Global Tax Alert (News from Americas Tax Center) | 13 September 2013

Argentine Senate approves tax reform bill

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On 12 September 2013, the Argentine Senate approved the tax reform bill recently proposed by the Executive Power.1

To become law, the bill must now be promulgated by the Executive Power and published in the Official Gazette, which is expected to take place in the next few days. The bill’s provisions will enter into force upon publication in the Official Gazette, and will apply to taxable events that take place from the publication date.

The reform would affect the following:

Capital gains

The bill would impose a 15% tax on capital gains realized by foreign beneficiaries on the sale of shares, quotas and other corporate participations, as well as titles, bonds and other securities. The tax would apply to 90% of net presumed income, resulting in an effective tax rate of 13.5% on the gross sale price (15% new capital gain rate x 90% presumed net income).

Alternatively, the bill would allow taxpayers to calculate net income by deducting from the sale price the actual costs allowed by Argentine regulations (additional regulations are needed to clarify how this will work in practice). If both the seller and the buyer are foreign parties, the buyer will be responsible for paying the tax to the Argentine tax authorities.

The 15% tax would also apply to capital gains realized by Argentine resident individuals on sales of shares, quotas and other participations, but would not apply to gains from the sale of shares, titles, bonds or other securities that are publicly traded in stock exchange markets.

Dividends

The reform imposes a 10% tax on dividends that would operate as a “sole and definitive tax” (presumably through withholdings to be performed by the distributing company). The tax on dividends would apply to distributions made by Argentine entities to Argentine individuals, as well as to foreign shareholders. This tax would apply in addition to the potential application of the 35% equalization tax when dividend distributions exceed the amount of the taxable income at the corporate level.

Several clarifications and regulations should be expected, through changes to the income tax regulatory decree or new resolutions by the tax authorities. Topics, among other matters that may require further regulations, include the collection mechanism applicable for foreign beneficiaries to pay the capital gain tax, the way in which the tax cost basis will be calculated and guidance in relation to the application of dividend withholding.

Endnote

1. See EY Tax Alerts, Argentina proposes significant changes on taxation of dividends and capital gains (29 August 2013) and Argentine House of Representatives approves tax reform bill (9 September 2013).

For additional information with respect to this Alert, please contact the following:

Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires
  • Carlos Casanovas
    +54 11 4318 1737
    carlos.casanovas@ar.ey.com
  • Gustavo Scravaglieri
    +54 11 4510 2224
    gustavo.scravaglieri@ar.ey.com
  • Ariel Becher
    +54 11 4318 1686
    ariel.becher@ar.ey.com
  • Pablo Baroffio
    +54 11 4510 2271
    pablo.baroffio@ar.ey.com
Ernst & Young LLP, Latin American Business Center, New York
  • Alfredo Alvarez
    +1 212 773 5936
    alfredo.alvarez@ey.com
  • Pablo Wejcman
    +1 212 773 5129
    pablo.wejcman@ey.com

EYG no. CM3802