Global Tax Alert | 4 June 2013

Argentina introduces amendments to its rules on tax-havens

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The Argentine Government has issued Decree 589/2013, published in the Argentine Official Gazette on 30 May 2013, modifying the rules on low or nil tax jurisdictions (tax-havens). Up to now, the Regulatory Decree to the Income Tax Law (ITL) – based on a specific delegation made by the ITL – contained a list of 87 countries, jurisdictions and territories considered as tax-havens for tax purposes. Now, the list has been eliminated from the Regulatory Decree and the Federal Tax Authorities (AFIP) have been empowered to establish a new list, which will include the countries, jurisdictions, territories and tax systems that will be considered as “cooperators for purposes of fiscal transparency.”

The new Decree establishes that any reference in the tax law to “tax-havens” now means jurisdictions that do not qualify as “cooperators for purposes of fiscal transparency.”

The countries or jurisdictions considered as cooperators will be those that have signed treaties for the avoidance of double taxation (tax treaties) or tax information exchange agreements, to the extent that effective exchange of information is actually achieved. The qualification as cooperator will cease whenever a treaty or agreement is terminated, or the effective exchange of information is not accomplished.

Argentina will consider as “cooperators,” not only the jurisdictions with whom treaties and agreements are in force, but also those that have initiated negotiations with Argentina to sign a tax information exchange agreement or a treaty for the avoidance of double taxation, with a broad clause for the exchange of information.

Tax treaties and exchange of information agreements will have to comply, to the extent possible, with the international standards adopted by the Global Forum on Transparency and Exchange of Information for Tax Purposes. Therefore, such treaties must establish that due to the application of the internal rules of the jurisdictions, banking, trading or any other secrecy may not be invoked whenever Argentina requests information.

The AFIP will establish the parameters that will be considered to verify the existence of an effective exchange of information, and the conditions to initiate negotiations to enter into a tax treaty or an exchange of information agreement with Argentina.

The modifications introduced by Decree 589/2013 have a significant effect on certain regulations included in the ITL and the Tax Procedural Law (TPL). The ITL and TPL require certain tax treatments to apply to transactions performed with individuals or entities located in jurisdictions considered as tax-havens. For example:

  • Application of Argentine transfer pricing regulations to transactions with parties located in tax-havens (analysis and documentation obligations)
  • Timing limitation on the deductibility of certain expenses paid by Argentine residents
  • Presumption of deemed unjustified wealth increase (subject to income tax and value added tax) applicable to funds entering the country from tax-havens
  • Increase of the income tax withholding rate applicable to certain interest payments made to banking institutions located in these jurisdictions
  • Effect on the computation of foreign tax credits, under certain circumstances
  • Application of Argentine CFC rules

The dispositions contained in Decree 589/2013 will become applicable on the day the AFIP publishes the list of jurisdictions considered as “cooperators for purposes of fiscal transparency.” To date, the AFIP has not made the list available.

It will be important to monitor the issuance of the new list by the AFIP, as changes are likely to occur in the qualification of jurisdictions given the new parameters to be taken into consideration by the tax authorities. Consequently, how the taxpayers apply the above-mentioned tax rules to their specific transactions may change as well.

As AFIP is commissioned to update the list based on the evaluation of the effective exchange of tax information that takes place with the different jurisdictions, it will be important to analyze the first list to be issued by the tax authorities and any subsequent modifications.

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
  • Gustavo Scravaglieri
    +54 11 4510 2224
  • Ariel Becher
    +54 11 4318 1686
  • Pablo Baroffio
    +54 11 4510 2271
Ernst & Young LLP, Latin American Business Center, New York
  • Alfredo Alvarez
    +1 212 773 5936
  • Pablo Wejcman
    +1 212 773 5129

EYG no. CM3496