On July 5 2018, the Argentine Foreign Affairs Ministry
announced the entry into force of the amendment protocol to the
double tax agreement (DTA) between Argentina and Brazil.
According to the official announcement, the revised DTA entered
into force on July 29 2018, being applicable to withholdings
for payments made from January 1 2019 or taxable events that
occur in fiscal years commencing from that date.
Meanwhile, on July 4 2018, the Chamber of Deputies ratified
the DTA between Argentina and the United Arab Emirates (UAE),
which now needs the approval of the Chamber of Senators to be
passed into law and continue the ratification process.
Double taxation treaty between Argentina and Brazil
The amendment protocol introduced relief on withholding tax
on payments of interest, royalties, technical assistance
services and dividends. However, the most important feature is
that it abolishes the exemption method to avoid double
taxation, replacing it with the foreign tax credit method. It
also includes other provisions aligned with the OECD Model Tax
Convention and the BEPS-orientated provisions.
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 amended tax
treaty, interest payments on such loans paid to Brazilian
beneficiaries should now be subject to a maximum withholding
tax rate of 15%.
Under the amended protocol, royalties and technical
assistance payments made to a Brazilian beneficial owner should
now find relief from domestic taxation being subject to maximum
income tax withholding at a rate of 10% or 15%, as the case may
be. Note that under domestic Argentine tax law, royalties may
be subject to withholding tax rates as high as 31.5%, whereas
under Brazilian domestic tax law, royalty payments from Brazil
to Argentina are subject to 15% withholding tax.
Treaties now generally tend to follow the OECD model.
However, there are some deviations from that model. One example
is the listing of technical assistance services in Article 12
on royalties, considering the rendering of independent services
that entail the provision of non-registrable knowledge through
any means as a royalty payment.
Under Argentine domestic law, dividend payments are at
present subject to a 7% withholding tax – to be
increased to 13% for profits generated in fiscal years
beginning on or after January 1 2020. An 'equalisation tax' of
35% will also still transitionally apply on profits generated
in fiscal years beginning before December 29 2017 until they
are fully distributed. The protocol establishes a 10% maximum
withholding rate on the gross amount of the dividend for
payments made to shareholder residents in the other contracting
states holding a stake of at least 25% for a period of at least
one year, which includes the dividend payment date. In all
other cases, a 15% maximum withholding rate applies.
Other particular features
Some other particular features the treaty provides are as
- The new title and preamble to the treaty
clearly state that it seeks to prevent tax avoidance;
- A new permanent establishment (PE) clause
addressing a commissionaire arrangement and similar
strategies, as well as making PE exclusions subject to a
preparatory or auxiliary condition;
- A new clause addressing taxation of
- The protocol 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 circumstances, they are clearly
aligned with prevailing global trends (e.g. BEPS) and mainly
aimed at avoiding treaty-abuse practices and double
- Treaty benefits are also recognised when
income is assigned by a resident of a contracting state to a
PE located in a third country, but only to the extent the
taxation level in that third state is at least 60% of that
which should have applied in the residency state; and
- Although it repeals the exemption method
available in the original DTA, it will reduce withholding
taxes at source and may allow exporters of services to
compute foreign tax credits, which has been an issue
negatively affecting competitiveness in cross-border
transactions between Argentina and Brazil.
Double taxation treaty between Argentina and the UAE
On November 3 2016, in the city of Dubai, UAE and Argentina
signed a DTA. After more than one and a half years, the
Argentine Chamber of Deputies approved the text that will be
now passed to the Chamber of Senators to be formally
The subsequent exchange of instruments of ratification will
make it effective as of January 1 of the year following such
Among other things, the treaty introduces relief on
withholding on payments of (i) interest, 12% (ii) royalties and
technical assistance services, 10%, and (iii) dividends, 10% or
15% (which may pose a reduction in Argentina in corporate
income taxes for the fiscal years 2020 onwards).
As with the Argentina-Brazil DTA, this DTA also includes an