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Proposed Income Tax Law enacted
The Argentine Senate have now approved the bill to modify the income tax law drafted by the National Executive Branch. Taxand Argentina investigates if and how this differs to the proposed draft bill.
As outlaid in the draft bill, the results derived from the transfer of depreciable movable goods, shares, quotas, equity participation bonds and other securities are taxed regardless of the nature and residence of the beneficiary. Argentine individuals and undivided estates are exempted when the transferred assets are listed in stock exchange markets and/or are authorised for their public offer.
Simiarly the 10% tax rate for the distribution of dividends (excluding those made in shares or quotas of the distributing companies) has been approved, without prejudice to the application of the so-called “equalisation tax”, if applicable.
The Senate also approved the new 15% tax rate for income obtained by Argentine individuals and individed estates. Although certain inconsistencies arise from the text of the law, whenever such income is obtained by non-resident companies, permanent establishments, estates or other similar subjects.
It appears it would be possible to choose between the 13.5% effective tax rate over the gross amount of the payment and the 15% tax rate over the net income arisen from the transaction. Furthermore, even though it is understood that the National Congress has not intended to increase the tax burden of non-resident individuals with respect to that of non-resident legal entities - under a literal interpretation of the new law it could be construed that the mentioned income would be taxed at the 31.5% effective rate over the gross amount of the payment, when it is obtained by non-resident individuals. Said individuals would not be entitled to determine the tax due over the net income arisen from the transaction.
As per the draft bill, the new law brings up certain doubts. For instance, which is the mechanism for the payment of the 10% tax over dividends (although it seems that the tax should be paid through withholding on the source). Furthermore, as to the tax on capital gains for those cases in which the transaction is closed between non-resident taxpayers, the law states that the acquirer would be liable for the payment of the tax. However, the payment mechanism and the eventual liability of the local representative of the non-resident taxpayer that is liable for the payment of the tax are not clear.
Multinationals should note however it is expected that some of the doubts that have been brought up by the new law will be clarified by further regulatory norms.