The DTA was signed on November 3 2016 in Dubai. It will
require ratification by both countries before entering into
force. The exchange of instruments of ratification, which is
expected to occur soon, will make the DTA effective from the
date when the last notification takes place.
The tax treatment of Argentinian transactions under the
newly signed tax treaty with regards to interest, royalties,
dividends and capital gains will be as follows once the
agreement is effective.
Domestic Argentinian tax law generally subjects interest
payments on related-party loans to a foreign beneficial owner
to a 35% withholding tax rate. However, under the tax treaty,
interest payments on such loans paid to UAE beneficiaries will
be subject to a maximum withholding tax rate of 12%.
Although the DTA contains non-discriminatory provisions they
are not wide enough and do not override domestic thin
capitalisation rules in Argentina that establish a 2:1
Under the tax treaty, royalties and technical assistance
payments made to a UAE beneficial owner should be subject to
Argentinian withholding income tax at a rate of 10%. It should
be noted that under domestic Argentine tax law, royalties may
be subject to withholding tax rates as high as 31.5%.
The DTA generally follows the OECD model, but there are some
deviations. For example, technical assistance services are
listed under Article 12 (royalties). Moreover, according to the
Argentinian tax authorities' controversial approach, this
concept includes the rendering of independent services
consisting of the provision of non-registrable knowledge
through any mean.
Under Argentinian domestic law, dividend payments are
subject to a 35% withholding tax to the extent the payment
exceeds the amount of accumulated tax earnings. Although it
envisions reduced withholding rates in practice the treaty does
not provide any relief in this regard.
Under the DTA, the taxation on capital gains derived from
the sale of shares will be limited to a 10% tax on the gain to
the extent it relates to a stake larger than 25%. If the stake
is lower than 25%, then the tax will be limited to a 15% tax.
This may imply a relief from an Argentinian perspective since
under domestic law foreign beneficiaries are subject to a 13.5%
effective tax on gross proceeds or, alternatively, 15% tax on
the actual capital gain duly supported.
However, the above potential relief will not apply if more
than 50% of the value of the relevant shares is derived from
real estate property (to this end cattle and equipment used in
farming, forestry, as well as in the exploitation of natural
resources would be considered as such).
Other particular features
Some other particular features that the treaty provides are
- Similar to the DTAs that Argentina
recently agreed with Chile and Mexico, the Argentinian DTA
with the UAE includes a limitation of benefits (LOB) clause.
Although these LOBs may be relaxed and some relief may be
provided by the relevant contracting state under certain
specific facts and circumstances, they are clearly aligned
with current global trends (e.g. BEPS), mainly aimed at
avoiding treaty-abuse practices and double non-taxation
- The reduced withholding rate for royalties
applies to copyrights only to the extent that the beneficial
owner is the moral holder of the rights (individual) or their
heirs. This was clarified and accepted by the Supreme Court
of Justice in Argentina after a long-standing controversy,
but the fact that this DTA has only one reduced rate for
royalties, as opposed to the other treaties Argentina has
signed, exposes copyrights licensed by companies to domestic
- It is stated that a permanent
establishment is deemed to exist in cases of fishing
activities for a period longer than three months even without
a fixed place of business.
The new tax treaty will enter into force after instruments
of ratification have been exchanged.
This development gives hope that the Argentinian authorities
are willing to continue expanding the tax treaty network, after
concluding new treaties with Spain, Switzerland, Chile (already
in force) and Mexico during the past three years, ratifying
certain BEPS-related features.
Andrés Edelstein (firstname.lastname@example.org)
and Ignacio Rodríguez (email@example.com)
Tel: +54 11 4850 4651