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Argentina issues additional regulations on taxation of nonresident investors

On 9 April 2018, Argentina published, in the Official Gazette, Decree No. 279/2018 (the Decree), which includes clarifications and additional regulations on the changes to the taxation of nonresident investors, and was enacted as part of the tax reform (Law 27,430).1 The Decree is effective 10 April 2018.

The Argentine Federal Tax Authorities (AFIP) are expected to issue additional regulations to implement the necessary procedures and mechanisms for the collection and payment of the corresponding taxes by nonresident investors.

Decree No. 279/2018

The Decree establishes presumed percentages of Argentine income for income derived from LEBACs (Argentine Central Bank Notes). Under the Decree, the presumed percentage for Argentine-source income is 100% (i.e., 100% of the income is Argentine source) and a 5% tax rate applies to that income. For foreign investors that qualify as banking entities under the supervision of a Central Bank or similar authority, and are not located in “non-cooperating” or low- or no-tax jurisdictions, only 43% of the income will be presumed to be Argentine-source income and subject to the 5% tax rate. Considering the 5% tax rate applicable to investments in Argentine Pesos (ARS), the effective tax rates will be 5% in most cases, and 2.15% for banking entities (i.e., 5% x 43%).

Additionally, the Decree establishes the following provisions:

  • For investors that reside in, or funds that arise from, “non-cooperating” jurisdictions, the applicable capital gains tax rate will be 35%.
  • In certain circumstances, for investments in “common investment funds,” the applicable tax treatment will be the same as the treatment applicable to the principal underlying asset held by such funds.
  • For purposes of determining the taxable gain derived from LEBACs when the taxpayer must establish the acquisition cost, a taxpayer may use the subscription value, and if applicable, the last purchase price or the quotation as of 31 December 2017, whichever is higher, until the National Securities Commission (in Spanish Comisión Nacional de Valores or CNV) issues other procedures.

The Decree also sets forth that a jurisdiction will be considered as “non-cooperating” if it is not included in the latest version of the “cooperators” list published by the tax authorities. The following “cooperators” list (which corresponds to 2017) applies until the Executive Power issues a new list of “non-cooperating” jurisdictions (in accordance with tax reform Law 27,430):

Albania

Costa Rica

Hungary

Moldavia

San Marino

Andorra

Croatia

Iceland

Monaco

Saudi Arabia

Anguilla

Cuba

India

Montserrat

Senegal

Armenia

Curacao

Indonesia

Morocco

Serbia

Aruba

Cyprus

Ireland

Nauru

Seychelles

Australia

Czech Republic

Italy

Netherlands

Singapore

Austria

Denmark

Isle of Man

New Zealand

Slovakia

Azerbaijan

Dominican Republic

Israel

Nigeria

Slovenia

Bahamas

Ecuador

Jamaica

Niue

Spain

Barbados

El Salvador

Japan

Norway

South Africa

Belarus

Estonia

Jersey

Pakistan

South Korea

Belgium

Faroe Islands

Kazakhstan

Panama

Sweden

Belize

Finland

Kenia

Paraguay

Switzerland

Bermuda

France

Kuwait

Peru

Tunisia

Bolivia

Gabon

Latvia

Philippines

Turkey

Brazil

Georgia

Liechtenstein

Poland

Turkmenistan

British Virgin Islands

Germany

Lithuania

Portugal

Turks and Caicos

Bulgaria

Ghana

Luxembourg

Qatar

Uganda

Burkina Faso

Gibraltar

Macao

Romania

Ukraine

Cayman Islands

Greece

Macedonia

Russia

United Arab Emirates

Canada

Greenland

Malta

St. Kitts and Nevis

United Kingdom

Cameroon

Guatemala

Malaysia

Saint Lucia

United States

Chile

Guernsey

Marshall Islands

Saint Martin

Uruguay

China

Honduras

Mauritius

St. Vincent and the Grenadines

Vatican City

Colombia

Hong Kong

Mexico

Samoa

Venezuela

Cook Islands

       

Companies doing business and different stakeholders investing in Argentina should consider the consequences of these additional regulations and evaluate the effect on their current or future Argentine investments and operations.

Endnotes

1. See EY Global Tax Alert, Argentina enacts comprehensive tax reform, dated 29 December 2017.

EYG no. 02178-181Gbl

Download this Tax Alert as a PDF file

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