Pursuant to the federal system of government adopted by the National Constitution (CN) described above, there are three levels of authority creating and providing taxes: the Nation, the Provinces and the Cities. The City of Buenos Aires has a special status of its own, which, for simplification purposes, may be considered comparable to a Province.
At each of such levels, as prescribed by the CN under the principle of legalidad and reserva de ley (i.e. “no taxation without representation”), it is the legislative branch (Congress / Legislature / City Council) who creates taxes and regulates the essential features thereof. In turn, we should note that the CN and the Law No 23,548 (joined by all the provinces), which provides a system whereby national taxes are co-shared to local governments, have certain provisions restricting local taxing powers in order to safeguard the distribution of competent jurisdictions determined by the CN and under the law, so as to avoid double taxation of the same source.
5.1. National Taxes
5.1.1. Income Tax (Law No. 20,628, as amended by Decree 649/97)
5.1.1.1. Income Tax Criteria
A taxpayer under the income tax is any individual, undivided estate, business or non-business party. If the taxpayer is resident in the country, it pays under the global income principle (i.e. for any income obtained within the country or abroad). if a non-resident, the taxpayer only pays for income from an Argentine source.
5.1.1.2. Individuals
Income tax is payable at a progressive rate on worldwide income. The rates vary from nine per cent (9 %) to thirty-five per cent (35 %) and apply upon discounting expenses and deductions as accepted under current legislation.
5.1.1.3. Corporate taxpayers
A business pays the tax for any property increase resulting from profits, income, benefits or enrichments. In this regard, a business residing in Argentina pays the tax on its worldwide income. Deductions as payments on account of this tax may include any amounts actually paid for similar taxes abroad on business done abroad, up to the limit that the obligation increases upon including the income obtained abroad. The applicable rate on taxable income is thirty-five per cent (35 %).
In the case of a non-resident business without a branch or other permanent establishment in Argentina, it is taxed upon its income tax from Argentine sources. The tax applies as a withholding by the paying agent in Argentina, who in turn pays the tax as a final lump sum. The tax is withheld on net profit, at the rate of thirty-five per cent (35%).
5.1.1.4. Transfer Prices
The Income Tax Law regulates transfer prices between affiliates and with parties located in countries with little or no taxation. Certain methods are provided to determine if the price is a market price determined at arms-length under similar circumstances, but adjustments may be made if this is not the case. The methods to be followed depend on the type of transaction and the quantity and quality of comparable information that is available.
5.1.2. Real Estate Transfer Tax
The tax applies to ownership transfers for value of real estate located in Argentina, by an individual or an undivided estate (entities are not subject to the tax). The applicable rate is one point five per cent (1.5 %) on the transfer value of the real estate at the time of the transaction, or on the market price where the transaction is made without a specified amount.
5.1.3. Value Added Tax
Value Added Tax (VAT) is a tax that applies to the selling price of goods and services in each phase of the marketing chain. An amount paid in respect of such tax in its prior phases may be taken as a payment on account of the tax.
Exports are not reached by this tax. An exporter may claim for reimbursement of VAT having an impact on the exported product, arising from consumables or services.
The general rate of VAT is twenty-one per cent (21 %), but there are differential rates, the lowest of which is ten point five per cent (10.5 %).
5.1.4. Presumptive Minimum Income Tax
The tax applies to assets located in Argentina and abroad, valued under the relevant law, and owned by parties including entities and permanent establishments located in Argentina. The tax rate for such assets is one per cent (1 %).
This tax is supplementary to the income tax, so any amounts paid in respect of the latter may be taken as a payment on account of presumptive minimum income tax.
5.1.5. Personal Assets Tax
This tax applies primarily to assets existing at December 31 each year in relation to the following persons: (i) individuals resident in Argentina are subject to an annual tax in the amount equal to 0.5 % of the taxpayer’s personal assets (located in Argentina or abroad), where the value of such assets is Arg$ 305,000 to Arg$ 750,000; 0.75 % where the value of such assets is Arg$ 750,000 to Arg$ 2,000,000; and 1 % where the value of such assets is Arg$ 2,000,000 to Arg$ 5,000,000. Above the latter amount, the tax rate is 1.25 %. Exempted from personal assets tax are any holdings of shares or equity interests in any type of entity governed by the Argentine Business Companies Law, except sole proprietorships and single-owner developments; and (ii) a non resident is subject to the tax on any property located within Argentina.
In the case of a non-resident entity with a direct holding of shares or equity interests in local entities, of any type whatsoever, the law presumes, regardless of any contrary evidence, that the shares or equity interests are directly owned by an individual residing abroad or any undivided estate located therein. The applicable rate in this case is zero point fifty per cent (0.50 %).
A taxpayer subject to the tax may take as a payment on account any amounts actually paid abroad in respect of a similar tax that considers the global patrimony or property as taxable amount.
5.1.6. Excise Tax
This tax only applies to the consumption of certain goods and services specified by law with different rates. The main products subject to the tax are cigarettes, alcoholic beverages, insurance, mobile and satellite telephone services, shipping, electronic products, and the like.
5.1.7. Tax on Credits and Debits to Checking Accounts
The tax applies to all credits and debits made to checking accounts opened at a financial institution. The general rate is six (6) per thousand, and applies on the gross amount of the taxable debit, credit or transaction. A lower rate is provided in certain cases, for instance grain brokers and go-betweens, operators of a credit, purchase or debit card business, or operators of electronic transfer systems on the Internet, and guaranty trusts where the trustee is a financial institution under the Law No 21,526.
A financial institution serves as a withholding agent for purposes of the tax.
Under current regulations, a holder of a taxed bank account may take, as tax credit, thirty-four per cent (34 %) of any amounts settled and received by the collection agent in respect of the tax.
5.2 Provincial Taxes
5.2.1.Turnover Tax
This tax is the most significant to a Province, and taxes the conduct of industrial and/or trade business in each. The tax may not be deducted from previous phases in the economic cycle of the product or service. The taxable amount consists of the turnover resulting from the business. Rates vary from one taxing jurisdiction to another, and according to the type of business that is being taxed.
5.2.2 Real Estate Tax
This tax applies to real estate located in the relevant venue. Rates vary from one jurisdiction to another, and apply on the taxable value assessed by each jurisdiction upon the relevant real estate.
5.2.3 Stamp Tax
The tax applies to acts, contracts or transactions for value, made in public and private instruments. The rates vary from one jurisdiction to another, but for example we may mention that the general rate in the City of Buenos Aires is 0.8 %. Each jurisdiction determines exceptions for certain instruments and/or persons.´
5.3 Municipal Taxes
Cities provide different taxes and services fees within their jurisdictions, such as public lighting, sweeping and cleaning, occupying public space, advertising and promotion, licensing sites and outlets, inspection, safety and health, and the like. We should note that the addition of new fees, their enforcement even when there is no such site within the city area, and the raising of rates, generally pose a considerable issue for a business conducted in the country.
5.4. Double Taxation Agreements
Argentina has entered into Agreements to Avoid Double Taxation (DTA) with different countries. It is important to note that, under the National Constitution, a DTA ranks higher than a law, insofar as it is a “treaty with other nations”, so it prevails over law-based provisions.
In this respect, Argentina has entered into, and confirmed by law, DTAs with the following countries: Sweden, Germany, Bolivia, France, Brazil, Austria (no longer effective since January 1, 2009), Italy, Chile, Spain, Canada, Finland, United Kingdom, Belgium, Denmark, The Netherlands, Australia, Norway and Russia. The DTAs with the USA and Switzerland have not yet been confirmed by law. Except in the cases of Chile and Bolivia, which have been modeled upon the Andean Pact, the agreements have followed the OECD model.
Such agreements provide different mechanisms to mitigate or avoid international double taxation, which arises due to different criteria for regulations between a taxpayer and the relevant taxing authority. |
