a 15 % on the net gain (sale price minus acquisition cost) or 13.5% of the total sale price (gross price of the operation). There are some requisites to comply with for the indirect capital gains to be taxed. If there is a seller located abroad and in a non-cooperative 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 the interests does not apply to financial entities, certain financial trusts, or when a WTX (withholding tax) apply in relation to the interest paid, among others. CFC Rules: In broad terms, local residents in Argentina having participations on foreign

entities that don´t pay taxes abroad in the relevant jurisdiction (despite the fact that the relevant jurisdiction has a corporate tax regulated) or local residents that have direct or indirect participations of 50% or more on entities that obtain passive income in certain ratio, or local residents having control over trust or foundations located abroad have to monitor this particular set of rules on a case by case basis to determine if they have or they have not to recognize income from such entities or trusts on an accrual basis. 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 includes a list of “non - cooperative jurisdictions” in Section 24. LOCAL TAXES: Turnover tax: A 3 % average tax rate on gross income. Such rate may be increased to 5 % in accordance with the company’s annual gross income. Note that such tax rate may also vary depending on the activity developed. Exemptions may apply. Stamp tax: A 1 % tax rate over the value of written contracts. This tax may not apply if the instrumentation of the document is made by offer/acceptance letters.

ILN Corporate Group – Establishing a Business Entity Series

Made with FlippingBook Ebook Creator