International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Argentina: Government changes black-list approach to tax havens

edelstein.jpg

rodriguez.jpg

Andrés Edelstein


Ignacio Rodríguez

On May 30 2013, the Argentine government issued Decree 589/2013 that eliminates the list of no-or-low tax jurisdictions included in the income tax regulations, the so-called black-list. The decree empowers the federal tax authorities to establish a new white dynamic list which will only include the countries, jurisdictions, territories and tax regimes that will be considered as cooperatives for fiscal transparency purposes, namely those that have signed double tax treaties or tax information exchange agreements with Argentina, to the extent that the exchange of information has been effective.

In 2000, Argentine income tax regulations introduced a black-list of countries, consisting of jurisdictions considered to have no-or-low tax regimes. Transactions with those countries are deemed as not being performed on an arm's-length basis for transfer pricing purposes and thus, are subject to annual analysis and support in light of these regulations.

In accordance with Decree 589/2013, any reference made in tax law and regulations to tax havens now refers to jurisdictions that do not qualify as effective co-operators according to the tax authorities' definition.

Moreover, a jurisdiction will no longer be characterised as cooperative if a treaty or a tax information exchange agreement (TIEA) is terminated, and/or the exchange of information is not effectively accomplished.

Although the jurisdictions that have double tax treaties and TIEAs in force with Argentina will initially be considered as cooperative, those that have initiated negotiations to sign a TIEA or a double tax treaty with a broad clause for the exchange of information may also be considered as such.

For these purposes, the treaties have to comply, to the furthest extent possible, with the international standards adopted by the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes, establishing that no internal rules can be invoked to allege banking, trading or any other secrecy whenever Argentina requests information.

As well as affecting the transfer pricing regulations, the changes introduced by Decree 589/2013 have a significant effect on other regulations. Indeed, Argentina's controlled foreign corporation rules are tied to this list.

It has to be considered at the time of defining, for instance:

  • Whether foreign source passive income has to be reported by local taxpayers for income tax purposes on an accrual or cash basis;

  • Whether taxes effectively paid abroad by second-tier subsidiaries are available to be computed as foreign tax credits; or

  • Whether foreign dividends distributed by an intermediate holding company that, in turn, owns an Argentine subsidiary have to be included or not in the income tax basis.

Also, amounts charged by those black-listed (now non-cooperative) jurisdictions involving Argentine source income are only deductible for the local taxpayer when they are paid.

Moreover, interest paid stemming from loans granted by foreign banking or financial entities is subject to an effective withholding income tax of 15.05%.

To achieve such a reduced rate the law requires, among other things, that these entities are not located in a no-or-low tax jurisdiction or that they are located in jurisdictions that have signed a TIEA with Argentina. Otherwise, interest paid abroad is subject to a 35% effective withholding income tax rate.

Also, in 2003, Argentina amended the tax procedural law to include a provision that, unless there is proof to the contrary, considers that funds transferred from tax havens or black-listed jurisdictions have to be treated as unreported income for income tax, valued added tax and excise tax purposes.

Decree 589/2013 rules will become applicable from the date on which the tax authorities release the new list of jurisdictions considered to be cooperatives for fiscal transparency purposes. This new list is not yet available.

Foreign investors doing business in Argentina should closely monitor the issuance of the new list by the Argentine tax authorities and its subsequent updates, as changes are likely to take place in relation to the now withdrawn black-list.

Also, it remains to be seen how this new approach is implemented with respect to certain practical matters such as whether the cooperative condition has to be met when a given agreement is signed, when the transaction is performed and/or when the payment is made, or when a jurisdiction ceases to be considered cooperative, and it is removed from the list when this change is effectively applicable, considering that income tax is an annual tax.

Lastly, this new approach will clearly affect certain existing structures as well as future planning for multinationals involving Argentina, as companies may have to consider situations in which a given jurisdiction may come to be considered as non-cooperative.

Andrés Edelstein (andres.m.edelstein@ar.pwc.com) and Ignacio Rodríguez (ignacio.e.x.rodriguez@us.pwc.com)

PwC

Tel: +54 11 4850 4651

Website: www.pwc.com/ar

more across site & bottom lb ros

More from across our site

An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.
The OECD’s rules may be impossible for businesses to manage, according to tax experts from companies including Shell.
The UK government is now committed to replacing the ‘super-deduction’ with a 100% capital allowances regime to offset the impact of the corporate tax rise to 25%.
Corporate tax is set to rise in the UK for the first time in decades, but the headline rate remains historically low despite what many observers think.
President Joe Biden’s nominee is set to be confirmed as IRS commissioner for a five-year term.
British companies are waiting to hear the details of what will replace the 130% ‘super-deduction’ next week, while Spain considers stopping a major infrastructure company moving to the Netherlands.
President Joe Biden wants to raise corporate tax and impose a higher stock buyback tax on US businesses, but his budget proposal faces insurmountable obstacles in Congress, writes Ralph Cunningham.
EY is still negotiating the terms of the plan to split its audit and consulting functions, but the future of tax services is reportedly a sticking point.
Country-by-country reporting is the best option for safe harbour provisions under the global anti-base erosion rules, according to tax directors at companies including Standard Chartered Bank and Pernod Ricard.