Businesses generally adopt a corporate form, as:

• Sociedades Anónimas (limited companies, or SAs);
• Sociedades de Responsabilidad Limitada (limited liability companies, or SRLs); or
• Sociedades Anónimas Simplificadas (simplified limited companies, or SASs).

Generally, these entities have the same tax treatment: up to 35% corporate income tax (CIT) and 7% dividends tax. All these entities are taxed as separate legal entities.

All three legal entities provide limited liability to their shareholders. Only in certain exceptional cases of bankruptcy or fraud (eg, in the fields of labour and tax law) may equity holders be held liable for the legal entity’s obligations.

Division of Corporate Capital

The corporate capital of an SA and an SAS is divided into shares, while in an SRL it is divided into quotas (hence the owners of the equity are named quotaholders).

An SRL requires the existence of at least two quotaholders. An SA and an SAS can have one or more shareholders, although sole-shareholder SASs are subject to more strict governance and control requirements. If an SA or an SAS has only one shareholder, then the corporate capital must be paid in full at all times; if there is more than one shareholder, then the initial corporate capital and further capital increases in cash can be paid 25% upfront, with the balance paid during the subsequent two years. Additionally, single-shareholder companies cannot be shareholders of other single-shareholder companies.

The minimum registered capital to create an SA is ARS100,000 and to create an SAS, it is an amount equivalent to two times the minimum wage in force at the time of incorporation (this currently amounts to ARS63,876). However, depending on the activity to be pursued by the company, the Public Registry of Commerce may require a higher corporate capital.

Corporate Bodies

Legal entities have three corporate bodies:

• a management body (comprised of directors or managers);
• a governing body (meetings of equity holders); and
• an audit body (a syndic, which is mandatory or optional, depending on the legal entity).

An SA is managed by a board comprising one or more directors. The majority of the directors must be domiciled in Argentina. Directors may hold office for a tenure of up to three fiscal years. However, at the end of the tenure, the tenure can be renewed. The board must meet at least once every three months. An SA is represented by the chairman of the board of directors.

The management of an SRL is performed by one or more managers, who can act individually, jointly or organised as a board, depending on the provisions of the by-laws. The majority of the managers must be domiciled in Argentina. Managers may hold office indefinitely.

The management of the SAS is conducted by managers, who can act individually, jointly or organised as a board, depending on the provisions of the by-laws. At least one of the managers must be domiciled in Argentina, which relaxes the requirements of SAs and SRLs. Managers may hold office indefinitely. One of the managers must be appointed as the legal representative of the SAS.

In all cases, the members of the management of the legal entity must be individuals and not legal entities. The members of the management are not required to be equity holders.

Meetings

At least annually, the equity holders of a legal entity will hold a meeting to approve financial statements and make a decision regarding the result of the fiscal year (profit or loss), consider the performance of the members of management and, if applicable, appoint members of management. The meetings of equity holders are also competent to amend the organisational documents, increase or reduce the corporate capital, approve mergers and spin-offs, and appoint or remove members of management. Decisions of the equity holders of an SAS and an SRL may be obtained through written consents or voting via mail.       

Transparent entities that are commonly used are the following:

• an administrative trust, in which the settlor is, at the same time, a beneficiary;
• a public financial trust; and
• closed-end investment funds.

These structures are commonly used in a wide range of businesses, from real estate to venture capital, because of their fiscal efficiency, which should be analysed on a case-by-case basis, and other corporate advantages (transparent structures are more flexible than regular incorporated businesses).

The three types of entities mentioned above can be transparent under certain conditions:

• administrative trusts are transparent if trustees are, at the same time, beneficiaries and there are no foreign beneficiaries; and
• public financial trusts and closed-end investment funds are transparent if they have a public offer and Argentine investments.

Generally, double tax treaties (DTTs) determine the residence of incorporated business according to the “place of management” of the entity, as does the Civil Code. Transparent entities may lack fiscal residence, in which case the controlling test is the residence of the beneficial owner. However, internal law determines that transparent entities’ residence depends on the law that governs the structure/contract.

Incorporated Business Income Tax

The Income Tax Law applies a progressive tax rate, according to the following criteria:

• if the net income of the company does not exceed ARS5 million in the fiscal year, a 25% tax rate applies;
• if the net income exceeds ARS5 million but is less than ARS50 million, a tax rate of 30% applies to the income exceeding ARS5 million; and
• if the net income exceeds ARS50 million, a tax rate of 35% applies to the income exceeding ARS50 million.

Resident companies are subject to incorporated business income tax on a worldwide income basis; ie, they are taxed in Argentina on their local-source profits and on their foreign-source profits. However, companies can compute as tax credit similar income tax payments made abroad on foreign-source income, subject to certain limits.

A transparent entity does not pay taxes by itself; the individual shareholder must pay taxes depending on the type of income obtained:

• corporate income is taxed at a progressive rate of up to 35%; and
• the sale of real property and the sale of shares are taxed at a rate of 15%.

Taxable profits are calculated based on the tax balance sheet, which derives from the accounting balance sheet, with some tax adjustments on deductions and credits (for example, exchange rate differences, depreciations, debts with related parties).

Generally, incorporated businesses are taxed on an accrual basis. However, this general rule may have some exceptions: deductions must be made on a receipt basis for Argentine-source payments to related companies or companies incorporated in low- or no-tax or non-cooperative jurisdictions.       

At a national level, the knowledge economy regime offers tax incentives for technology investments for incorporated business that develop relevant activities.

The regime offers various tax advantages (income tax and VAT reductions, and withholding and collection exemptions, among others) and usually requires the beneficiary to prove that a substantial part of its expenses is used for R&D purposes.

The following are examples of relevant activities that are included. In some activities, a case-by-case analysis will be needed:

• software and digital services in general;
• audio-visual production and post-production;
• bioindustries;
• geological prospecting services;
• electronic and communications;
• professional services (export only);
• nanotechnology and nanoscience;
• the aerospace and satellite industry;
• engineering for the nuclear industry; and
• 4.0 technology.

Subject to compliance with certain conditions, the tax benefits included in the regime are the following:

• tax benefits stability;
• a non-transferable tax credit bonus equivalent to 70% of the employer contributions effectively paid with respect to employees assigned to work in promoted activities;
• income tax (related to promoted activities) could be reduced by up to 60%, 40% or 20% depending on the kind of legal entity applying for the benefit (micro, small, medium and macro legal entities);
• a VAT collection regimen will not apply to beneficiaries that carry out exports related to promoted activities; and
• deductible expenses – income tax paid or withheld abroad will be treated as deductible expenses for the income tax assessment of the local entity.

Provinces may adhere to the national regime and regulate local benefits. In general, the benefits included are turnover tax, stamp tax and/or real estate property tax.

At a federal level, Argentina provides various special incentive regimes, including the Renewable Energy Regime, the Forestry Promotion Regime, the Mining Regime, Tierra del Fuego’s Special Customs Zone and the SME law (Ley PyME).

Renewable Energy Regime

Acts No 26,190 and 27,191 established a special regime with the purpose of promoting the generation of electricity from renewable sources. The main tax benefits under this regime are:

• accelerated depreciation of fixed assets for the purposes of CIT;
• an anticipated refund of VAT corresponding to goods or infrastructure works included in the investment project for new renewable energy plants; and
• import duty exemptions for certain assets related to renewable energy projects.

Forestry Promotion Regime

Act No 25,080 established a special regime for the purpose of promoting forestry activity. The main tax benefits under this regime are:

• accelerated depreciation of fixed assets for the purposes of CIT;
• an anticipated refund of VAT corresponding to goods or infrastructure works included in the investment forestry project;
• tax stability; and
• valuation of reserves at market value.

Mining Regime

Law No 24196 created an investment regime for mining activity that applies to individuals and legal entities.

The tax benefits under this regime include tax stability, accelerated amortisation, and income tax and custom duties incentives, as well as the possibility to obtain a VAT reimbursement in compliance with its regulations.

Tierra del Fuego Tax Regime

Act No 19,640 established a special tax regime to promote activities developed in Tierra del Fuego (an Argentine province). Under this regime, companies domiciled in this province enjoy a general tax exemption (including on CIT and VAT) and have significant benefits in connection with customs duties.

SME Regime

In 2016, Act No 27,264 was enacted, creating a special tax regime for small and medium-sized enterprises (SMEs). This regime provides several tax benefits for these types of companies:

• deferral on VAT payment (90 days, instead of the general rule of monthly payments);
• small and micro enterprises may compute 100% of the amounts paid pursuant to the debits and credits tax against their CIT; and
• a non-taxable minimum of ARS60 million for service export duties.

The basic rules on loss relief, generally, include a carry-forward rule, by which the net operating losses of one fiscal year may be offset against income tax to be paid for the next five years.

There are certain losses that can only be offset against profits generated from similar sources, such as capital loss from the sale of stock, bonds, derivatives or other securities issued by Argentine companies, and income derived from a foreign source.

There are certain limits imposed on the deduction of interest by local corporations. If the local entity is related to the local/foreign entity to which it pays interest, it can only deduct interest payments for up to 30% of its EBITDA (thin-capitalisation rules), although certain exceptions may apply.

The law establishes that interest and foreign exchange losses on financial debts owed to related parties will be tax deductible, subject to certain quantitative limitations, except for those debts generated by acquisitions of goods, leases and services related to the company’s business. This interest will be deductible at the higher of the following limits:

• an annual cap established by the federal executive power (currently ARS1 million); or
• 30% of the net profit before deducting the interest referred to above and amortisations allowed by law.

Non-deductible interest can be carried forward for five years.

Among other exclusions, the deductibility limitation does not apply to:

• financial entities;
• certain financial trusts;
• companies whose main business is the execution of lease purchase agreements, and whose secondary business consists exclusively of financial activities; and
• a whole economic group – 30% of the net profit before deducting the interests and amortisations allowed by law, considering this percentage on an economic group basis when evidence can be produced that the beneficiary of the interest has paid tax in Argentina on the income concerned (income tax for Argentine residents or withholding tax for foreign residents); in such case, the deductibility limitations will only apply to losses derived from foreign-exchange losses.

As a basic rule on consolidated tax grouping, Argentina uses a separate entity approach, pursuant to which, each company may only compute its own losses against its own future income tax. The only application of consolidated tax grouping relates to the thin-capitalisation rules exception, discussed in 2.5 Imposed Limits on Deduction of Interest, which includes an exception to the interest deduction limit, applying a 30% limit to the debt of the whole economic group.

As a general rule, the sale of shares of Argentine private companies is subject to capital gains tax levied on the seller, regardless of its status (resident/non-resident), and whether the sale occurs directly or indirectly (ie, the sale of shares in a foreign holding company).

The applicable tax rate for local corporations is levied at a progressive tax rate that could be 25%, 30% or 35% depending on the income amount.

The applicable tax rate for a foreign seller (corporations or individuals) is 15% on the net value of the sale or 13.5% of the total sales price, at the seller's option (a reduced tax rate may apply if a DTT is applicable). If the seller is based in a non-cooperative jurisdiction (or the funds come from such a jurisdiction), the rates to be applied will be 35% of the net value of the sale or 31.5% of the sales price.

For foreign sellers, indirect sales of equity participations acquired after 1 January 2018 are subject to capital gains tax provided that, at the time of sale or during the 12 preceding months:

• at least 30% of the market value of the shares derives from shares, assets or rights located in Argentina; and
• the shares being sold represent at least 10% of the equity of the foreign company.

Indirect transfers of shares within economic groups are exempt from this tax if certain conditions are met.

Finally, foreign sellers (other than those located in non-cooperating jurisdictions) are exempt from capital gains tax on the sale of shares listed on stock markets authorised by the Argentine Securities Commission.

Federal taxes include VAT, bank debits and credits tax, customs duties, excise tax and liquid oil tax, while local taxes include turnover tax and stamp tax (local). There are different collection and perception regimes for income tax, VAT and turnover tax, depending on the activity. The following are the most relevant taxes.

Value Added Tax

VAT is applied on the sale of goods, and the provision of services and imports (including imports of services) by individuals and legal entities carrying out economic activity within Argentine territory. Exports of goods and services are taxed at a zero rate and the exporter can request a tax refund to recover the VAT paid by the exporter to third parties.

The general VAT rate is 21%. There is a reduced tax rate of 10.5% that applies for very specific sales of goods and provisions of services, such as interest and commission charged in connection with loans granted by banking entities that adhere to the standards of the Basel Committee on Banking Supervision.

Debits and Credits Tax

Pursuant to the debits and credits tax, debits and credits in bank accounts are taxed at a rate of 0.6% for the debits and 0.6% for the credits, which means that the consolidated impact of this tax is 1.2%. Certain exceptions or tax rate reductions may apply. Companies are able to compute 33% of their debits and credits tax payments as a tax credit against CIT. Small and micro enterprises that are beneficiaries of the SMEs regime are allowed to compute 100% of their payments against CIT.

Customs Duties

Import duties tax rates range from 0% to 35%. Export duties tax rates range from 0% to 35%. However, in both cases, some exceptions may apply.

Incorporated businesses are also subject to a 0.5% personal property tax on shares, over the book value at the end of each fiscal year, as a surrogate payer for their shareholders.

Moreover, incorporated business acting as employers must pay employer contributions. The applicable tax rate depends on whether they qualify as an SME. Currently, SMEs pay social security taxes at a total tax rate of 24% on the gross salary of the employee, while non-SMEs pay at a rate of 26.4% (SST rates informed include healthcare).

Closely held local businesses generally operate in a corporate form.

Generally, corporate rates (up to 35% over the net income and 7% on dividends, upon distribution) are higher (effective tax rate: up to 37%) than individual progressive rates (5% to 35%, depending on the net income).

In broad terms, individual professionals that develop their activity in a non-corporate form can obtain certain local tax benefits (turnover tax).

There are no rules preventing closely held corporations from accumulating earnings for investment purposes. Actually, corporations benefit from doing so because they defer the tax on dividends that will be levied with tax only upon distribution.

Capital gains of individual residents are taxed at 15% on the net gain (foreign beneficiaries – individual or corporations – may choose to pay 13.5% of the total sale price or 15% on the net gain).

Dividends distributed to individual residents are taxed at 7%. Dividends distributed to foreign beneficiaries (companies or individuals) are also taxed at a rate of 7%. This tax rate is usually lower than the withholding tax regulated for dividends in DTTs.

There is no tax on capital gains derived from the sale of shares of a company that is publicly traded on a local stock exchange for individual residents and foreign beneficiaries (individuals and corporations that are not located in non-cooperative or low- or no-tax jurisdictions).

However, if a company is traded on another stock exchange, the gains from the sale of shares are taxed at a 15% rate on the net gain. Foreign tax credits may apply for individual residents.

Dividends are subject to a 7% withholding tax.

In the absence of income tax treaties, dividends are subject to a 7% withholding tax. Royalties bear a 21% withholding tax if they are derived from a transfer of “technology” (under the relevant “technology” definition) that could not be obtained in Argentina, provided the agreement is properly registered at the Federal Bureau of Industrial Property (INPI). Other royalties have a 28% withholding tax.

On the other hand, interest is taxed at 15.05% (when the creditor is a bank, among other cases) or 35%, depending on the conditions and the jurisdiction of the creditor. Under most tax treaties, the relevant rate is materially capped. This interest, within certain limits, is considered a deductible expense of the Argentine company.

The above tax rates will increase in the case of grossing up.

The DTTs with Spain, the UK and the Netherlands are usually used by foreign investors. Nevertheless, most treaties signed by Argentina (except Bolivia, for example) follow the OECD Model Tax Convention on Income and on Capital and have similar clauses.

Local tax authorities have started to challenge the use of treaty country entities by non-treaty country residents. For example, there was a leading case (“Molinos Río de la Plata SA”) litigated at the Supreme Court in which the tax authority challenged the use of the Argentina–Chile DTT by a Chilean holding entity with no substance and/or activity in Chile when distributing dividends to its Argentine shareholder. The Supreme Court decided in favour of the tax authority in 2021 and considered that the DTT could not be applied because the transaction was considered as tax treaty abuse.

The most litigated subject matters regarding transfer pricing include the election of comparable entities, comparability adjustments and profit-level indicators. Economic cycles are also a matter of heavy debate, considering the huge peaks, valleys and devaluations that the Argentine economy commonly undergoes.

The agribusiness, pharma and car industries are usually in the spotlight.

Argentine law requires a more detailed report on transfer prices for transactions entered into with tax havens or non-cooperating jurisdictions.

Further problems include the financial cost and the bureaucracy involved in transfer pricing studies, because these require the taxpayer to fill in tax declaration forms each year.

OECD Model Tax Convention on Income and on Capital

The transfer pricing rules in Argentina follow the OECD model, based on the principle that transactions between an Argentine company and related companies based outside Argentina (or with companies located in non-cooperative, low-tax or no-tax jurisdictions) must be made subject to the arm's-length principle. This analysis is made taking into account the functions, assets and risks assumed by each party in the relevant transaction.

Argentina’s rules include the five methods from the OECD model:

• the comparable uncontrolled price method;
• the net margin method;
• the resale price method;
• the cost plus method; and
• the profit split method.

The Argentine tax authority usually challenges the use of related-party limited risk distribution arrangements. The tax authority corroborates that the income obtained is related to the risks assumed, the functions performed and the assets involved in the operation on a case-by-case basis.

Argentina has an additional rule, called the “sixth method” (as compared to the OECD’s five methods).

• In the case of exports of goods with a market value in which (i) there is an international intermediary related to the resident export entity, (ii) there is an international intermediary not related to the resident export entity but there exists a nexus between the export and import entities, (iii) there is an international intermediary incorporated in a low- or no-tax jurisdiction, or there is an international intermediary incorporated in a non-cooperative jurisdiction. The export entity must prove:
1. that the intermediary remuneration complies with the arm’s-length standard considering functions, assets and risks involved in the transaction; if the remuneration exceeds the market value, that excess will be considered a higher Argentine income for the export entity; and
2. that the export agreement was registered at the tax authority, giving certain information; if the agreement was not registered, Argentine income derived from the export will be calculated over the value market of the goods at the moment of shipment (and not considering the price agreed with the intermediary).
• Another departure from the OECD standards is that the tested party must be the Argentine entity.

The latest tax reform introduced a mutual agreement procedure (MAP) to the Tax Procedure Law, but it still lacks further regulation.

Compensating adjustments are not regulated in the Argentine transfer pricing legislation, but they may be allowed if a DTT applies. The latest tax reform introduced a MAP, but it still lacks further regulation.

Local branches of non-local corporations are not generally taxed differently from local subsidiaries of non-local corporations. One notable difference between the taxation of branches and subsidiaries is that branches are not subject to personal property tax, as a surrogate payer for their shareholders. However, one major disadvantage is that, in the case of branches, joint and several liability applies to the parent company.

As a general rule, the sale of shares of Argentine private companies is subject to capital gains tax levied on the seller, regardless of its status (resident/non-resident), and whether the sale occurs directly or indirectly (ie, sale of shares in a foreign holding company). The applicable tax rate for a foreign seller is 15% on the net value of the sale or 13.5% of the total sales price, at the seller's option (a reduced tax rate may apply if a DTT is applicable). If the seller is based in a non-cooperative jurisdiction (or the funds come from such a jurisdiction), the rates to be applied will be 35% of the net value of the sale or 31.5% of the sales price.

Indirect sales of equity participations acquired after 1 January 2018 are subject to capital gains tax provided that, at the time of sale or during the 12 preceding months:

• at least 30% of the market value of the sold shares derives from Argentina; and
• the shares being sold represent at least 10% of the equity of the foreign company.

Indirect transfers of shares within economic groups are exempt from this tax if certain conditions are met.

Foreign residents (other than those from non-cooperating jurisdictions) are exempt from capital gains tax on the sale of shares listed on stock markets authorised by the Argentine Securities Commission.

There are no change of control provisions: indirect capital gains may be taxed regardless of how many companies there are between the holding and the Argentine corporation (if complying with the requirements explained under 5.3 Capital Gains of Non-residents).

Formulas are only used in transfer pricing regulations when there are intercompany transactions. The general rule is that each company must have its own financial statements.

Generally, the standard applied is the “arm’s-length transaction”. In addition, the deduction will only be allowed once the payments are effectively made (on a receipt basis). This latter rule also applies to payments to beneficiaries located in low- or no-tax jurisdictions, or in non-cooperating jurisdictions.

Thin-capitalisation rules apply to these transactions. As a consequence, deductions are only allowed for up to 30% of the local company’s EBITDA. Some exceptions may apply.

Argentina has a world-income taxation regime. The foreign income of local corporations is taxed at a progressive rate of up to 35%.

Resident companies are subject to CIT on a worldwide income basis; ie, they are taxed in Argentina on their local-source profits and on their foreign-source profits. However, companies can compute as tax credit similar income tax payments made abroad on foreign-source income, subject to certain limits.

Foreign income is not exempt. Even so, expenses related to exempt income are generally not deductible.

Dividends from foreign subsidiaries of local corporations are taxed at a progressive rate of up to 35%. Generally, taxes paid abroad for such distribution (or even the CIT paid by the foreign subsidiary) will be offset as a tax credit against Argentine CIT.

Transfer pricing rules apply to determine the adequate price of the intangible transference or licence to related parties. Income derived from such transfers or licences is taxed at a progressive rate of up to 35%.

Argentine controlled foreign corporation (CFC) rules include:

• if an Argentine resident controls a foreign trust, the income of that trust will be attributed to the Argentine resident;
• if an Argentine resident owns equity holdings in a foreign transparent (disregarded) entity, the income of such entity will be attributed to the Argentine resident; and
• if an Argentine resident owns equity holdings in a foreign non-transparent entity that has passive revenues representing 50% or more of its income, profits will be attributed to the Argentine resident if certain conditions are met.

Furthermore, profits derived by foreign branches are generally considered as a foreign source of income for the local corporation (tax credits may apply).

The Income Tax Law defines the substance of an affiliate as the organisation of human and material resources that a company needs to achieve its economic activity.

In addition, local residents must show evidence that the foreign entity has economic reasons to justify its activity, and that it has qualified personnel, infrastructure and adequate goods for the carrying out of the activities performed abroad.

Gains on the sale of shares in non-local affiliates are taxed at a general progressive tax rate of up to 35%.

Argentina has a substance-over-form rule called “Realidad Económica”, under which the Federal Administration of Public Income, for tax purposes, may consider the business to have a different structure from the one that has been chosen by the parties.

This principle applies when the taxpayers use manifestly inadequate forms and legal structures that do not reflect their actual economic intention.

Multilateral Instrument (MLI)

Argentina is also a signatory to the MLI, a multilateral convention promoted by the OECD/G20 BEPS Project in order to better address multinational tax evasion. The MLI allows its signatory countries to modify their bilateral tax treaties incorporating anti-evasion clauses such as the principal purpose test (PPT) and the limitation of benefits (LOB).

PPT

The PPT could be interpreted as having a similar application as the domestic Realidad Económica principle.

LOB

The LOB clause was drafted with the intention to avoid treaty shopping; ie, when a resident of a third country seeks to obtain the benefits of a DTT between two other countries, interposing a company or an entity. On this line, the LOB clause establishes certain tests to determine the applicability of the DTT to a company or an entity.

Argentina has incorporated the PPT and the LOB clauses into some recent DTTs that are already in force, such as the DTTs with Chile, Mexico and Brazil. Also, Argentina is currently negotiating the amendment of several DTTs pursuant to the MLI (eg, with Italy, France, the UK and the Netherlands).

The tax administration sets its audit policies according to each economic activity, and to each tax in particular. These policies are generally set at the beginning of each year and are not made public. The audits are focused on large economic groups or other businesses with significant revenues.

Regarding individuals, audits are generally conducted after the tax administration finds inconsistencies between the tax return and the information collected via various automatic information regimes, rather than following a preset cycle.

Argentina has already implemented the Common Reporting Standard (CRS), country-by-country (CbC) reporting, the new permanent establishment rules, a new non-cooperating jurisdictions list (including aggravated taxation and further obligations) and new fiscal transparency rules.

The general government attitude towards BEPS is highly co-operative: Argentina has passed BEPS-related legislation and has entered into various agreements with other countries following the BEPS guidelines. The reason behind these policies is that the current administration is trying to “open” the country to international markets, and to enter the OECD as a permanent member. This is the reason why the OECD’s Pillar One and Pillar Two may be approved by Argentina.

International tax has a very high public profile in Argentina, particularly after the “Panama Papers” leaks and various investigations into non-declared offshore accounts. These issues will likely influence the further implementation of BEPS recommendations.

Argentina does not have a competitive tax policy objective. Latin America is actually a rather “expensive” tax jurisdiction. Further to this, Argentina is one of the most expensive Latin American countries for tax purposes, with a 35% progressive CIT rate, dividend taxation and a personal income tax rate of up to 35%, plus local taxes such as turnover tax that are not regulated in other countries.

However, Argentine legislation included some of the BEPS objectives even before BEPS took place, such as thin-capitalisation rules, fiscal transparency and information exchange.

Argentina has terminated and reformed several DTTs that were vulnerable to treaty shopping and evasion/avoidance by taxpayers (for example, the DTTs with Spain, Chile, Austria and Switzerland).

The best policy options to address hybrid instruments are the specific anti-avoidance rules and the rules specifically addressing hybrid mismatch arrangements, recommended by the OECD. General anti-avoidance rules could also be useful in this matter.

Argentina has long had a substance-over-form rule called “Realidad Económica”, under which the Federal Administration of Public Income may disregard a certain legal structure and deem it another one, for tax purposes. General anti-avoidance rules tend to be compliant with DTTs.

Argentina has a residence-based, worldwide income tax regime. Nevertheless, Argentine thin-capitalisation rules favour debt collection by companies rather than capital contributions, because they offer interest deductibility for paid interests, but capital contributions have no deductions for dividends. This, coupled with lower withholding taxes on treaty partners and deductions of currency losses, may make debt appealing.

Argentina has a residence-based tax regime on a worldwide basis, but already has transparency or CFC rules that make deferral clearly more cumbersome. However, in broad terms, companies with no Argentine controlling shareholder will not be subject to this rule. CFC rules can sometimes be legally circumvented under the new rules.       

The proposed DTT LOB or anti-avoidance rules were included in DTTs even before BEPS took place (for example, in the DTT with Chile and Spain). These new clauses started to be included after the “Molinos Río de la Plata” case, a leading case litigated before the Supreme Court (2021), as mentioned in 4.3 Use of Treaty Country Entities by Non-treaty Country Residents.

Argentina already had complex transfer pricing legislation before BEPS. The proposed changes may add to this regime, but do not radically alter it. IP is particularly difficult to price adequately, mainly because it is hard to find a suitable comparable. Local resolutions have not clearly defined the contribution to the value chain. However, OECD guidelines about development, enhancement, maintenance, protection and exploitation (DEMPE) functions may contribute to the analysis. If the local company develops any of these DEMPE functions, a higher income could be allocated at a local level (the analysis should be made on a case-by-case basis). This is a source of controversy in Argentina but has not yet been heavily discussed before the judiciary.

In general, the proposals for transparency and CbC reporting are favoured. As mentioned before, Argentina has already included transparency rules in its local legislation. The CbC report provides more detailed information to the tax authorities, forcing the transfer pricing reports to be more thorough and to include other intercompany transactions that would otherwise not be dealt with for these purposes.

The digital economy is always under analysis by Argentine authorities. This can be seen in the new VAT legislation, which has included new clauses to tax B2C businesses operating from abroad (Netflix, Spotify, to mention just two).

Moreover, some provinces have already started to develop similar clauses in their turnover tax legislation.

Argentina has approved VAT digital taxation in the last tax reform (2017). There are no formal proposals for direct digital taxation, as the country may be waiting for OECD’s global consent. However, in a recent administrative case (“Consulta Vinculante 39/2021”), the tax authorities considered that online advertising rendered by a non-resident have to be subject to withholding tax since the existence of a local source of income is presumed in such cases. There are expectations of further legislation in the near future.

There are no other provisions dealing with the taxation of offshore IP that is deployed within Argentina. For the payment of royalties to foreign beneficiaries, please see the explanation in 4.1 Withholding Taxes, which could be reduced if a DTT applies. From a transfer pricing perspective, the tax authority has ruled that if a local party that is not the owner of the intangible contributes to the value chain of such intangible, regardless of whether it pays royalties, the way in which it is remunerated should consider the functions, assets and risks involved in such contribution to the value chain.