Global Tax Alert | 14 March 2013

New Tax Treaty signed between Argentina and Spain

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It has recently become public that on 11 March 2013, Argentina and Spain signed a new Tax Treaty for the Avoidance of Double Taxation and Prevention of Fiscal Evasion. Although the Treaty still needs to be ratified according to the legislation of the respective countries and the notification instruments need to be exchanged for its entrance into force, it has been reported that the countries intend to apply it retroactively to 1 January 2013. Further news on this matter is expected.

It should be noted that a Treaty was signed in 1992. However, the Treaty was terminated by Argentina on 29 June2012, with effect from 1 January 2013 for taxes withheld at source and for tax periods beginning on or after such date for other taxes.

One of the main reasons Argentina terminated the prior Treaty was the existence of an exemption for Spanish shareholders from the Argentine tax on personal assets. This tax applies at a 0.5% rate to foreign shareholders (among others) on their participation in Argentine entities (calculated at equity value) as of 31 December of each year. The new Treaty eliminates that exemption from Article 22 (taxation on capital).

Other changes made by the new Treaty include:

  • Reduction of the maximum withholding rate on interest from 12.5% in the previous Treaty to 12% (but this rate actually had been reduced to 12% by the most-favored nation clause).
  • Modifications to Article 26 dealing with Exchange of Information based on the latest OECD recommendations and international standards.
  • Elimination of the most-favored nation clause, which established the automatic application of lower withholding rates if Argentina agreed to lower withholding rates in other Treaties with OECD countries.

It also has been reported that the parties have signed a Memorandum of Understanding, which contains certain limitation of benefits, in order to avoid the abusive utilization of the Treaty. However, its text has not yet become public.

As stated above, the ratification of the Treaty and exchange of ratification instruments, as well as the potential clarification of the enforcement date and the publication of the Memorandum of Understanding should be further awaited.

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 1619
    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
  • Florencia Fernandez
    +54 11 4318 1720
    florencia.fernandez@ar.ey.com
EY Abogados, Madrid
  • Laura Ezquerra
    +34 91 572 7570
    laura.ezquerramartin@es.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
Ernst & Young LLP, Spanish Tax Desk, New York
  • Inigo Alonso Salcedo
    +1 212 773 8692
    inigo.alonsosalcedo@ey.com

EYG no. CM3267