17-11-2020
In Argentina, the federal, provincial and municipal governments levy taxes. The federal government imposes Income Tax, Value Added Tax, Wealth tax, Excise Tax, Tax on Financial Transactions and Customs Duties. The provincial and municipal jurisdictions levy Turnover Tax, Real Estate Tax, Stamp Tax, Tax on Vehicles and Tax on Advertising in Public Domains, among others. This article provides a brief introduction about the company tax law system in Argentina.
1. Filing procedures and tax payments in Argentina
The Argentine tax system is based on the principle of self-assessment. The federal tax laws require taxpayers to file annual or monthly returns to report their taxable income, determine their tax liability, deduct any taxes withheld or paid in advance, and pay any due balance.
The corporate income tax return must be filed within five months after the end of the company’s fiscal year. The tax year for individuals is the calendar year. Individuals whose sole earnings are employee’s compensation are not required to file an individual income tax return for the year. Instead, their employers are required to withhold income tax monthly, and this tax is considered final. Notwithstanding the above mentioned, informative tax returns could be required- depending on the level of income.
Foreign taxpayers not established in Argentina are not required to file a tax return if their income tax liability is fully satisfied by withholding taxes on Argentine-source income.
2. Calculation of tax in Argentina
Tax laws establish very detailed rules on how the tax should be calculated. In general, the calculation is based on known facts, such as those shown in the books kept by the taxpayer or in the documentation kept on file. Only when no detailed information has been provided by the taxpayer or no proper accounting books are being kept, or the information or records prove to be incorrect or incomplete, may the tax authorities turn to legal assumptions to establish the tax obligation of the taxpayer at issue.
3. Business taxation in Argentina
1) Tax rates
The rate of the corporate income tax is 30%. From 2021 onwards, it will be 25%. An additional withholding tax will be levied on distributed dividends or profits as follows. 7% of the dividend withholding tax rate for distribution of profits accrued for tax years, until December 31st 2020; 13% of the dividend withholding tax rate for distribution of profits accrued for tax years starting on or after January 1st 2021.
2) Territoriality
For resident companies, worldwide income is taxable, including income of foreign branches and subsidiaries. Income of foreign subsidiaries is taxable only to the extent of the dividends actually paid, unless the subsidiary is subject to the tax transparency regime, in which case, the Argentine company is taxed on the allocable share of the subsidiary’s income- regardless of whether the dividends are paid or not. Companies formed under the Argentine law, as well as commercial, industrial, agricultural, mining, and other types of permanent establishments of foreign entities, are considered resident. They must keep separate books and records for a permanent establishment in Argentina.
3) Business income
Business income includes income from the sale of goods, depreciable assets, shares or real estate; income from dividends other than those from resident companies; interests; royalties and fees; and foreign-exchange gains. The only type of business income the law specifically defines as “gross profit” is that derived from the sale of inventories- which are the net sales less the cost of acquisition or production.
4) Capital gains
Companies’ capital gains are not subject to a specific tax. They are included in the scope of income tax and, consequently, subject to a 30% rate, the same as ordinary income.
5) Individuals' gains tax
They are included in the scope of income tax and, consequently, subject to a 30% rate, the same as ordinary income.
6) Net operating losses
Net operating losses cannot be carried back, they but can be carried forward for a maximum of five years.
7) Non-resident companies
Foreign companies are taxed only on Argentine-source income. They are generally subject to withholding taxes at different rates, depending on the nature and origin of the income.
8) Import-related income
Income earned by a foreign company from imports into Argentina is not taxable, provided the ownership of goods is transferred overseas, and the local purchaser clears the goods through the Argentine Customs Authorities.
9) Portfolio income
Proceeds from the sale of shares of local companies are subject to tax at a 13.5% rate on the gross amount, or at a 15% rate on the net amount (the taxpayer’s option). However, foreign beneficiaries- provided they are not resident and that the funds do not come from non-cooperative jurisdictions- will be exempted from:
- Income derived from the sale of shares that are publicly traded in stock exchanges or stock markets under the supervision of the Argentine Securities and Exchange Commission (CNV).
- Interest income and capital gains resulting from the sale of public securities, corporate bonds and certificates of deposit of shares issued abroad- which represent shares issued by entities domiciled or located in Argentina (i.e. ADRs). LEBACS (Central Bank Bills) are not included within this exemption.
For indirect taxation of shares, a non- resident is deemed to obtain Argentine- source income from the sale of shares or any other right representing the capital or equity of an entity domiciled or located abroad, when the following conditions are met:
- The market value of shares upon the sale or within the twelve (12) months prior to the sale, accounts for, at least, 30% of the value of the assets owned by the referred seller -either directly or through the intermediation of other entities in Argentina. Shares, interests, units, securities or rights sold which, at the moment of the sale or within the twelve (12) months prior to the sale, account for -at least- 10% of the foreign company’s equity that owns, either directly or indirectly, the assets indicated above.
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