Argentina: Decree detailing tax reform for businesses

On December 27th, 2018, Decree 1170/80 was published which details implementation measures for the tax reform introduced in 2017. Specifically the decree outlines rules for transfer pricing, taxation on financial investments, indirect transfer rules for assets as well as fiscal transparency methods. Furthermore, specific terms regarding rules for permanent establishments are being defined.

 

Measures

Companies can be affected by the following measures:

 

Transfer pricing

Guidance in using transfer pricing measures as well as documentation duties with view to CbC reports, Master file and Local file. For details click here and here.

 

Indirect transfers of stock or assets by nonresidents

Exceptions for transfers within the same “economic groups” if 80% of the shares have been directly or indirectly owned two years prior to the transfer.

 

Fiscal transparency and low-tax or no-tax jurisdictions

In order to decide whether a jurisdiction qualifies as low- or no-tax the overall tax rate of the jurisdiction has to be taken into account, independently from its legal status (federal state, city or municipality). Preferential tax regime are such that deviate from the regular corporate taxation thus allowing for reduced tax rates for companies.

 

Permanent establishment

Actors that play a crucial role in negotiations contracts have to reside in Argentina permanently. Profits have to be connected to a permanent establishments with view to specific functions and used resources.

 

Thin capitalization rules

Subjects affected by the withholding tax do not qualify for the 30% EBITDA (revenue from interest, tax, depreciation and amortization) deduction limitations – even if the withholding tax was reduced to 0%. In case of currency differences on loans the EBITDA does apply since no withholding tax is levied.

 

Controlled foreign corporation (CFC) rules, substance requirements

CFC-rules require the employment of qualified staff, the economic substance of business structures and transactions as well as a valid business purpose.

 

Taxation of financial investments

Taxpayers that keep or sell public bonds at loss can keep the respectively generated interest.

 

These regulatory changes could affect your business with view to customizing or support of your ERP/SAP system. Please contact us to learn about possible necessary reactions to the changes – we are happy to assist you!

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