Corporate Taxation – at a glance

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.

Turnover Tax

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.

Stamp Tax

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%.

Municipal Rates

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

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:

(*) Without limit.

Personal Taxation

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.

Investment Income

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

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

Administration

Non-residents Taxation

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.

Transfer Pricing

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.

Reporting Requirements

Tax Department
March 2019

© 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.

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.

Best regards

Nicolás Scalone, Carlos Anavia, Juan Espeso, Silvio Ureta, Luis Uncal, A. Rafael Faillace, Martin Jebsen

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