“Boldness in Business is the first, second, and third thing”
This section includes publications related to Jebsen & Co. and/or its team members, as well as newspaper articles published abroad which make reference to the Argentine reality.
Regime to Promote Knowledge Economy - June 2019
The National Congress approved the so called “Regime to Promote Knowledge Economy” aimed at promoting economic activities using knowledge as well as the digitalization of information and technologies for the purpose of obtaining goods, rendering services and/or to improve processes. The mentioned Regime will become into force from January 1, 2020 until December 31, 2029.
The main objective is to promote the creation, development, production and implementation or adaptation of products and services, both in their basic and applied aspects, including those which are produced to be incorporated into processors and/or other technological devices.
In particular, the promoted areas or items are:
- Services, development, implementation and the set-up of software and digital information services;
- Audiovisual and digital production and post-production;
- Biotechnology, bio-economy, biology, biochemistry, microbiology, bio-information technology, molecular biology, neuro-technology and genetic engineering, geo-engineering as well as their tests and analysis;
- Geological and drilling services as well as services related to electronics and communications;
- Export of professional services;
- Nanotechnology and nanoscience;
- Aerospace and satellite industry;
- Engineering for nuclear industry;
- Manufacturing, set-up, maintenance of goods and services oriented to solutions, digital processes and production automatization, such as artificial intelligence, robotics, internet, sensors, etc.
The activities related to engineering, exact and natural sciences, agricultural and livestock sciences as well as medical sciences focused on research tasks and experimental development, are also included among the promoted areas.
This promotion regime is intended for legal persons incorporated in Argentina or authorized to act in this country, developing within the national territory, either on their own or as their main activity, some of the activities mentioned hereinbefore.
Besides their due registration at the National Registry of Beneficiaries of the Regime for the Promotion of Knowledge Economy, the beneficiary subjects must comply with at least two of the following requirements:
- Provide evidence of continuous improvements to the quality of their services, products and/or processes, or by means of a well-known quality standard;
- Provide evidence, indistinctly and/or jointly, of expenses incurred on research and development for a minimum of 3% of its total turnover, or on training for the employees involved on the activities referred above for a minimum of 8% of the total salary payroll; or
- Provide evidence on the export of goods and/or services arising from the development of any of the promoted activities, for at least 13% of the total turnover of said activities. If the exports are related to professional services, it will be required, at least, to perform an export exclusively deriving from such activity for 70% of the total turnover (unless in case of a micro or small sized company, in which case it will have to represent 45% of the total turnover for the first 5 fiscal years to be counted from the enforcement of the present promotion regime).
In order to be considered as the main activity, the turnover of the promoted activities must represent at least 70% of the total. Should the beneficiary subject had not yet issued any invoice, it might request its registration by filing a sworn statement and providing evidence that 70% of its personnel are involved in such activity.
The beneficiaries of this promotion regime are entitled to a fiscal stability in connection with the activities subject to promotion as from the date of their registration at the National Registry of Beneficiaries of the Regime for the Promotion of Knowledge Economy, and therefore their total national tax burden would not be increased at the time of filing the application in the mentioned Registry (in other words, national taxes having as passive subjects the registered beneficiaries, as well as duties or fees to imports and/or exports).
In line with employers’ social security contributions, for each worker under a labor relationship a detraction (reduction) of an amount equivalent to ARS 17,509.20 is established, amount which will be reviewed and updated according to the Consumer’s Price Index. Furthermore, the beneficiaries can obtain a fiscal credit bonus which is transferable only once and equivalent to 1.6 times the amount of the employers’ contributions which would have corresponded to be paid over the amount referred to above, and the same can be applicable to the payment of income tax or VAT. Whenever an employee under an employer-employee relationship holds the title/degree of Doctor, the fiscal credit bonus generated by such employee will be equivalent to two times the employer’s social security contributions which should have been paid over the amount of ARS 17,509.20 (updatable) previously referred to, for the term of 24 months since his/her incorporation.
Regarding income tax, the beneficiaries will be subject to a reduced rate of 15% provided always that the personnel payroll is kept according to the provisions established in the pertinent regulations. Additionally, a credit can also be deducted for taxes actually paid or withheld abroad, whenever referring to income from an Argentine source (up to the limit of the tax obligation increase arisen from the incorporation of such income).
Finally, the beneficiaries will not be subject to VAT withholdings or collections.
Rate Verification, Control and Payment
The application authority may carry out audits, verifications, inspections, controls and/or evaluations aimed at verifying the fulfillment of the liabilities and obligations corresponding to the beneficiaries. These tasks will be settled through the payment of a fee that may not exceed 4% calculated over the amount of the fiscal benefits obtained within the framework of the present promotion regime.
Finally, each beneficiary will have to pay, on an annual basis, an amount equivalent to up to 1.5% of the total amount of the fiscal benefits granted, to the Fiduciary Fund for the Development of Enterprising Capital (acronym in Spanish “FONDCE”).
Taxation in Argentina - March 2019
Corporate Taxation – at a glance
|Corporate or Branch Income||30|
|Interest||15.05 / 35|
|Royalties (patents, trademarks and know-how)||28|
|Royalties (copyrights)||12.25% / 31.5%|
|Fees (technical)||21% / 31.5%|
|Fees (management)||24.5% / 31.5%|
The Net Operating Losses can be carried forward for 5 tax periods.
Taxes On Corporate Income and Gains
Corporate Income Tax
Personal Assets Tax
Tax on Debits and Credits in Current Account
Debits and credits in current account are subject to this tax at a 0.6% rate. The 33% of the tax levied on credits can be credited against Income Tax and/or Minimum Presumed Income Tax.
The following operations are considered to replace the use of debits and credits in current account, and therefore they are taxed at an increased rate of 1.2%:
a. Management of the collection of checks, invoices and any other instrument
b. Drafts and transfers carried out via any means
c. Payments on behalf of and/or in the name of a third party
In this case, the 17% of the tax levied on these operations can be credited against Income Tax and/or Minimum Presumed Income Tax.
On the other hand, debits and credits originated in activities carried out by grain brokers, livestock brokers and other intermediaries, are taxed to a reduced rate of 0.075% without right to tax credit.
The provinces and the City of Buenos Aires levy this tax on gross revenues derived from the usual practice of economic activities.
Rates vary depending on the type of activity, ranging generally from 1% to 8%. Exportations are generally exempt. Primary and industrial production activities -except for sales to final consumers- can be exempt, under certain conditions.
The provinces and the City of Buenos Aires levy this tax on contracts for consideration, which are implemented in writing. Rates vary depending on the type of contract and the jurisdiction in which the same is enforceable, ranging generally from 0.5% to 4%.
Each municipality applies rates on services rendered to persons domiciled therein. In general, the rates are calculated in accordance with certain variables (e.g. activity developed, surface occupied and turnover amount).
Other Significant Taxes
Value added tax (IVA) – standard rate
Value added tax (IVA) – other rates
5 / 10.5 / 27
Social security taxes on salaries and wages, paid by the employer
18 / 20.41
Local taxes on real estate, etc.
Export duties on services.
The importer of goods and services in Argentina is liable for payment of VAT on the value of the goods and services imported, which constitutes in-put VAT for the importer.
There is a permanent regime for the reimbursement of tax credits originated in the purchase, construction, manufacturing or import of fixed assets, which after six consecutive tax periods (months) as from their acquisition are still part of the balance in favor of the taxpayer.
These rates will gradually converge in 19.5% for tax periods beginning as from January 1st, 2022. On the other hand, there is a tax allowance of ARS 7,003.68 per employee, which will gradually increase on an annual basis until 2022.
However, the export duty amount must not exceed ARS 4 per each USD of taxable services.
Treaty Withholding Tax Rates
Argentine’s double taxation treaties, which establish maximum tax rates lower than those under general tax law, are the following:
|Country||Dividends %||Interest %||Royalties %|
(*) Without limit.
Income Tax – Employment
Residents are subject to tax on worldwide income. Non-residents are taxed only on Argentine source income.
Individuals of foreign nationality, who have obtained a permanent residence in Argentina or have resided temporarily for 12 months, are considered resident. However, individuals residing in Argentina on work assignments for a period not longer than 5 years are taxed only on their Argentine source income.
Taxable income from employment includes all salaries, regardless of taxpayer’s nationality or the place where the compensation is paid or the contract is entered into. Taxable compensation also includes most employer paid items except employee education expenses and the provision of working clothes and equipment.
The progressive tax rates applied to Argentine taxable residents range from 5% to 35% (depending on the taxable income). Non-residents are taxed at a flat rate of 35%.
When computing tax to be withheld from an employee’s salary, employers are authorized to deduct certain allowable expenses (e.g.: social security contributions, medical insurance payments for employees and their families, medical expenses, cost of home rent, expenses incurred by travelling salesmen based on estimates established by the tax authorities, burial expenses and life insurance premiums).
Other standard deductions are permitted in fixed amounts established by law. Their estimated amounts include a personal deduction of ARS 412,075.14, a personal exemption of ARS 85,848.99, and family allowances equal to ARS 80,033.97 for spouse and ARS 40,361.43 for each child. To qualify, the dependants must reside in Argentina for more than 6 months in the year and must not have income in excess of the amount of the personal exemption.
Income Tax – Self-Employment / Business Income
Residents are subject to tax on their worldwide self-employment and business income. Non-residents are subject to tax on self-employment and business income only from Argentine source.
Self-employment or business income is taxable regardless of the recipient’s nationality, the place of payment, or where the contract was concluded.
The progressive tax rates range from 5% to 35%.
Expenses incurred in producing income are deductible. Certain expenses not primarily incurred for business purposes are deductible as well (e.g.: social security contributions, medical insurance payments for employees and their families, medical expenses, expenses incurred by travelling salesmen based on estimates established by the tax authorities, burial expenses and life insurance premiums).
Other standard deductions are permitted in fixed amounts established by law. Their estimated amounts include a personal deduction of ARS 171,697.97, a personal exemption of ARS 85,848.99, and family allowances equal to ARS 80,033.97 for spouse and ARS 40,361.43 for each child. To qualify, the dependants must reside in Argentina for more than 6 months in the year and must not have income in excess of the amount of the personal exemption.
Director’s fees are taxed as self-employment income. If they are paid by Argentine companies they are considered Argentine source income regardless of where services are performed.
Dividends from Argentine corporations and branch remittances are taxable at a rate of 7% (when paid out of corporate profits subject to the 30% tax rate) or 13% (when paid of corporate profits taxed at the 25% tax rate).
Royalties and income from renting real property are taxed as an ordinary income.
Financial gains are subject to tax, as well as capital gains derived from the sale of shares, values representative of shares and certificates for the deposit of shares and other corporate participations (including quotas of mutual investment funds and certificates of participations in financial trusts and any other right over trusts and similar contracts), digital coins, securities, bonds and othervalues.
Income tax rate is 15% for capital gains or profits derived from investments in foreign currency or with an adjustment clause –exchange differences or capital updates are excluded–, as well as income derived from the sale of shares and similar corporate participations. Applicable rate for capital gains or profits derived from investments in local currency without adjustment clause is 5%.
A deduction of ARS 85,848.99 is allowed for capital gains or profits derived from local investments, except for income from the sale of shares and similar corporate participations.
Income derived from the sale of shares with a quotation negotiated at the local exchange markets is exempt, as well as income derived from operations concerning the public offer of shares carried out according to the provisions set-forth by the National Securities Commission. The exemption is extended to the case of mutual investment funds whose assets are mainly formed by shares (at least at a 75%). These exemptions are applicable to individuals resident in Argentina. They also apply to foreign beneficiaries residing in “cooperative jurisdictions” or whose invested amounts come from such jurisdictions (except for bank notes known as “Lebacs”).
Relief for Losses
Business losses of self-employed individuals may be carried forward for 5 years. Foreign source business losses may offset only foreign source income.
Capital gains derived from the sale or transfer of shares, bonds and other securities are taxable at a 15% rate. The sale of real estate owned by individuals (except the dwelling house) is subject to tax and the applicable rate and taxable base depend on the purchase date of the property. If it was purchased before January 1st, 2018, real estate transfer tax is levied on the sale price at 1.5% rate; if it was purchased as from that date, income tax applies at a 15% rate on the difference between sale price and updated cost, plus certain expenses.
Personal Assets Tax
Social Security Taxes
Double Tax Relief
A tax credit is allowed for income taxes paid abroad, up to the increase in Argentine tax resulting from the inclusion of the foreign source income in the Argentine tax base.
Transactions with related parties
For all transactions with foreign related parties, local companies must show whether prices have been agreed upon according to market values between independent parties, otherwise make the corresponding price adjustment for corporate income tax purposes.
This procedure also applies to transactions carried out with parties organized or located in non-cooperative jurisdictions (as listed by the Executive Branch* ), regardless of whether the parties are related or not.
The definition of “related party” is very large. It includes not only situations of direct or indirect participation in the capital, control or management, but also the exercise of a significant influence over another entity (e.g. exclusive distributor, single supplier, single customer, single client, and company having the exclusive use of technology or assistance).
In general, the following methods are allowed: (i) Comparable Uncontrolled Price; (ii) Resale Price; (iii) Cost Plus; (iv) Profit Split; and (v) Transactional Net Margin.
© mgi Jebsen & Co. The information of this publication is not to be construed as an opinion or tax advice and does not imply a comprehensive coverage of all the matters referred to herein.
48th Anniversary - March 2019
1971 – 2019
It is a great pleasure to share with you the first 48 years of life of Jebsen & Co. which we are celebrating on 1st March 2019.
Retrospectively, we can observe long and lasting relationships with our clients as well as the steadiness of our staff members.
Both aspects are the main and essential assets of Jebsen & Co. for which we feel very proud and grateful on this significant date for our professional activity.
We look at the future of our development with optimism and hope to continue sharing the same both with our staff and our clients.
Nicolás Scalone, Carlos Anavia, Juan Espeso, Silvio Ureta, Luis Uncal, A. Rafael Faillace, Martin Jebsen
CRONISTA.COM - August 2015
By Dolores Olveira | CRONISTA.COM
Justice has ruled in favour of a company that was able to prove that a money contribution received from its head office overseas was not a simple capital contribution pretending to be a loan in order to accrue interest, and therefore use the expenses to reduce the amounts to be paid as Income Tax, but has instead been a real trade operation.
The Courtroom IV of the Federal Chamber for Contentious Administrative Proceedings, confirmed the final judgement of the National Fiscal Court on the case “Lexmark International de Argentina Inc. Sucursal Argentina” that had revoked an adjustment made by the AFIP (tax authorities) in relation to the deduction of interest and exchange differences concerning unpaid balances in foreign currency due to the purchase of goods to a related company from Uruguay, which the Tax Authorities had considered to be capital contributions.
The AFIP justified that adjustment on the principle of economic reality, re-classifying the importation of inventories as capital contributions in view that the same were operations between related companies, alleging that there existed no term for the cancellation of debts, no interest due to delays in payment, no refinancing agreements signed or special guarantees and, furthermore, there existed no intention for permanence of the funds because the creditors did not expect any reimbursement and had made no claim whatsoever, as explained by Nicolás Scalone, from Jebsen & Co.
The Chamber considered unsatisfactory the evidences produced by the AFIP in order to justify the adjustment made, because it has been duly proved on the case, through accountant’s expert evidence, that the liabilities corresponded to real trade operations and were related to the trade activities of the taxpayer, and that from 2003 to 2007 most of the debt’s total had been cancelled, being this used as a contundent evidence to show the existence of the permanence of funds plead by the AFIP.
Note extracted from: CRONISTA.COM printed edition.
Date: 14 August 2015
HELVETIA MAGAZINE - March 2015
Since 1987 Jebsen & Co. is a member of mgi, an international alliance that is currently represented by 315 firms in 85 countries. Recently, and during the Annual General Meeting held on October 2014, mgi has announced that within the alliance a new network structure will be created. During said meeting, Luis Uncal, partner of Jebsen & Co., has been appointed as “Risk Partner for the Latin American Area”. This duty implies that he will be the valid spokesman before the remaining areas of mgi and before the International Committee of mgi during the process of quality control implementation. His main activity will be to act as intermediary between the headquarters in London and the Latin American Area, with more than 40 members, on all issues referred to the implementation of the network within mgi, aimed at assuring the fulfillment of the Area’s needs.
Note extracted from: Helvetia Magazine
Date: March 2015
HELVETIA MAGAZINE - June 2013
MGI meeting in Uruguay
The partners of MGI Jebsen & Co., Rafael Faillace, Luis Uncal and Martín Jebsen, have last May attended the Annual Latin American Area Meeting of MGI. They travelled to Montevideo, together with two of their staff members, Ms. Gisela Oddera (accountant) and Mr. Nicolás Scalone (lawyer), to attend this event organized by the uruguayan firm MGI CASU, held at the Sheraton Hotel of Montevideo. It is worth mentioning that Nicolás Scalone, Manager of the Legal – Tax Department of MGI Jebsen & Co., together with his colleague from MGI CASU, the CPA Nicolás May, were invited to made a lecture during said meeting about the issue “TIEA: Tax Information Exchange Agreements”.
Furthermore, Rafael Faillace made a presentation about “Transfer Pricing: working experiences between Latin American Area firms of MGI”.
Note extracted from: Helvetia Magazine
Date: June 2013