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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

Other tax considerations

Argentina

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).

Australia

Anti-avoidance regime and OECD BEPS-related developments

Australia has a general tax anti-avoidance regime. The regime empowers the Commissioner to deny a tax benefit, where a taxpayer obtains tax benefit in connection with a scheme, the tax benefit would not have arisen without the scheme, and under an objective test there was a dominant purpose of entering into the scheme to obtain the tax benefit.

In an effort to tackle multinational anti-avoidance, Australia's general tax anti-avoidance regime was amended with the introduction of the Multinational Anti-avoidance Law (MAAL) which was operative from January 1, 2016. The MAAL applies to multinational entities with an annual global income of AUD 1 billion or more and is targeted at multinational entities entering into contrived arrangements to avoid a taxable presence in Australia.

Further, Australia's general tax anti-avoidance regime was amended with the introduction of the Diverted Profits Tax (DPT), which applied from July 1, 2017. The DPT is targeted at multinational entities with an annual global income of AUD 1 billion or more, which have entered into contrived arrangements to shift taxable profits out of Australia.

Under Australia's domestic law, protection under double tax treaties are not available for Australia's general tax anti-avoidance rules, which includes the MAAL and DPT.

In addition, the Australian Government has introduced rules targeting hybrid mismatches, which  generally apply from January 1, 2019.  These rules are  generally in line with OECD's BEPS Action 2, with certain modifications including a specific integrity rule targeting interposed entity structures.

Australia is also a signatory to the OECD's multilateral instrument. The Australian Government has enacted legislation which gave the multilateral instrument the force of law in Australia from January 1, 2019.  The multilateral instrument is expected to modify Australia's double tax treaties between Australia and other signatory treaty countries.

Superannuation

Employers must make superannuation contributions to their employees' nominated super fund, at the rate prescribed by the relevant legislation.

Workers' compensation

Employers are required to take out insurance with an approved insurer covering the employer's full liability for workers' compensation as well as damages.

Goods and Services Tax (GST)

GST is a form of value added tax (VAT). It applies at a rate of 10% to taxable supplies of goods, services and other things that are connected with Australia.

From July 1, 2017, GST will apply to inbound intangible supplies made to Australian Consumers, but GST will not usually apply if the same inbound intangible supply is instead made to an Australian business. This reform is referred to as the "Netflix Tax".

Also from July 1, 2017, GST will apply to inbound supplies of goods with a value of less than AUD 1,000 which are made to Australian Consumers. This may capture online sales of goods made by non-residents to Australian Consumers where the goods are shipped directly to Australian customers.

Austria

Not applicable for this jurisdiction.

Belgium

Not applicable for this jurisdiction.

Brazil

Contribution for intervention in the economic domain (CIDE)

The contribution is due for payments made in connection with:

  • License agreements
  • Acquisition of technological know-how or
  • Agreements involving cross-border transfer of technology

CIDE also applies to the cross-border provision of technical services, administrative assistance and other similar services that do not involve the transfer of technology.

CIDE is generally imposed at a 10% rate over the total amount paid, credited, delivered or remitted abroad to non-resident beneficiaries.

Welfare contributions on gross revenues (PIS/COFINS)

The Contribution to the Social Integration Program (PIS) and the Contribution to Finance Social Security (COFINS) are welfare contributions that are levied over a taxpayer's gross revenue. Currently, there are two methods of calculating PIS/COFINS, the cumulative and non-cumulative methods.

The cumulative method is applicable to cooperative organizations, immune or exempt entities companies, financial institutions, insurance companies and taxpayers that accrue the corporate income tax in accordance with the deemed profits method. Under such method, the PIS shall apply at a 0.65% rate, whereas the COFINS will apply at a 3% rate.

The non-cumulative method is applicable to most legal entities. The main purpose of this legislation is to avoid the cascading effect of the welfare contributions by granting tax credits that can be offset with PIS/COFINS payable amounts. Currently, PIS and COFINS apply at a combined rate of 9.25%, with PIS at 1.65% and COFINS at 7.6%.

The taxpayer is entitled to calculate tax credits over the following expenses:

  • Acquisition of goods for resale
  • Inputs (ie, goods and/or services) that are deemed as necessary and essential for the maintenance of the taxpayer's activities
  • Acquisition of electric energy
  • Payment of leases related to buildings, machinery and equipment
  • Lease expenses derived from leasing transactions (arrendamento mercantil)
  • Acquisition or manufacture of machinery and equipment to be leased to third parties, or used in the manufacture of products intended for sale, and/or for incorporation as a fixed asset
  • Buildings and betterments in third-party real estate property to be used in the company's operations
  • Storage and freight costs, incurred in sale transactions, supported by the seller
  • Meal coupons, transportation and uniforms provided to employees by a company that engages in cleaning, conservation and maintenance services and
  • Intangible assets, acquired for the utilization in the manufacture of goods destined for sale or in the rendering of services.

Furthermore, PIS and COFINS shall not apply to:

  • Revenues resulting from export transactions, whose payment represents an inflow of foreign capital into Brazil and
  • Revenues derived from domestic sales by trading companies (empresas comerciais exportadoras) with specific export purposes

Originally, under the non-cumulative system, a taxpayer's financial revenues were taxed by PIS/COFINS at a 0% tax rate (except those derived from interest on equity perceived by holding companies and hedge transactions). However, the tax rate applicable to these specific revenues is now 4.65%, with PIS at 0.65% and COFINS at 4%.

The concept of "gross revenues" for the calculation of the PIS and COFINS under the cumulative system has been changed under legislation. Accordingly, "gross revenues" for such purposes is defined as:

  • The results of the sale of goods and provision of services
  • The result of operations on behalf of third parties and
  • Revenues derived from taxpayer's main activity that are not comprised as retail of goods and provision of services

PIS and COFINS over import transactions (PIS/COFINS-import)

PIS and COFINS are also charged on import transactions of goods and services. As a general rule, in respect of the importation of goods, PIS shall apply at a 2.1% rate and COIFNS at a 9.65% rate. Whereas, in respect of the importation of services, PIS shall apply at a 1.65% rate, and COFINS at a 7.6% rate.

Please note that the importation of certain goods, such as pharmaceuticals, are taxed at specific tax rates. In addition, with respect to certain import transactions, a COFINS 1% surcharge may apply.

The tax basis shall be the customs value of the imported goods or the amount charged for the service by the foreign contractor.

Taxpayers that are subject to the PIS/COFINS under the non-cumulative system are allowed to accrue tax credits from the PIS and COFINS paid on their imports and offset them against the PIS and COFINS accrued over their respective gross revenue.

Federal excise tax (IPI)

IPI is a Federal value-added tax, which applies to manufactured products, either to their importation or manufacture in Brazil. IPI rates may vary depending on the type of product and whether it is regarded as essential.

Import duty (II)

II is due upon customs clearance of imported products on an ad valorem basis. The rate varies, depending on the tariff classification of the product imported.

As mentioned above, import transactions are also subject to the PIS/COFINS-import and to the IPI. Import transactions are also taxed by the State VAT (ICMS). These taxes, along with II, are calculated as follows:

  • The II and the PIS/COFINS-import are imposed over the good's customs value (ie, CIF value)
  • The IPI is levied on the CIF value plus II and
  • The ICMS is levied on the CIF value plus II, IPI and ICMS itself

Export tax (IE)

IE applies to the export of certain listed goods and the tax is calculated on an ad valorem basis. The tax rate varies depending on the type of product exported.

Financial transaction tax (IOF)

The IOF applies to several types of transactions such as credit, exchange and insurance, loans, as well as on transactions involving gold, financial asset or exchange instruments. IOF rates and basis vary depending on the nature of the transaction.

State VAT on sales and services (ICMS)

Similar to the IPI, the ICMS is another value-added tax on sales, communication and transportation services, payable upon the importation of a product into Brazil, the sale of a good in the Brazilian market, or upon the provision of certain communication and intrastate and interstate transportation services.

ICMS rates and tax benefits vary from State to State and depend on the type of transaction (eg, import, intrastate or interstate sale of goods, communication or transportation services, etc.).

The ICMS non-cumulative system permits a taxpayer to offset the ICMS paid in acquired goods and services against the ICMS due on subsequent taxable transactions (eg, sale of goods and services subject to ICMS tax). The difference is the amount due to the state government.

Note that State ICMS legislation may attribute the responsibility to pay the ICMS to a legal entity that, although it did not perform the relevant taxable transaction per se, had an indirect relation to it. An example is the responsibility for paying the ICMS attributed to electricity generator or distributors on one or more operations, from production or importation until the end consumer.

Specific rules apply to operations with hydrocarbons, such as oil, lubricants and natural gas.

Estate and gift tax (ITCMD)

ITCMD is a state tax that is levied on the transmission of movable or immovable assets as a result of donation or in the event of the death of the owner. As a general rule, ITCMD is subject to rates varying from 4% to 8%, depending on the state, over the fair value of the movable asset, real estate or transmitted rights.

Tax on services (ISS)

ISS is a municipal tax that applies to the price charged for the provision of certain listed services. Rates vary from 2% to 5%, depending on the type of service and the particular municipality in which the party rendering the services is located.

The ISS shall also apply to the importation of services. In such circumstances, each municipality may set forth in the relevant municipal legislation that the contracting parties located in Brazil are liable for collecting the relevant tax.

The ISS shall not apply to the exportation of services, except over those developed in Brazil and whose results also occur in Brazil, even if the contracting party is a foreign resident.

Real estate property tax (IPTU)

IPTU is a municipal tax levied annually, at progressive rates according to the appraised value and use of the real estate, and over the ownership, possession and use of urban realty.

Real estate transfer tax (ITBI)

ITBI is a municipal tax on the transfer of real estate. The rates may vary according to the actual value of the transaction or the appraised value of the property, whichever is higher.

Individual income taxation (IRPF)

Brazilian tax legislation distinguishes individual residents from non-residents. As mentioned above, a Brazilian national is automatically a resident while legally domiciled in Brazil or, if not domiciled in Brazil, upon his or her election to be treated as a resident for tax purposes.

In general, resident individuals are subject to tax on their worldwide income, regardless of nationality (universal taxation), while non-residents are generally subject to tax in Brazil only on Brazilian source income (limited taxation).

A foreign individual will be considered to be a tax resident in Brazil when:

  • Admitted to the country under a permanent visa or
  • Admitted to the country under a temporary visa, and
    • Under an employment relationship for purposes of Brazilian law, on the day such relationship is established or
    • Upon completing 184 days, consecutive or not, of physical presence in Brazil within a 12-month period

The duration of the time period for this visa begins on the day the foreigner enters Brazil, independent of the calendar year. The days counted are only those days spent within the country, interrupted upon the moment they leave Brazil and recommenced if they return.

Tax residents are subject to income tax on worldwide income on a cash basis for each year, even if the income is generated abroad. An individual income tax return should be filed by the last business day of April to report income received in the previous year, with no extensions.

Brazil has a different set of rules for ordinary income, capital gains, income received from abroad and from individuals and income from financial products.

Ordinary income is subject to progressive rates ranging from 7.5% up to 27.5%.

Compensation received from a Brazilian company for services provided under an employment relationship or as an individual contractor is subject to WHT at monthly progressive rates also ranging from 7.5% up to 27.5%, depending on the amount of income perceived.

In the annual income tax return, the taxpayer must report all ordinary income received from all Brazilian payment sources on a consolidated basis. Consolidated ordinary income will be subject to income tax at the progressive rates mentioned above. Because each payment source calculates WHT separately, without taking into account the taxpayer's overall income and bracket, the taxpayer might be required to make an additional tax payment upon filing of the annual income tax return.

Capital gains resulting from the disposition of assets and other rights, including investments in the capital markets (ie, disposition of stocks, commodities and other rights) are subject to income tax at capital gains, at rates varying from 15% up to 22.5%.

Income received from paying sources located abroad and from individuals in Brazil are subject to a mandatory monthly tax payment (Carnê Leão), which is due at the same progressive tax rates applicable to ordinary income mentioned above. The tax must be collected until the last business day of the following month.

Financial income from Brazilian sources is subject to a final withholding tax system performed by the financial institution. Tax rates shall vary according to the type of investment and also on the term under which it was made.

Brazil provides double taxation relief through a foreign tax credit system applicable to income tax paid to countries with which Brazil has entered into a tax treaty or on a reciprocity basis when the source country also grants a foreign tax credit for taxes paid in Brazil on Brazilian source income. The Brazilian tax authorities have agreed on a reciprocity basis with the United States, Germany, United Arab Emirates and United Kingdom.

Canada

Not applicable for this jurisdiction.

China

R&D expenses may have a bonus deduction, including R&D service fees paid to a foreign R&D service provider.

Colombia

Equity tax

Law 1943, 2019, create a new 1% equity tax for Colombian tax resident individuals and non-tax residents that holds a net equity equal to or exceeding 5 billion pesos as of January 1, 2019.

Non-tax residents are subject to equity tax only with respect to its assets held in Colombia, unless the non-tax residents have a permanent establishment in Colombia. In that case, the non-tax resident could be subject to equity tax with respect to the net equity attributable to it, either located in Colombia or abroad.

Tax amnesty

Taxpayers that on January 1, 2019 failed to report assets or include non-existing liabilities are subject to a 13% amnesty tax. This rate could be reduced to 50% when the taxpayer invests the non-reported assets abroad for a period of more than 2 years.

Taxpayer that held assets through foreign private foundations, trusts or investment vehicles have to report the underlying assets according to the rules applicable to Colombian Trusts (patrimonio autónomo). Appointed beneficiaries in the abovementioned structures will have to disclose assets' information. If there are conditional beneficiaries or if the appointed beneficiaries do not hold control over the underlying assets, the founder, settlor or the initial holder of the assets are obliged to report the assets in the foreign structures.

Value added tax – VAT

VAT is an indirect national tax applicable on:

  • Sales and imports of tangible goods
  • Sales or transfers of rights over industrial property
  • Provision of services in Colombia or from abroad (if the beneficiary is located in Colombia)
  • Gambling activities (except of those operated online)

 Applicable tax rates are 0%, 5% or 19%.

Consumption tax

National consumption tax is levied on the following services:

  • Mobile phone, internet and mobile navigation services
  • Sale of certain vehicles, aircraft and other goods
  • Restaurant and cafeteria services at 8%, alongside catering services, provided that these services are not rendered under a franchise agreement. Services subject to consumption tax are excluded for VAT

 Rates: 4%, 8% and 16%.

As of January 1, 2019, sales of real estate property, other than rural property focused on agricultural activities, whose selling price exceeds 26,800 tax units (In 2019: COP$9 million) are subject to a 2% consumption tax.

Industry and trade tax – ICA

The industry and commerce tax is a local tax that is imposed on the gross revenue generated from industrial, commercial or service activities carried out in the corresponding municipality.

Tax rates are from 0.2% to 1.4%. 100% of the industry and commerce tax paid during the relevant taxable year can be credited against income tax liability.

Transactional tax

The 4% transactional tax is accrued on every transaction aimed, in general, at withdrawing resources from checking, deposit or savings accounts and cashier checks. 50% of the transactional tax is deductible for income tax purposes.

Registry tax

Registry tax is levied on the registration of documents before the Chamber of Commerce and before the Registry of Public Deeds (Oficina de Registro de Instrumentos Publicos). Tax rate varies from 0.3% to 1%. For documents that do not embed any value, a fixed value applies.

Employment taxes

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:

Contributions1 Rate Employer Employee
Pension 16% 12% 4%
Health 12.5% 8.5% 4%
Solidarity Pension Fund2 1% - 2% N/A 1% - 2%
Professional Risks 0.348% - 8.7% 0.348% - 8.7% N/A
1 The basis to calculate contributions to the social security system (pensions, solidarity pension fund, health and professional risks) is the ordinary monthly salary earned by the employee. However, if the monthly salary exceeds 25 times the minimum wage, contributions to the social security system will be calculated on the maximum basis of 25 times the minimum wage. Non-salary payments agreed between the employer and the employee are not included in the basis to calculate social security contributions, if such payments do not exceed 40% of the employees’ compensation. If these non-salary payments exceed 40%, the difference will be subject to social security contributions. In case of employees earning integral salary, 70% of salary will be the basis to calculate contributions to the social security system. However, if 70% of the integral salary is more than 25 times the minimum wage, contributions to the social security system will be calculated on the maximum basis of 25 times the minimum wage.
2 The contribution to the Solidarity Pension Fund only applies for employees who earn more than 4 times the legal minimum wage. This payment is equivalent to 1% of the monthly salary, but in the case of employees earning more than 16 times the [1] The contribution to the Solidarity Pension Fund only applies for employees who earn more than 4 times the legal minimum wage. This payment is equivalent to 1% of the monthly salary, but in the case of employees earning more than 16 times the minimum wage the rate will be increased as follows: between 16 and 17 times the minimum wage, an extra 0.2%; between 17 and 18 times the minimum wage an extra 0.4%; between 18 and 19 times the minimum wage an extra 0.6%; between 19 to 20 times the minimum wage an extra 0.8% and between 20 and 25 times the minimum wage an extra 1%. Contributions to the solidarity fund also have the cap of 25 times the minimum wage.

Presumptive income tax system

The Colombian Tax Code sets forth a presumptive income system as an alternative method to determine corporate income tax. According to this method, income tax must be applied at least on the amount corresponding to the 3% of the net assets of the company as of December 31 of the year prior to the reporting tax year.

For 2019 and 2020, presumptive income must correspond to 1.5% of the net assets determined as of December 31 of the previous year. As of 2021, presumptive income system will no longer apply.

Finland

Not applicable.

France

Not applicable for this jurisdiction.

Germany

Not applicable for this jurisdiction.

Hong Kong

Imports into Hong Kong are generally tax-free with few exceptions. No customs or excise duty is levied on exports from Hong Kong.

India

Service fees

Withholding tax on fees for technical or consultancy services applies to payments made to non-residents. Corresponding provisions of the relevant tax treaty may be examined to ascertain any relief or exemption.

Goods and Services Tax

Goods and Services Tax (GST) is an indirect tax that came into effect on July 1, 2017. GST is levied at every stage of production-distribution chain with applicable set off credits in respect of tax paid at previous stages. Goods and services are divided into 5 tax slabs for collection of tax - 0%, 5%, 12%, 18% and 28% with lower rates for essential items and the highest for luxury and de-merits goods. Petroleum products and alcoholic drinks are taxed separately by the individual state governments.

Any services offered by Indian resident to a person resident outside India are usually treated as "export of service" and are thus exempt from levy of GST which is otherwise payable at 18% rate. This is subject to certain exceptions.

Following are the different types of levies in GST:

  • Central GST (CGST)
  • State GST (SGST)/Union Territory GST (UTGST)
  • Integrated GST(IGST)

SGST is levied along with CGST on the supply made by a registered person within a State and UTGST is levied along with CGST on the supply made by a registered person within a Union Territory. However, in no case, both SGST and UTGST are levied on an invoice of supply of goods or services or both. It is either be SGST or UTGST along with CGST which can be levied on the invoice. IGST can be levied on Import or Inter-State supply of goods or services or both. IGST is equivalent to sum total of CGST and SGST/UTGST.

Ireland

Not applicable for this jurisdiction.

Israel

Not applicable for this jurisdiction.

Italy

IRAP

In addition to corporate income tax (IRES), local income tax is levied at the level of Italian corporations (ie, IRAP). IRAP is levied on the net value of the production generated in each Italian region, computed as the difference between revenues and production costs. Employment expenses (if not related to open ended relationships), write-down of assets and other specific costs are not deductible. The IRAP tax rate is equal to 3.90%, but any region can decide to increase the tax rate up to 4.82%. IRAP is deductible from corporate income tax up to an amount of 10% of IRAP paid.

Specific IRAP provisions apply to banks and financial institutions.

Japan

It is expected that Consumption tax rate will increase from 8% to 10% on 1 October 2019.

Luxembourg

Net Wealth Tax (NWT)

Both Luxembourg resident companies and Luxembourg branches of non-resident companies are subject to NWT. As of January 1, 2016, a new scale of rates has been introduced as follows:

  • 0.5% up to EUR 500 million
  • 0.05% over EUR 500 million

Luxembourg companies are subject to a minimum NWT. Luxembourg companies having a total balance sheet exceeding EUR 350,000 and which consists of more than 90% of financial assets, transferable securities and cash at bank should be subject to a minimum flat tax amounting to EUR 4,815. If the 90% threshold and the EUR 350,000 threshold are not met, a minimum NWT ranging between EUR 535 and EUR 32,100 is due.

Interest deduction limitation

Luxemborug has introduced an interest limitation rule in the context of the transposition of ATAD. As from January 1, 2019, excess borrowing costs (ie, tax-deductible borrowing costs which exceed underlying interest income and economically equivalent income) are only deductible up to the higher of 30% of earnings before interest, taxes, depreciation and amortization (EBITDA) of the taxpayer and EUR 3 mio.

Excess borrowing costs which are not deductible in a tax period may be carried forward without time limitation. Unused interest capacity in a given tax period may be carried forward for five years.

The interest limitation rule is not applicable to excess borrowing costs:

  • On loans concluded before June 17, 2016
  • On loans to finance EU long-term public infrastructure projects or
  • Onloans incurred by standalone entities and "financial undertakings"

Intra-EU hybrid mismatches

As from January 1, 2019, hybrid mismatch provisions apply in an intra-EU context as a result of ATAD.

The rule aims at  preventing hybrid mismatches which result in a double deduction (ie, a deduction of the same expenses both in Luxembourg and in the other EU member state) or a deduction without inclusion (ie, a deduction of expenses in Luxembourg and no corresponding inclusion of the income in the taxable basis of the other EU member state).

The anti-tax avoidance directive provisions provide that when a structure includes a hybrid mismatch with double deduction, the deduction shall only be granted in the EU member state where the payment has its source. When a structure includes a hybrid mismatch with deduction without inclusion, the EU member state of residence of the payer shall deny the deduction of such payment.

Hybrid mismatches with third countries (ATAD 2) and covering a wider range of intra-EU mismatches will be implemented at a later stage and will come into force on January 1, 2020 and January 1, 2022 (for the reverse hybrid mismatch rule).

Mexico

Not applicable for this jurisdiction.

Netherlands

Not applicable for this jurisdiction.

Norway

Foreign employees

Foreign employees who work temporarily in Norway may opt to pay 25% salary tax on the gross remuneration received, up to a certain maximum (NOK 617,500 in 2019). The 25% salary tax is final, and no deductions are allowed. Certain exemptions apply.

Poland

Standard Audit File for Tax (SAF-T) was introduced in Poland in 2016 as a regular evidence for tax control purposes (Jednolity Plik Kontrolny).

Portugal

Not applicable.

Romania

An annual property tax is levied by the local tax authorities for constructions, land and vehicles held in patrimony. Other local taxes are applicable in some cases.

Rules for deductibility of borrowing costs

Excess borrowing costs, which are higher than the RON equivalent of EUR 200,000 (this threshold is expected to be increased by law), are deductible within a limit of 10% of the computation basis. The excess borrowing costs which fail the two deductibility tests are not deductible in the tax period when they are incurred but will be carried forward to the following tax periods, without a time limit.

VAT

Value added tax shall be charged by Romanian companies for goods supplied or services provided.

Foreign entities are also liable to register for VAT purposes in Romania and charge Romanian VAT on supplies of goods and provision of services having the place of supply in Romania. The standard VAT rate is 19%, while reduced VAT rates of 9% or 5% are applicable for supply of certain goods.

Companies registered for VAT purposes are allowed to deduct the input VAT incurred upon acquisition of goods and services used in respect of taxable transaction. The difference between the output VAT charged on goods supplied or services provided and the input VAT incurred upon acquisitions of goods or services should be paid to the state budget, if positive, or could be requested for refund from the state budget, where negative.

Russia

E-commerce taxation

From January 1, 2019, foreign companies supplying e-commerce services to Russian customers, including to private individuals and legal entities and individual entrepreneurs, are obliged to register with the Russian tax authorities. The legislative changes cover both B2C e-commerce supplies as is the case under previously enacted rules, and B2B e-commerce operations. B2B supplies shall not be subjected to VAT taxation via a reverse-charge VAT mechanism and foreign e-commerce suppliers must independently calculate and pay VAT on the value of so rendered services from January 1, 2019 on a go-forward basis.

Singapore

Not applicable for this jurisdiction.

South Africa

Interest deduction limitations

In addition to any transfer pricing adjustments that may be applicable, SA has interest deduction limitation provisions, which can apply to loan funding obtained from a controlling foreign company not subject to tax in SA.

Interest deduction limitation rules also apply to certain reorganisation transactions.

Value-added tax

VAT is levied in SA at a standard rate of 15%. VAT is largely directed at the domestic consumption of goods and services and at goods and services imported into South Africa. The tax is designed to be paid mainly by the ultimate consumer or purchaser in South Africa.

Most business transactions carried out in South Africa are subject to VAT. The tax is collected by businesses, which are registered as vendors with SARS. A vendor is required to register for VAT if they made taxable supplies or have a written contractual obligation to make taxable supplies of more than R1 million during the relevant period. A vendor may register voluntarily in certain instances.

Foreign exchange controls

The Financial Surveillance Department (FSD) of the South African Reserve Bank imposes exchange controls on South African residents. Exchange control is not applicable to non-residents, but they need to comply with the notice requirements to the FSD in order to facilitate subsequent withdrawals of their capital from SA.  Most commercial banks are authorised dealers of the FSD.

South Korea

Value added tax (VAT) is a tax levied on added value acquired in the process of the transaction of goods or the provision of services. VAT is imposed on value generated at each step of a transaction, and applies a VAT rate of 10%. Certain supplies are eligible for VAT zero-rating or VAT exemption. VAT zero-rating is the same as VAT exemption in that no VAT is charged. However, only VAT zero-rating allows input VAT deduction for VAT incurred in relation to the VAT zero-rating supplies. The VAT imposed on businesses is calculated by subtracting the input tax from the output tax.

Value added tax should be reported and paid every 6 months, and the taxable period of 6 months is divided into 3 months for a preliminary report.

Spain

Not applicable for this jurisdiction.

Sweden

Value Added Tax (VAT)

VAT should be charged on the supply of goods or services. Registration for VAT is normally mandatory if sales of taxable goods or services are made in Sweden by a taxable person. The standard VAT rate is 25%. Reduced rates apply on certain goods and services.

Switzerland

Special tax regimes

Due to pressure by the European Union and the OECD criticizing certain cantonal and federal tax regimes, Switzerland is currently reforming its corporate tax system (Corporate Tax Reform (CTR)). With the CTR the special tax regimes for holding, domiciliary, mixed and principal companies as well as the Swiss Finance Branch regime should be abolished in order to align the Swiss tax system with internationally accepted standards.

The outcome of the CTR is currently unclear but it is possible that the below tax regimes will be abolished in the coming years. Until implementation of such reform, currently, the following special tax regimes typically apply in Switzerland:

Holding companies

In general, holding companies whose main purpose is the administration of investments in other companies (subsidiaries in Switzerland or abroad) enjoy preferential tax treatment on both the cantonal and the federal tax levels. On a cantonal tax level, holding companies are generally exempt from any income tax on profits with the exception of income from Swiss real estate and they pay a reduced tax on equity. Even though the federal direct tax does not recognize the concept of a holding company, full or very substantial tax reductions are granted to qualifying dividend income and qualifying capital gain of holding companies under participation relief.

Mixed companies

Mixed companies usually provide services to other entities of the group abroad or to third party foreign companies. Currently, all cantons generally grant tax privileges to these companies.

A mixed company can only have a limited commercial activity in Switzerland. As a general rule, at least 80% of the income from its activities must be derived from non-Swiss sources and a maximum of 20% of income may be linked to Swiss sources (ie, dealings with Swiss counterparties). Many cantons additionally require that at least 80% of a mixed company's costs must be related to activities undertaken abroad.

Provided a company qualifies as a mixed company, it may apply for a tax ruling and is entitled to a treatment under which its foreign sourced income is only subject to a combined federal, cantonal and communal effective income tax rate of about 8% to 12%.

Income from Swiss sources is taxed at the normal rate. Certainly, a portion of foreign source income is subject to cantonal and municipal income taxes depending on the degree of business activity carried out in Switzerland.

Principal structures

Principal companies are companies which manage, by the means of subsidiaries and affiliates, trade transactions abroad on a commission basis and conclude production contracts with such companies.

The taxation of principal companies at the federal level takes place in accordance with Circular No. 8 of the Swiss Federal Tax Administration dated December, 18, 2001. A principal company based in Switzerland can allocate 50% of distribution profits to a deemed permanent establishment abroad. If the principal company also has production abroad, 30% of the company's production profit would be attributed to the Swiss principal company and 50% of the remaining 70% of distribution profit would be attributed abroad.

At the cantonal level, principal companies are usually taxed as mixed companies.

These features can lead to an overall combined federal, cantonal and communal income tax below 10%.

Patent Box

The Canton Nidwalden, as the first canton in Switzerland, implemented a "patent box" regime on January 1, 2011, which provides that a company having a certain degree of local substance that manages its IP rights and grants licenses under certain conditions may be subject to income tax at an overall effective tax rate of 8.80% (including federal tax). The definition of "qualifying income" for the patent box regime of Canton Nidwalden is based on the OECD definition.

Taiwan

Effective starting from May 1, 2017, a foreign enterprise, institution, group, or organization having no PE within Taiwan, but supplying electronic services to domestic individuals, with annual income derived from Taiwan that exceeds NT$480,000 shall be the taxpayer (the E-Services Provider) under the Taiwan Value-added and Non-value-added Business Tax Act, and shall apply by itself or appoint a Taiwan resident or an entity with a PE in Taiwan as its tax agent (the Tax Agent) for taxation registration and filing bi-monthly VAT returns and paying VAT.

On January 2, 2018, the Taiwan authority further introduced a ruling in regard to the income tax payable by the E-Services Provider, which applies retroactively from January 1, 2017. Under this ruling, the E-Services Provider will be required to report its Taiwan-source income and file annual income tax returns and pay income tax, either by itself or through the Tax Agent, in regard to revenues derived from domestic individuals, while income tax for business-to-business transactions will be withheld at source by the domestic business entities.

Turkey

An environmental tax is applied on places of business at fixed rates that change every year based on the determined categories.

Bank and insurance charges are subject to transaction tax at a general applicable rate of 5%.

Ukraine

A simplified taxation system is available for Ukrainian companies upon certain conditions and allows for payment of a single tax at the rate of 5% applied on turnover or 3% (if the company is a VAT payer).

United Arab Emirates

Value Added Tax

The UAE introduced Value Added Tax (VAT) on January 1, 2018. The VAT regime is loosely based on the EU VAT system with a number of notable differences. The UAE VAT applies to most supplies of goods and services (including the import of goods and services). The standard VAT rate is 5%.  For specific activities, a zero rate applies (such as on exports), whereas other activities may be exempt (such as financial services).

Customs Duty

The UAE is a member of the Gulf Cooperation Council's (GCC) Customs Union, which is governed by the GCC Customs Law. The GCC Customs Union is based on the principle of a single entry point upon which all customs duty on foreign imported goods is collected. Under the GCC Customs Law, customs duties (if any) are levied over the customs value of the foreign imports (eg, the Cost, Insurance and Freight (CIF) value).

United Kingdom

VAT applies generally at 20% to supplies of goods and services taking place in the UK, subject to a reduced rate of 5% for specified goods and services, and exemptions and zero-rating of certain goods and services.

United States

Not applicable for this jurisdiction.

Zimbabwe

Value Added Tax (VAT) is a tax levied on the supply of goods and services by persons/entities in Zimbabwe once the supplier has reached a certain revenue threshold. A supplier of taxable supplies is obliged to charge VAT at the prescribed rate (which currently is 15 percent of the cost of the supply) and pay over this tax to ZIMRA as "output tax." Presently, where the value taxable supplies made by  a taxpayer have reached RTGS$60,000 (sixty thousand real time gross settlement dollars only), or more, in the previous 12 months, or where the taxpayer believes that the value of his/her/its taxable supplies will be US$60,000 (sixty thousand United States dollars only), or more in the next 12 months then the taxpayer must register to be a VAT operator with ZIMRA.