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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

Employment taxes

Argentina

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.

Australia

Employers must withhold federal income tax from wages paid to employees. Employers also must pay Fringe Benefits Tax and Payroll Tax where applicable.

Austria

Austrian wage tax is a withholding tax which has to be paid by the employer but is also partly borne by the employee. Along with this wage tax, the employer also has to pay social insurance contributions and other taxes. As a general, but very rough rule approximately 50% of the salary costs for an employee are taxes and social security contributions.

Belgium

Employers must withhold federal income tax on the salaries paid to their employees. Employers must also pay social security contributions on such salaries. Such social security contributions are tax deductible in the hands of the employers.

Brazil

Employers must withhold income tax and social security tax. Employers also must pay their share of social security tax, unemployment tax and other payroll charges in respect of compensation paid to employees. These social and payroll taxes are deductible by an employer for Brazilian corporate income tax purposes.

Canada

Employers must withhold federal income tax, Canada Pension Plan (CPP) (or Quebec Pension Plan (QPP)) premiums and Employment Insurance (EI) premiums. Employers must also pay the employer's portion of the CPP (or QPP) premium and the employer's portion of the EI premium in respect of compensation paid to employees. These taxes are generally deductible by an employer for Canadian income tax purposes. Other withholding obligations and taxes may apply at the provincial level.

China

Employers must withhold Individual Income Tax when paying salaries and wages to employees. Contributions of mandatory social insurance and housing fund are deductible for Individual Income Tax purposes.

Colombia

Social security

Employees in Colombia must be enrolled in the social security system (for pension, health and labor risks) and employers have the obligation to make the relevant monthly contributions.

If foreign employees are enrolled to a pension system abroad, they are not obligated to be enrolled or pay contributions to the Colombian pension system.

Social security contributions correspond to the following percentage over the employee's salary

Payroll taxes

Employers in Colombia must make contributions to SENA, ICBF and Family Compensation Fund, known as payroll taxes, that shall be calculated based on the ordinary monthly salary earned by the employee, including any  vacation. In the case of employees earning integral salary, 70 percent of salary will be the basis for this contribution. Non-salary payments are excluded from payroll taxes. Payroll taxes do not have any cap.

For employees earning an ordinary salary lower than 10 MMLW, employers are exempted for making contributions to SENA, ICBF and to the healthcare system.

Finland

Finnish employers are liable to PAYE withholding obligations on salary paid to the Finnish employees. The tax base covers cash salary, benefits as valued by tax administration and share based employee benefits. The tax rate on salaries is progressive up to 57%.

In addition, Finnish employers are required to withhold the employee’s share of the social security contributions (some 7%) from the salaries. In addition, the Finnish employers are liable to pay their share of the social security payments (some 30%) based on their paid total salaries.

France

Employees and employers must pay contributions for health insurance, unemployment insurance and the national pension scheme. These contributions are deducted at source from salary payments. Starting from 2019, income tax will have to be withheld at source by employing companies.

Germany

Employers must withhold wage taxes (ie, withholding tax on income from employment) and 50% of the wage-related social security contributions for pension, health, nursing care and unemployment insurance.

Hong Kong

Employment taxes

Regardless of whether the employees are residents in Hong Kong, employers are not required to withhold tax for employees. The only exception applies if the employee intends to leave Hong Kong for over 1 month following the cessation of employment; the employer is required to give IRD a notification of such impending departure and must temporarily withhold all payment due to the employee until IRD issues a "letter of release."

Pension contributions

Employers are required to:

  • Withhold 5% of their employees' relevant income (capped) as the employees' contributions, and
  • Pay an additional 5% as their own contributions (capped), to the Mandatory Provident Fund (MPF) scheme

Currently, the maximum mandatory contributions for such MPF scheme is HK$ 1,500 (approximately US$200) for employees with a monthly relevant income exceeding HK$30,000 (approximately US$3,870). If the employee's monthly relevant income falls under HK$7,100 (approximately US$915), their monthly contributions to MPF are not required but the employer's contributions remain the same.

India

Employers must withhold income tax at the applicable rates. Employers must also withhold and pay social security tax in respect of compensation paid to employees. These taxes are deductible by an employer for Indian income tax purposes. Professional taxes may be payable in some states of India.

Ireland

Under the pay as you earn or PAYE system, employers must deduct any income tax, PRSI (pay related social insurance) and USC (universal social charge) due each time a payment of wages, salary and other benefits in kind etc. is made to an employee. Employers also make a contribution to PRSI.

Income tax is levied at 20% and a higher threshold of 40% applies to income over a certain threshold (which depends on the marital status of the employee). The Universal Social Charge applies to employees taxed under the PAYE system at a rate of 0.5%, 2%, 4.5% or 8% of gross income depending on the level of income earned. Self-employed persons earning over €100,000 may be subject to the Universal Social Charge at a rate of up to 11%.

Israel

Employers must withhold income tax from employees' salary according to their individual tax rate, of up to 50%.

Employers must also withhold national insurance and health care tax at the aggregate rate of up to 19.5%. The burden of such taxes is divided between the employer and the employee and is subject to a cap.

Italy

Employers must withhold an advance payment of individual income tax on salaries paid to employees. Employers also must pay social security contributions in respect of compensation paid to employees. These taxes are deductible by an employer for IRES and for IRAP but only if related to open ended working relationship.

Japan

An employer must withhold certain amounts on salary payments to employees. Under the withholding tax system, an employee does not pay the income tax directly to the tax authority. Instead, the employer is required to withhold a certain amount of money and pay that amount to the tax authority on behalf of the employee. Most Japanese employees do not file a tax return because their income tax has already been paid by withholding from their salary income. It is possible to get a tax refund by filing a tax return if the amount of income withheld exceeds the income tax that should have been imposed. The tax return made by employees is relatively rare because employers frequently adjust withholding tax in the later months of the year to account for their employees’ deductible expenses.

Luxembourg

Social security contributions apply to wages and salaries and are due from both the employer (rates approximately: 12/15%) and the employee (circa 12%). Contributions for both employers and employees are computed on a capped basis and must be withheld by the employer. Self-employed individuals must register for social security purposes and pay approximately the same rates as the combined rates for an employer and an employee.

Mexico

Employees must be registered with the Mexican Institute of Social Security (ie Instituto Mexicano de Seguro Social, IMSS), as well as the National Housing Fund (ie Fondo Nacional para la Vivienda de los Trabajadores, INFONAVIT).

This is relevant becauseMexican employers are required to make contributions to the IMSS and INFONAVIT, based on the salaries of their employees. These contributions are subject to daily salary caps that are determined based on a multiple of the minimum daily salary in the area in which the work is performed.

In this regard, an employee must pay approximately 2.755% of his or her salary to the IMSS (payment to the IMSS includes all social security dues), while an employer must pay a total of 36.69% of the employee's salary. Contributions to INFONAVIT are approximately 5%, and contributions to a Mandatory Pension Plan are approximately 2% of employees compensation.

These contributions are subject to daily salary caps that are determined based on a multiple of the minimum daily salary in the area in which the work is performed.

The contribution percentages are generally applied to an employee’s total integrated salary. However, in some cases, the percentage is broken down and applied to only a portion of the salary. There are maximum contributions that are capped for high salaries.

In addition, most states impose a payroll tax of approximately 2% of a company's total payroll. There are no caps for the state payroll tax.

Profit sharing

Mexican companies are required, under the Federal Constitution and labor laws, to make mandatory profit sharing payments to employees equal to 10% of the adjusted taxable income of the company. In general terms, the same overall rules are applied in determining the adjusted taxable income for profit sharing as for income tax purposes. Most significantly, profit sharing rules do not provide for inflationary adjustments or net operating loss carryforwards. Furthermore, exchange gains and losses are recognized as realized rather than an accrual basis. Mexican companies are not required to make profit sharing payments for the first year of existence.

The profit sharing is allowed as a deduction for income tax purposes. The deduction is allowed as a reduction of taxable income once certain calculations are made, not as one of the deductible expenses. However, since profit sharing is not a tax per se, it is not creditable for foreign tax credit purposes, representing a cost to most foreign investors. 

Netherlands

Employers must withhold wage taxes and contributions for pension, health and unemployment insurance.

Under certain conditions, employers may provide incoming employees 30% of their wage tax-free. Incoming employees must be recruited or seconded from another country to work in the Netherlands, and have specific expertise with no or little availability in the Dutch employment market.

Norway

Employers are obliged to pay employer's contributions of the total salary. The rate is differentiated regionally, and ranges between 0% and 14.1%.

Employers are further obliged to make tax deductions from the salary payments made to the employees.

Poland

Employers must withhold personal income tax from the employees' gross remuneration. Employers also must pay social security contributions in respect of compensation paid to employees. These taxes are deductible by an employer for corporate income tax purposes.

Portugal

Employers must withhold income tax and social security contributions.

Romania

Employers must withhold income tax, the social security contribution (pension contribution) and health fund contribution from the gross salary received by each employee. Salary tax incentives are applicable for the IT and R&D sectors. Employers also must pay a labor insurance contribution on top of the gross salary costs, which is deductible for Romanian corporate income tax purposes at the level of the employer.

Russia

Employers must withhold personal income tax from income earned by their employees and make mandatory social insurance contributions which are tax deductible expenses at the level of the paying entity.

Singapore

An employer is required to file tax clearance for its foreign employees (ie, non-Singapore citizens including Singapore permanent residents) who:

  • cease employment
  • start an overseas posting or
  • leave Singapore for more than 3 months

In particular, the employer must file the relevant form at least one month before the last date of employment, or the departure date, to report the employee's taxable remuneration. The employer must also withhold all monies due to the employee for 30 days unless otherwise notified by the IRAS.

South Africa

Employers are required to deduct PAYE on all remuneration paid to employees, including directors, unless a tax deduction directive is issued by SARS. Fringe benefits are included in remuneration.

Employers may also be required to deduct and pay unemployment fund contributions and skills development levies.

South Korea

Employers must withhold wage income tax. Employers also must pay 4 compulsory social insurances which are pension, health, unemployment and industrial accident in respect of compensation paid to employees. These taxes are deductible by an employer for corporate income tax purposes.

Spain

Employers must withhold income tax. Employers also must pay social security contributions. Social security contributions are deductible by the employer for Spanish income tax purposes.

Sweden

Employers are obliged to pay employer’s contributions at a rate of 31.42% of the total salary. Employers are also obliged to make tax deductions from the salary payments made to the employees.

Switzerland

All B-permit holders and foreign employees with no residence in Switzerland are taxed at source and the employers must withhold the income tax. All other individuals have to fill in a tax return and are subject to tax on their worldwide income if they have their permanent or temporary residence in Switzerland.

Taiwan

An employer must withhold income tax from its payment of salaries to its employees. Also, an employer is required to make partial payments of premiums for national health insurance for its employees, which include regular premium plus supplementary premium based on salaries and other payments to the employees.

Turkey

Employers are obliged to withhold income tax at progressive income tax rates on salaries. The applicable rate is applied between 15% to 35%.

The general rate for the employers' social security contribution is 20.5% while the social security contribution rate applicable for the employees is 14%. Employers and employees are also subject to unemployment benefit plan contributions based on the gross salary. Applicable rates for such contribution are 2% for employers and 1% for employees.

Ukraine

Employers act as tax agents in relation to their employees and pay the following taxes:

  • 18% of personal income tax is withheld from paid income
  • 1.5% of military duty is withheld from paid income
  • 22% of unified social contribution is paid on top of income at the cost of employer (subject to minimum and maximum caps)

United Arab Emirates

Social security

Social security is only applicable to UAE and other GCC nationals (UAE and GCC passport holders).

End of service benefits

According to the UAE labor law, all employees who complete a period of continuous service that is longer than one year are entitled to a gratuity computed and accrued by employers according to either Emirate or Free Zone specific regulations.

United Kingdom

Employers must withhold income tax (ie, pay as you earn or PAYE) and a social security tax (ie, primary national insurance contributions). Employers must also pay secondary national insurance contributions. Secondary contributions are deductible by an employer for UK corporation tax purposes, but it is not permitted to recover them from the employee. There are no withholding obligations at a local level in the UK.

United States

Employers must withhold federal income tax. Employers also must pay social security tax, unemployment tax and Medicare tax in respect of compensation paid to employees. These taxes are deductible by an employer for US income tax purposes. Other withholding obligations and taxes may apply at the state or local level.

Zimbabwe

Employers are obliged to withhold employment tax from their employees' income according to a tax table of graduated tax rates. The tax is known as Pay – As – You – Earn (PAYE). The tax rate ranges from 0 to 45 percent depending on employment income earned by the individual.

In addition to PAYE, employers are also obliged to withhold a three percent AIDS levy from their employees' employment income.