[ESTABLISHING A BUSINESS ENTITY IN ARGENTINA]
15
jurisdiction the tax rate will be higher (35% net gain or 31,5% gross price of the sale). • Wealth tax on shares: A 0.50 % tax rate on the book value of the equity held in the local company. The local company pays this tax on behalf of the shareholders. • Transfer Pricing Rules: Transfer pricing rules in Argentina follow the OECD Model, based on the principle that transactions between an Argentine company and related companies based outside of Argentina (or with companies located in non-co-operative, low- or no- tax jurisdictions) must be done in arm's length conditions. Argentina’s rules include the five methods from the OECD model, but in addition to the five OECD methods, Argentina has an additional rule, called the 'sixth method', which in general applies to the import and export of commodities made through an international related intermediary or an intermediary located in a non-co- operative jurisdiction or low-tax jurisdiction. • Thin Capitalization Rules: In line with international standards (OECD guidelines), interest on financial debts (excluding, as a consequence, debts generated by acquisitions of goods, leases and services related to the company's business) owed to related parties (Argentine residents or not) will be deductible subject to certain quantitative limitations. The deductibility limitation on interests does not apply to financial entities, certain financial trusts, or when a WTX (withholding tax) applies in relation to the interest paid, among others.
• Argentina's CFC (Controlled Foreign Company) rules require local residents to recognize income on an accrual basis under specific conditions. This applies when a resident taxpayer: o Holds any participation in a foreign entity located in a jurisdiction with a corporate tax system, but where the entity itself pays no local corporate income tax. o Holds a direct or indirect participation of 50% or more in a foreign entity that derives a certain proportion of its income from passive sources. o Exercises control over a foreign trust or foundation. o Affected taxpayers must analyze their specific situation case-by-case to determine if these rules trigger immediate Argentine tax liability on the foreign entity's or trust's income. • Tax Havens and non-cooperative jurisdictions: The Income Tax Law includes different tax effects when a jurisdiction qualifies as tax haven or non-cooperative. Such effects should be analyzed on a case by case basis, but in general the qualification of a jurisdiction for those concepts are as follows: 1- countries, territories or tax regimes that establish a corporate income tax rate that is lower than 15% will be considered low or no tax jurisdictions 2- jurisdictions that do not have a tax Information Exchange Agreement or a Double Taxation Treaty with broad clauses of Information Exchange in force will be considered non-cooperative jurisdictions. The Income Tax Implementing Decree
ILN Corporate Group – Establishing a Business Entity Series
Made with FlippingBook Ebook Creator