FEDERAL TAXES
Income tax
Argentine entities, either local companies or subsidiaries and branches belonging to foreign companies are subject to federal income tax at a rate of 35% applied on the net income (gross income less authorized deductions and amortizations). At present, the payment of dividends or profits to the shareholders or owners is not subject to income tax withholding, except when a certain ratio is exceeded: when the dividends or profits distributed exceed the net income assessed and accumulated at the closing of the fiscal year previous to the fiscal year in which distribution takes place. In such case the tax withholding would be 35% over the amount exceeding the ratio. Tax losses may be carried forward for a five-year term.
In 1998 Argentina incorporated thin capitalization rules, but they do not apply in all cases and are not at present applicable (among others) to loans granted by non-financial foreign companies to their subsidiaries.
Treaties for the avoidance of double taxation are in force with Canada, Australia, Great Britain, Sweden, Bolivia, Germany, Brazil, France, Austria, Chile, Italy, Spain, Finland, Denmark, Belgium, Netherlands, Norway and Russia. Treaties were also signed with the United States of America and with Switzerland in 1981 and 1997 respectively, but same have not been ratified and have not entered into force.
Value Added Tax (V.A.T.)
+ General comments
This federal tax is applied on the sale of goods, the rendering of services and the importation of goods. The tax rate is 21%.
The difference between VAT credits and VAT debits must be paid to the Argentine Tax Bureau monthly. VAT credits may be carried forward without time limit.
+ Particular Aspects of Oil Activity
Joint ventures and other sorts of associations are considered VAT taxpayers. As regards VAT, such associations are deemed to be independent entities from its members. Therefore, transactions between the ventures and its members are deemed levied transactions.
Tax on Minimum Presumptive Income
This tax levies the assets owned, amongst other cases, by local companies, subsidiaries and foreign companies´ branches. The tax rate is 1%.
This tax may be compensated with income tax.
Tax on Personal Goods
This tax is, as a general principle, applied only to individuals resident in Argentina. However, a company may have to pay this tax in the following cases:
+ Shareholding, Quota Holding or Interest-Holding
Local companies must pay this tax annually with respect to the value of the shares, quotas or interest held by foreign individuals or entities, valued at their proportional net worth value existing on the financial statements closed on 31st December of the corresponding fiscal year. The tax rate is 0.5%.
The Argentine company paying the tax is entitled to obtain reimbursement from the shareholders even through a withholding or the foreclosing of the corresponding shares.
+ Direct Asset Holding
Assets belonging to a foreign company or entity must pay this tax if such company or entity is considered “off-shore” (i.e.: when the shares of the company are not nominative). In this case the tax rate would be 2.5%. This criterion does not apply if the foreign company is an insurance company, an open investment fund, a pension fund or a financial or banking entity which home office is located or incorporated in a country which central bank or equivalent entity adopted the international supervision standards of the Basel Committee Bank.
The Argentine company paying the tax is entitled to obtain reimbursement from the shareholders even through a withholding or the foreclosing of the corresponding shares
Export Duties
As from the enactment of Law No. 25,561 (Economic Emergency Law, dated January 6, 2002) export duties on hydrocarbons were established. The rates have varied as time went by, and they have been used, in practice, as regulators of economic policy, and now reach rates exceeding 45% for crude oil and 100% for natural gas.
Such export duties have been also applied to other products, although to a lesser extent. Among the products taxed with these duties we may mention the minerals not subject to a prior tax stability (between 5% and 10%), agricultural products and machinery and equipment in general.
PROVINCIAL TAXES
Gross Income Tax
This local tax is applied on the gross income derived by entities or individuals that carry out economic activities within the territory of a province. The tax rates vary depending on the activity and the province, but generally range between 1% for primary activities, 3% for trading and 4% for financial activities or intermediation.
Stamp Tax
+ General Comments
Stamp tax is a tax that levies agreements which are either executed within the territory of a province or which produce effects in it. The tax rates vary depending on the sort of agreement and the province. Most fiscal codes set forth that agreements will be levied with the tax when they are either formalized (i.e.: signed by the parties or in a public deed) or executed by exchange of letters. Consequently, it became a common practice amongst numerous companies to execute agreements with acceptance by way of action. Generally, the action consists of a bank deposit or the delivery of a certain product to which the agreement refers. At present, the only province that has expressly levied agreements executed with an acceptance by way of action is Tierra del Fuego.
