Corporate tax in Argentina

At a glance

Corporate Income Tax Rate (%) 35 (a)
Capital Gains Tax Rate (%) 15 / 35 (b)
Branch Tax Rate (%) 35 (a)
Withholding Tax (%):
Dividends 10 / 41.5 (c)
Interest 15.05 / 35 (d)
Royalties from Patents, Know-how, etc. 21 / 28 / 31.5 (d)
Branch Remittance Tax 10 / 41.5 (c)
Net Operating Losses (Years):
Carryback 0
Carryforward 5

a) A Tax on Minimum Presumed Income is payable to the extent it exceeds regular corporate income tax for the year. For details, see Section B.

b) The 15% rate applies to capital gains derived by foreign residents from sales of shares, quotas, and other participations in entities, titles, bonds and other securities. Similar treatment is granted to Argentine individuals. Argentine corporate residents are subject to the regular 35% corporate rate.

c) The 10% dividend withholding tax is calculated on after-tax dividend distri­butions. However, if the amount of a dividend distribution or a profit remit­tance exceeds the after-tax accumulated taxable income of the taxpayer, a separate final withholding tax of 35% may be imposed on the excess, regard­less of the application of the general 10% withholding tax, thereby resulting in an effective rate of 41.5%.

d) These are final withholding taxes imposed on nonresidents only. For details concerning the rates, see Section B.

Taxes on corporate income and gains

Corporate income tax. Resident companies are taxed on worldwide income. Any profits, including capital gains, are taxable. Companies incorporated in Argentina and branches of foreign companies are considered to be resident companies.

Rates of corporate tax. Corporate tax is payable at a rate of 35%.

Tax on Minimum Presumed Income. The Tax on Minimum Pre-sum ed Income (TMPI) is imposed on resident companies and branches of foreign companies. The TMPI is payable to the extent it ex ceeds regular corporate income tax for the year.

The tax base for the TMPI is the resident company’s or branch’s worldwide assets at the end of the tax year. Certain specified assets are excluded from the calculation of the tax base.

The standard rate of TMPI is 1%, but special rates apply to cer­tain types of companies.

TMPI that is paid may offset regular income tax in the following 10 tax years.

Capital gains. Capital gains derived by tax-resident companies are included in taxable income and taxed at the regular corporate tax rate. Capital gains derived by non-Argentine companies from the sale, exchange, barter or disposal of shares, quotas, participations in entities, titles, bonds and other securities are subject to a 15% tax. This tax may be calculated on actual net income or on 90% presumed income, thereby resulting in an effective 13.5% tax on the sale price.

Administration. The tax year for a company is its accounting year. Companies are required to make 10 advance payments of corpo­rate income tax. The first payment is equal to 25% of the preced­ing year’s tax and the other payments are each equal to 8.33% of such tax. The payments are due monthly beginning in the sixth month after the end of the accounting year. The due dates depend on the company’s taxpayer registration number.

Under certain circumstances, advance payments of TMPI (see Tax on Minimum Presumed Income) may be required.

Companies must file their tax returns and pay any balance due by a specified date in the fifth month after their accounting year. If the payment is late, interest is charged.

Dividends. Dividends and branch remittances are subject to a 10% withholding tax calculated on after-tax dividend distributions. If the amount of a dividend distribution or a profit remittance exceeds the after-tax accumulated taxable income of the payer (determined in accordance with rules in the income tax law), a separate final withholding tax of 35% is imposed on the excess, regardless of the application of the general 10% dividend with­holding tax, thereby resulting in an effective rate of 41.5%.

Withholding taxes on interest and royalties. Final withholding taxes are imposed on interest and royalties paid to nonresidents.

A withholding tax rate of 15.05% applies to the following types of interest payments:

  • Interest on loans obtained by Argentine financial entities.
  • Interest on loans granted by foreign financial entities located in the following jurisdictions:

— Jurisdictions listed as cooperators for purposes of fiscal transparency under the Argentine income tax regulations

— Jurisdictions that have signed exchange-of-information agree ments with Argentina and have internal rules providing that no banking, stock market or other secrecy regulations can be applied to requests for information by the Argentine tax authorities

  • Interest on loans for the importation of movable assets, except automobiles, if the loan is granted by the supplier of the goods.
  • Under certain conditions, interest on investments in Argentine financial entities.

The withholding tax rate for all other interest payments to non­residents is 35%.

The general withholding tax rate for royalties is 31.5%. If certain requirements are satisfied, a 21% rate may apply to technical as sis-tance payments and a 28% rate may apply to certain royalties.

Foreign tax relief. Resident companies may credit foreign income taxes against their Argentine tax liability, up to the amount of the increase in that liability resulting from the inclusion of foreign-source income in the tax base.

Direct and indirect foreign tax credits are available. To qualify for an indirect foreign tax credit, an Argentine company must own directly at least 25% of a first-tier subsidiary’s shares. In addi­tion, for a foreign tax credit regarding a second-tier subsidiary, an Argentine company must have an indirect ownership interest of at least 15%. The credit does not apply below the second tier.

Determination of trading income

General. Tax is applied to taxable income, which is the accounting profit (not adjusted for inflation) earned in the tax period after adjustments provided for by the tax law. Exemptions are usually insignificant.

Expenses are deductible to the extent incurred in producing tax­able income, subject to certain restrictions and limitations, includ­ing, among others, those applicable to the following:

  • Representation expenses
  • Directors’ fees
  • Royalties for patents and trademarks paid to nonresidents

Depre ciation, rental payments and all other automobile expenses, such as license fees, insurance, fuel and maintenance, are also de – ductible, subject to certain restrictions. In general, certain limi­tations apply to the deductibility of interest payments to foreign related entities that are not subject to the withholding tax rate of 35% (see Section E).

Any expense incurred by an Argentine company in favor of a foreign related party that is deemed Argentine-source income for the recipient of the payment can be deducted for tax purposes in the year of accrual only if the payment is made by the date when the income tax return for that year is due. Otherwise, such expens­es must be deducted in the year of payment. This limitation also applies to expenses paid to individuals or entities located in tax havens, regardless of whether they are related parties.

Foreign-exchange losses. Non-capital foreign-currency gains and losses arising from customary business transactions are treated as business income or expenses for the year in which the exchange fluctuation occurs.

Inventories. Stock is valued according to procedures established by the tax law, which result in values nearly equal to its market value or replacement cost at the end of the tax period, depending on the type of goods.

Provisions. A provision for bad debts is allowed. However, it must be computed according to rules prescribed by the tax law.

Depreciation. Tangible assets may be depreciated using the straight-line method over the assets’ expected lives. A method based on effective use may also be acceptable. In general, buildings are depreciated at an annual rate of 2%. However, a higher rate may be acceptable if it is established that, because of the materials used to construct the building, the expected useful life is less than 50 years. The law does not specify rates for movable assets. Intan gible property may be depreciated only if it has a limited life based on its characteristics. Certain assets, such as goodwill and trade names, may not be depreciated.

Relief for losses. Tax losses may be carried forward for five tax periods. Losses resulting from sales of shares or from foreign-source act ivities may offset only the same type of income. Loss carrybacks are not permitted.

Except for hedge transactions, losses resulting from the rights contained in derivative instruments or contracts may offset only the net income generated by such rights during the fiscal year in which the losses were incurred or in the following five fiscal years. For this purpose, a transaction or contract involving deriv­atives is considered a hedge transaction if its purpose is to reduce the impact of future fluctuations in market prices or fees on the results of the primary economic activities of the hedging company.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax (VAT), on goods delivered
and services rendered in Argentina,
on services rendered outside Argentina
that are used or exploited in Argentina,
and on imports
Standard rate 21
Other rates 2.5 / 5 / 10.5 / 27
Tax on financial transactions; generally
imposed on debits and credits with
respect to checking accounts; a portion
of the tax may be creditable against
other taxes
General rate 0.6
Other rates 0.05 / 0.075 / 0.1 / 0.25 / 0.5 / 1.2
Various local taxes on gross receipts, real estate and other items Various
Social security taxes (including medical
care contributions), on monthly salaries; paid by employer; a portion may be
creditable against VAT; the creditable
portion varies depending on where the employees render services
23 / 27
Export duties; general rates; higher rates apply to certain exports (oil, grains and meat) 5 / 10
Tax on personal assets; imposed on all legal
persons and individuals domiciled abroad
holding ownership interests in Argentine
companies; tax is calculated based on the
equity value of the Argentine company; tax
is paid by the Argentine company, but the
company may recover the tax paid from he foreign shareholder
0.5

Miscellaneous matters

Foreign-exchange controls. The Executive Branch and the Central Bank have issued regulations that establish certain requirements for the transfer of funds abroad.

Exporters must repatriate into Argentina the cash derived from exports of goods and services within a specified time period.

Funds deriving from loans granted from abroad must be received in Argentina and remain in the country for a minimum term. In certain circumstances, 30% of the funds received from abroad must be held as foreign currency in a non-interest-bearing de­posit for a one-year period.

Various types of payments abroad, including dividends, principal and interest and payments for services and for imports of goods, are subject to certain requirements. In addition to Central Bank regulations, import transactions must be approved in advance by the tax authorities through an Early Import Declaration (Declaración Jurada Anticipada de Importación, or DJAI). Payments for ser­vices, royalties and similar items are subject to the Early Declara­tion System for Services (Declaración Jurada Anticipada de Servicios, or DJAS). Payments of interest, dividends and other items are subject to the Early Declaration System of Payments Abroad (Declaración Anticipada de Pagos al Exterior, or DAPE).

Debt-to-equity rules. Under general principles, transactions be tween related parties must be made on an arm’s-length basis.

A debt-to-equity ratio of 2:1 for the deduction of interest applies to loans granted by foreign entities that control the Argentine borrower company (according to the definition provided for transfer-pricing purposes), except for those cases in which inter­est payments are subject to a withholding tax rate of 35%.

If the debt-to-equity ratio is applicable, interest paid on liabilities in excess of the ratio is nondeductible. The interest expenses disallowed as a deduction as a result of this limitation are treated as dividends and may not be deducted in future years.

Transfer pricing. The Argentine law includes transfer-pricing rules that generally apply to transactions between related parties. In ad dition, transactions between unrelated parties may also be sub­ject to these rules. Transactions with entities and individuals located in jurisdictions not considered as cooperators for purposes of fiscal transparency (the federal tax authorities are in charge of creating and updating the list of jurisdictions qualifying as coop­erators) are deemed to be not carried out at arm’s length. The law provides for the following transfer-pricing methods:

  • Comparable uncontrolled price method
  • Resale price method
  • Cost-plus method
  • Profit-split method
  • Transactional net margin method

If exports of agricultural commodities and other products with a publicly quoted price are made to related parties and if an inter­national intermediary who is not the effective purchaser of the products participates in the transaction, the appropriate transfer price is deemed to be the higher of the market quote on the day the products are delivered and the price agreed to by the parties. This rule does not apply if the foreign intermediary meets the following requirements:

  • It has a real presence and maintains a commercial establishment to manage its own activities in its country of residence, and it has assets, risks and functions (operations) that correspond with the volume of its transactions.
  • Its principal source of income is not passive income, income from trading goods to or from Argentina, or income from intra-group trading.
  • Its intragroup operations do not exceed 30% of its annual trans­actions.

A taxpayer must submit the following to the tax authorities to de monstrate the reasonableness of its transfer-pricing policy: spe­cial tax returns; and a special report signed by an independent certified public accountant, which is based on a mandatory transfer-pricing study.

Treaty withholding tax rates

Some of Argentina’s tax treaties establish maximum tax rates lower than those under general tax law. To benefit from a reduced treaty withholding tax rate, certain formal requirements must be met. The following table shows the lower of the treaty rate and the rate under domestic tax law.

Dividends (a)

%

Interest (e)

%

Royalties (e)

%

Australia 10/15 (b) 0/12 10/15
Belgium 10/15 (b) 0/12 3/5/10/15 (f)
Bolivia 10/41.5 (d) 15.05/35 21/28/31.5
Brazil 10/41.5 (d) 15.05/35 21/28/31.5
Canada 10/15 (b) 0/12.5 3/5/10/15 (f)
Denmark 10/15 (b) 0/12 3/5/10/15 (f)
Finland 10/15 (b) 0/15 3/5/10/15 (f)
France 10/15 (c) 15.05/20 18
Germany 10/15 (c) 10/15 15
Italy 10/15 (c) 15.05/20 10/18 (g)

 

Netherlands 10/15 (b) 0/12 3/5/10/15 (f)
Norway 10/15 (b) 0/12 3/5/10/15 (f)
Russian Federation 10/15 (b) 15 15
Spain 10/15 (b) 0/12 3/5/10/15 (f)
Sweden 10/15 (b) 0/12 3/5/10/15 (f)
Switzerland 10/15 (b) 0/12 3/5/10/15 (f)
United Kingdom 10/15 (b) 0/12 3/5/10/15 (f)
Uruguay 10/41.5 (d) 15.05/35 21/28/31.5
Non-treaty countries 10/41.5 (d) 15.05/35 (h) 21/28/31.5 (h)
    a) As discussed in Section B, under domestic law, a 10% withholding tax applies to dividends paid. If the dividend distributions exceed the after-tax accumu­lated taxable income of the payer, a separate final 35% withholding tax applies to the excess, regardless of the application of the general 10% withholding tax, thereby resulting in a total effective rate of 41.5%. If the treaty estab­lishes reduced rates, the maximum applicable withholding rate is the treaty rate. Footnotes (b) and (c) are referenced to the treaties that establish maxi­mum rates.
    b) These treaties establish maximum rates of 10% or 15%. The 10% rate applies if the beneficial owner of the dividend is a company that controls, directly or indirectly, at least 25% of the voting power of the payer. The 15% rate applies to other cases. These rates are the maximum rates applicable to dividend pay­ments and accordingly may limit the applicable withholding rate if the 41.5% rate applies. If only the general 10% withholding tax applies, no effective reduction results from the application of the treaties.
    c) These treaties establish a maximum rate of 15%. This rate is the maximum rate applicable to dividend payments and accordingly may limit the applica­ble withholding rate if the 41.5% rate applies. If only the general 10% with­holding applies, no effective reduction results from the application of the treaties.
    d) These treaties do not establish a maximum withholding rate. The general 10% and the 41.5% withholding tax rates established by the domestic law may apply.
    e) The rates listed are the lower of the treaty or statutory rates. For details con­cerning the domestic rates, see Section B.
    f) In general, the rates apply to the following categories of payments:
    – 3% for the use of, or right to use, news
    – 5% for the use of, or right to use, copyrights of literary, dramatic, musical or other artistic works (but not royalties with respect to motion picture films and works on film or videotape or other means of production for use in connection with television)
    – 10% for the use of, or right to use, industrial, commercial or scientific equipment or patents, trademarks, de signs, models, secret formulas or pro­cesses, or for the use of or information concerning scientific experience, including payments for the render ing of technical assistance
    – 15% for other royalties

These categories may differ slightly from treaty to treaty.

g) The 10% rate applies to royalties for the use of, or right to use, copyrights of literary, artistic or scientific works. The 18% rate applies to other royalties.

h) For details concerning these rates, see Section B.