This content is from: Argentina

Argentina: Protocol drastically changes tax treaty with Brazil

Ignacio Rodríguez

On July 21 2017, a new amendment protocol to the double tax treaty (DTA) between Argentina and Brazil was signed. The subsequent exchange of instruments of ratification, which is expected to occur soon, will make it effective from January 1 of the year following the completion of this ratification process.

The tax treatment of Argentine transactions under the new protocol provisions with regards to interest, royalties and dividends will be as follows once the agreement is effective.


Domestic Argentinean 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 DTA, interest payments on such loans paid to Brazilian beneficiaries should now be subject to a maximum withholding tax rate of 15%.

Although the DTA already contains non-discrimination provisions they do not override domestic thin capitalisation rules that establish a 2:1 debt-to-equity ratio. Therefore, taxpayers should still consider these rules if debt funding an Argentinean company from Brazil.


As per 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 10% or 15% rates, 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%.

Although the treaty generally follows the OECD model, there are some deviations. For example, listing technical assistance services in Article 12 on royalties, considering as such those renderings of technical services of a scientific, consulting, administrative or similar nature, covering then most of intellectual services.


Under Argentine 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.

Other particular features

Some other particular features the treaty provides are, among others, as follows:

  • It includes a required holding period for enjoying dividends taxation relief;
  • The amendment includes a limitation of benefits (LoB) clause. Although these LOBs may be relaxed 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 scenarios;
  • Treaty benefits are also recognised when income is assigned 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 that should have applied to in the residency state; and
  • Non-discrimination rules would not override domestic legislations regarding limitations for deductibility of royalty payments made to a controlling company located in the other contracting state.

However, one of the most relevant changes is to leave behind the exemption method to avoid double taxation now stating the foreign tax credit method, which has been a long-standing demand from exporter of services, although it faces the downside of now taxing Argentine dividends on the Brazilian side and any Brazilian source income obtained by Argentine residents.

This development is also an encouraging indication that the Argentine and Brazilian authorities are continuing to expand and improve their respective tax treaty networks.

Ignacio Rodríguez (
Tel: +54 11 4850 6714

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