Documentation requirements apply in order to benefit from exemption from or reduced dividend withholding tax.

Service fees

Royalties, interests, rents, etc

Interest, royalties and lease payments for certain types of tangible assets (ships, rigs, planes, etc.) paid to related parties resident in low-tax jurisdictions outside the European Economic Area (EEA) is subject to a withholding tax of 15 percent.

Royalties, interests and lease payments to corporate shareholders resident in the EEA are exempt from withholding tax, provided that the shareholder conducts a real business activity in the relevant jurisdiction.

The effective date is 1 July 2021 for interest and royalties and 1 October 2021 for lease payments. Norway does not levy withholding tax on service fees.

Poland

From 2019, the requirements to apply the withholding tax exemptions and reduced withholding tax rates based on EU law or the applicable double tax treaties have been extended and more formalized. In order to benefit from a reduced rate or full tax exemption in accordance with the new regulations, regardless of the value of payments made, payers are required to exercise “due diligence.”

If the total amount of payments to the same recipient in a given tax year exceeds PLN2 million, the payer will be obliged to calculate, collect and pay the withholding tax using the standard rates set out in the CIT Act (19 to 20 percent), with a right to apply for a tax refund to the tax authority. The entry into force of this new withholding tax collection mechanism, planned initially on January 1, 2019, has been postponed until June 30, 2020. The postponement is caused by plans to amend of the regulations regarding withholding tax announced by the Ministry of Finance.

Dividends

The general withholding tax (WHT) for dividends is 19 percent. The WHT rate may be reduced by specific provisions of the applicable income tax treaty or an exemption based on the EU Parent Subsidiary Directive may be available. WHT is payable monthly by the 7th day of each month for preceding month. The exemption is not available if the dividend distribution is aimed at tax avoidance.

Royalties and interest

A 20-percent withholding tax applies to royalties, interest and other passive income paid by a domestic corporation to a foreign person, subject to reduction or elimination by an applicable income tax treaty or regulations based on the EU Interest Royalties Directive. WHT is payable monthly by the 7th day of each month for the preceding month. The exemption is not available if the royalty or interest distribution is aimed tax avoidance.

Intangible services

A 20-percent withholding tax applies to fees for intangible services paid to foreign recipients, like management fees or fees for advisory, legal, marketing, accounting, recruitment services or guarantees, the tax may be reduced based on the relevant tax treaty.

Portugal

Dividends, royalties, interest, rents, etc 

Dividends paid to a foreign entity are subject to withholding tax at a rate of 25% (35% if paid to a resident of a black-listed country or if paid or made available in accounts in the name of one or more holders acting on behalf of undisclosed third parties). The withholding tax rate may be reduced under a tax treaty. Dividends are not subject to withholding tax in the case of qualified participations (generally, 10% or more equity interest held for at least 1 year), subject to additional requirements.

Interest paid to a foreign entity is subject to withholding tax at a tax rate of 25% (35% if paid to a resident of a black-listed country or if paid or made available in accounts in the name of one or more holders acting on behalf of undisclosed third parties). The withholding tax rate may be reduced under a tax treaty. Interest is not subject to withholding tax if the EU Interest & Royalty Directive applies.

Royalties paid to a foreign entity is subject to withholding tax at a tax rate of 25%(35% if paid to a resident of a black-listed country or if paid or made available in accounts in the name of one or more holders acting on behalf of undisclosed third parties). The withholding tax rate may be reduced under a tax treaty. Royalties are not subject to withholding tax if the EU Interest & Royalty Directive applies.

Other payments made to foreign entities may be subject to withholding tax. The general tax rate is 25%.

Service fees

Withholding tax may be applied to service fees if the services are performed or used in Portugal.

Romania

Dividends, royalties, interest, rents, etc.

A 5-percent withholding tax applies to dividends and a 16-percent withholding tax applies to royalties, interest, commission and other taxable income paid by a Romanian tax resident to a foreign person, subject to reduction or elimination by an applicable tax treaty.

An increased 50-percent tax rate applies for payments made under certain conditions and when income is paid in respect of transactions that qualify as artificial.

Dividends, interest and royalties could be exempt from withholding tax where paid to a resident of another EU member state provided the minimum holding criteria and specific conditions referring to the legal and fiscal status of the payer and the beneficiary of the income are equally met.

Service fees

Withholding tax of 16 percent may apply to fees for management and consultancy services and for other services if performed in Romania.

Russia

Dividends, royalties, interest, rents, etc.

Certain items of passive income (including dividends, royalties and interest) paid to a nonresident are generally subject to Russian withholding profits tax at a rate of 20 percent (15 percent for dividends).

Following the instruction by the Russian president voiced on March 25, 2020, the Russian Ministry of Finance have commissioned work to revise the withholding tax rate on dividends and interests paid to bank accounts in certain “transit” jurisdictions. It is planned that the unilateral rate will be 15 percent as opposed to the current reduced tax rates available under applicable double tax treaties.

The change announced by the president will require amendments to the existing double tax treaties. It was also noted that, if foreign countries do not cooperate, Russia will unilaterally withdraw from the consequent double tax treaty. Currently, Russia has notified Cyprus, Malta and Luxembourg on the proposed changes to the respective double tax treaties.

Service fees

Generally, service fees are subject to profits tax in Russia if such fees are attributed to a permanent establishment of a foreign recipient in Russia.

Reduced tax rates or full protection from withholding tax may be available under an applicable double tax treaty.

Fees earned from rendering of services that are physically provided from locations outside Russia are not deemed to be Russian-sourced. Accordingly, they are not subject to a 20-percent Russian profits tax at source, irrespective of availability of a relevant treaty.

Singapore

Dividends, royalties, interest, rents, etc.

Withholding tax applies to royalties, interest and rents etc. paid to non-residents of Singapore, subject to reduction by an applicable income tax treaty.

Service fees

Withholding tax may apply to service fees if the services are performed in Singapore.

Dividends

No withholding tax.

South Africa

Dividend, royalties, interest and foreign entertainment withholding taxes apply.

A 20-percent withholding tax applies to dividends, whereas the other withholding taxes are imposed at a rate of 15 percent.

Withholding taxes may be reduced in terms of tax treaties.

South Korea

The payer of interest, dividends, business income, other income, etc. should withhold taxes in accordance with their respective withholding tax rates. Tax treaties can reduce or eliminate these taxes when the income is paid to a foreign person.

Spain

Dividends, royalties, interest, rents, etc

A 19% withholding tax applies to dividends and interest paid by a domestic corporation to a foreign person. Royalties are subject to a 24% withholding tax. These rates could be subject to reduction by an applicable Double Tax Treaty.

Under the EU Parent-Subsidiary Directive and the EU Interest and Royalties Directive, dividends and royalties paid to an associated company may qualify for an exemption. In addition, as a general rule, interest payments to EU residents are exempt from withholding tax in Spain.

Service fees

As a general rule, withholding tax only applies to service fees if the services are performed in Spain, provided that a double tax treaty does not apply.

Sweden

Dividends, royalties, interest, rents, etc

Under the general rule, a dividend payment to a foreign shareholder will be subject to 30% withholding tax. However, domestic law contains exemptions from withholding tax under certain conditions:

Exemption 1

Withholding tax should not be levied on a dividend payment to a legal person within the EU if such person holds more than 10% of the shares in the paying company and fulfills the requirements in Article 2 of the Parent Subsidiary Directive.

Exemption 2

Withholding tax should not be levied on a dividend payment if the shares are unlisted or, if listed, the recipient holds at least 10 percent of the voting rights in the paying company. The recipient must also fulfill the definition of being a "foreign company" and be the foreign equivalent of a Swedish limited liability company. Further, for the exemption to apply, it is required for the dividend payment to have been tax exempt under the participation exemption regime should the shareholder have been a Swedish limited liability company.

A rule from January 1, 2016 in the Swedish Withholding Tax Act states that dividends from a Swedish subsidiary to a foreign company should not be tax exempt if certain conditions are met.

Sweden does not levy withholding tax on interest or royalty payments. However, royalty payments made to non-residents are deemed to derive from a Swedish business and are taxed as income from a permanent establishment in Sweden. Thus, the recipient is taxed in Sweden on the net royalty income at the ordinary corporate income tax rate of 21.4 percent. Sweden's right to tax royalties may be reduced under an applicable tax treaty.

Service fees

Not applicable for this jurisdiction.

Switzerland

Dividends, royalties, interest, rents, etc

Swiss withholding tax is a federal tax levied on certain types of investment income from Swiss sources, including dividends and interest payments. Royalties, management fees and interest payments on certain loans are in general not subject to withholding tax. The withholding tax is levied at a flat 35% rate, subject to reduction under an income tax treaty.

Service fees

Service fees are not subject to withholding tax.

Taiwan, China

Dividends, royalties, interest, rents, etc

In general, Taiwan-source dividends are subject to withholding tax at 21%, while other profit distributions, interest income, rental income and royalties earned by foreign companies are subject to withholding tax at 20%. However, Taiwan has entered into tax treaties with 33 countries, resulting in reduced tax rates.

Service fees

Service fees are normally subject to a 20% withholding tax if considered Taiwan-source income, though apportionment of fees (ie, where only part of the service fees are Taiwan-source income) is possible. A company having its head office outside Taiwan which is engaged in technical services in Taiwan for which the costs and expenses are difficult to calculate may apply for approval to treat 15% of its total service fees as income derived in Taiwan, which if taxed at the 20% rate, would effectively reduce the tax rate to 3%.

Turkey

Dividends, royalties, interest, rents, etc 

A 15% withholding tax applies to dividends paid to the non-resident companies.

The rate applicable to the interest on loans paid to an international institution or a foreign bank with the status of a financial entity is 0%. However, interests on loans from other non-resident entities are subject to an applicable rate of 10%.

A 20% withholding tax applies to royalties, paid to a non-resident.

The rates mentioned above may be subject to reduction under an applicable tax treaty.

Service fees 

Payments for professional services (eg, technical assistance, consulting, design, supervision) are subject to a 20% withholding tax. This rate may be subject to reduction under an applicable tax treaty.

Ukraine

Dividends, royalties, interest, rents, etc 

Dividends, royalties, interest and rents paid to a non-resident are subject to standard 15% withholding tax unless relief is granted by relevant double tax treaty. Other rates are envisaged for certain types of income such as insurance payments, freight, etc.

Service fees 

Generally service fees payable to non-residents are exempt from withholding tax. Exceptions are:

  • Engineering fees, which are subject to 15% withholding tax (avoided under most double tax treaties in force for Ukraine)
  • Advertising fees, which are subject to 20% withholding tax which is paid on top of income and at the expense of Ukrainian company (and is not relieved under double tax treaties)

United Arab Emirates

Not applicable for this jurisdiction.

United Kingdom

Dividends, royalties, interest, rents, etc 

There are no withholding taxes on dividends paid by a UK company to any shareholder.

A 20% withholding tax applies to royalties, yearly interest certain qualifying annual payments and rents paid by a UK letting agent or tenant to a non-resident company, subject to reduction under an applicable income tax treaty and, in the case of rents, the non-resident landlord scheme.

It is sometimes possible to structure loan arrangements so that payments equivalent to interest fall outside the definition of yearly interest (such as the use of discounted bonds). Interest payable on a loan instrument listed on a recognized stock exchange is not subject to any withholding.

Service fees 

Certain payments for construction services provided in the UK are subject to a form of withholding tax at either 30% or 20% unless the party providing the service is registered for gross payment.

United States

Dividends, roytalties, interest, rents, etc

A 30-percent withholding tax applies to dividends, royalties, interest, rents and other FDAP income paid by a domestic corporation to a foreign person, subject to reduction or elimination by an applicable income tax treaty.

Service fees 

Withholding tax may apply to service fees paid to a foreign person if the services are performed in the US.

Zimbabwe

A withholding tax on dividends is payable at a rate of 15 percent in respect of unlisted securities and 10 percent in respect of listed securities; however, the existence of a DTA may reduce the rate to 5 percent where the shareholder receiving the dividend holds 25 percent shareholding in the relevant company paying the dividend, and 10 percent in all other cases. 

Non-resident withholding tax on payments made by branch office to foreign head office in respect of head office charges is levied at a rate of 15 percent.

Withholding tax on interest is levied on residents at the rate of 5 percent (for a fixed-term deposit with a tenure of at least 90 days) or 15 percent. Non-resident investors, however, are currently exempt from withholding tax on interest.

Non-resident withholding tax on royalties is levied at the rate of 15 percent.

Non-resident withholding tax on management fees is levied at the rate of 15 percent.

Non-resident withholding tax on remittances is levied at the rate of 15 percent.