17 December 2019 Argentina reorders income tax law and its regulatory decree and issues list of jurisdictions considered “non-cooperating” for tax purposes Through Decree No. 824/2019, published in the Argentine Official Gazette on 6 December 2019, the Argentine Government reordered the Income Tax Law (ITL) for ease of reference and interpretation. In addition, Decree No. 862/2019, published in the Argentine Official Gazette on 9 December 2019, reordered the ITL’s Regulatory Decree and incorporated provisions that were contained in different regulations (e.g., taxation of nonresident investors, tax rules applicable to real estate transactions and severance payments). The decree also lists the countries that should be considered “non-cooperating” for tax purposes. The list is effective 9 December 2019. Effect of “non-cooperating” jurisdiction provision The “non-cooperating” jurisdiction provision affects certain provisions of the ITL and the Tax Procedural Law. Specifically, a 35% income tax withholding rate, instead of the 5% or15% income tax withholding rate, would apply to capital gains from the sale of: - Shares
- Public bonds
- Negotiable obligations
- Common investment funds
- Certificates of participation or debt titles of financial trusts and similar contracts
- Other bonds
- Certain other investments obtained by foreign investors located in “non-cooperating” jurisdictions or the investments’ funds arising from “non-cooperating” jurisdictions
Additionally, transactions conducted with individuals or entities located in “non-cooperating” jurisdictions are not considered performed on an arm’s-length basis and, thus, are subject to transfer-pricing analysis and documentation obligations. Expenses incurred by Argentine entities that are deemed Argentine-source income in favor of foreign parties established in “non-cooperating” jurisdictions should 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, the expense must be deducted in the year of payment. The “non-cooperating” jurisdiction provisions affect the exemption for foreign beneficiaries applicable to: - The sale of shares
- Interest income
- Capital gains on the sale of public bonds, negotiable obligations and share certificates issued abroad that represent shares that are issued by Argentine companies (i.e., ADRs) and publicly traded in stock exchanges under the supervision of the Argentine Securities and Exchange Commission
The exemption will apply, however, if the foreign beneficiaries do not reside in, and the amounts do not arise from, a “non-cooperating” jurisdiction. The non-cooperating provisions also affect: - Interest paid to foreign banks established in “non-cooperating” jurisdictions, which will be subject to a 35% income tax withholding, instead of the 15.05% income tax withholding that applies for payments to banks established in other jurisdictions
- Amounts from “non-cooperating” jurisdictions that should be considered as an unjustified increase in net worth subject to income tax and value-added tax, except when the taxpayer can prove that the amounts have been previously declared
New “non-cooperating” jurisdiction list The complete list of “non-cooperating” jurisdictions is as follows: - Afghanistan
- Algeria
- Angola
- Ascension Island
- Bangladesh
- Benin
- Bhutan
- Bolivia
- Bosnia and Herzegovina
- Botswana
- Brechou
- Burkina Faso
- Burundi
- Belarus
- Cambodia
- Cape Verde
- Central African Republic
- Chad
- Comoros
- Cuba
- Democratic Republic of Congo
- Djibouti
- East Timor
- Egypt
- Equatorial Guinea
- Eritrea
- Ethiopia
- Federated States of Micronesia
- Fiji
- Gabon
- Gambia
- Guinea
- Guinea-Bissau
- Guyana
- Haiti
- Hashemite Kingdom of Jordan
- Honduras
- Iran
- Iraq
- Ivory Coast
- Kenya
- Kiribati
- Kyrgyz Republic
- Laos
- Lesotho
- Liberia
- Libya
- Madagascar
- Malawi
- Maldives
- Mali
- Mauritania
- Mongolia
- Montenegro
- Mozambique
- Myanmar
- Namibia
- Nepal
- Nicaragua
- Niger
- North Korea
- Oman
- Palau
- Papua New Guinea
- Paraguay
- Philippines
- Pitcairn Islands
- Republic of the Congo
- Rwanda
- Saint Helena Island
- Solomon Islands
- Sao Tomé and Principe
- Sark Island
- Sierra Leone
- Somalia
- South Sudan
- Sri Lanka
- Sudan
- Suriname
- Swaziland
- Syria
- Tajikistan
- Tanzania
- Thailand
- Togo
- Tonga
- Trinidad and Tobago
- Tristan
- Tuvalu
- Uzbekistan
- Vatican City
- Vietnam
- Yemen
- Zambia
- Zimbabwe
For additional information with respect to this Alert, please contact the following: Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires Ernst & Young LLP (United States), Latin American Business Center, New York Ernst & Young LLP (United Kingdom), Latin American Business Center, London Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific Document ID: 2019-6595 |