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Tax treaty developments in Argentina

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A new tax treaty between Argentina and Brazil came into force during the summer.

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 follows:

  • 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 capital;

  • 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 non-taxation situations;

  • 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 ratified.

The subsequent exchange of instruments of ratification will make it effective as of January 1 of the year following such ratification process.

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 LoB clause.

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