background image
8.2.2. Withholding Taxes

Foreign-domiciled entities and non-resident individuals without a taxable presence in Argentina (i.e., a branch or permanent establishment) are taxed on Argentine-source income by way of withholding at source to be made by the local payer of the income. The statutory withholding rate currently stands at 35%. However, as a general rule, foreign beneficiaries are not taxed on an actual net income basis, but rather on a presumed net income basis, which varies depending on the type of income. Thus, as a general rule, actual expenses or other deductions otherwise allowable in determining net taxable income may not be claimed in the case of foreign beneficiaries.

Dividends and Similar

Effective 1 January 2018, the equalization tax has been repealed and a 7% rate applies to dividend distributions.

Until 31 December 2017, Argentina had a dividend taxation system under which profits already taxed at the corporate level were not subject to further taxation upon distribution. As a result, dividends and remittances of profits by local branches were not subject to tax if distributed out of earnings and profits already taxed at the corporate level. Otherwise, an equalization tax consisting of the withholding of 35% on the excess of accounting over taxable profits at the corporate level was applied.

The 7% withholding tax on dividends is a payment on account of the final tax liability for resident beneficiaries and a final tax in full satisfaction of the tax liability for non-resident beneficiaries. The government has clarified that the payer of the dividend is required to act as the withholding agent, and in the case of dividends declared by mutual investment funds, the management company or depository of the fund is required to act as the withholding agent.

Interest and Similar

Non-resident lenders are subject to withholding tax on interest paid by an Argentine resident borrower. An effective rate of 15.05% (35% on a presumed net income of 43%) on gross interest applies if payments are made:

  • By an Argentine financial institution; or
  • To non-resident suppliers financing imports of capital assets (including under the form of financial leasing transactions), non-resident financial institutions, and certain non-resident investors in debt securities.

An effective 35% withholding rate applies to interest on cross-border inter-company loans.

Interest paid to a non-resident financial institution will benefit from the reduced tax rates only if the lender meets the following requirements:

  • It is supervised by a Central Bank or equivalent;
  • Resides in a jurisdiction that is not deemed as a "non-cooperative jurisdiction" (see Sec. 13.5.) for Argentine tax purposes, or, if so, the jurisdiction is a party to an information exchange treaty with Argentina; and
  • It is not prohibited from providing information to its tax authorities due to bank secrecy or similar privacy laws.

In case of interest on term deposits in Argentine banks, investments in Argentina Central Bank Notes, and certain other investments, an effective withholding tax rate of 2.15% (5% on a presumed net income of 43%) is applicable if the investment is subject to an inflation adjustment clause. In the absence of an inflation adjustment clause, the effective withholding tax rate is 6.45% (15% of a presumed net income of 43%).

General Resolution 4227 of 11 April 2018 provides that the following are responsible for withholding/remitting tax on interest income:

  • For term deposits in financial entities, the financial entity paying the interest on the deposit is responsible;
  • For Argentine Central Bank notes (LEBAC), the entity exercising the custody function of the securities is responsible;
  • For negotiable obligations, debt securities of financial trusts and similar contracts, bonds, and other securities, the payer of the interest is responsible; and
  • For shares in mutual investment funds, the depository company or the integral placement and distribution agent, if any, is responsible.

Royalties (Copyright, Patent, Trademark)

Unless otherwise provided in a tax treaty, royalty payments are subject to an effective withholding tax at the rate of 28% (35% on a presumed net income of 80%), in the case of a registered trademark, industrial know-how, and other technology transfers. Payments made in consideration for technical assistance, engineering, and consulting services not obtainable in Argentina are subject to a 21% (35% on a presumed net income of 60%) effective withholding rate.

To apply the reduced withholding tax rates of 21% and 28%, the agreements must be registered with the Argentine Trademark and Patent Office.

License agreements that provide the right to use a software program registered in Argentina, as well as those allowing the sub-licensing of software in Argentina, are deemed to produce Argentine-source income.

An effective withholding rate of 12.25% (35% on a presumed net income of 42%) is levied if:

  • The agreement and the software are registered with the National Copyright Bureau (Dirección Nacional de Derechos de Autor);
  • The profits are derived from the exploitation of software;
  • Income tax is levied on the authors or their successors (derecho habientes); and
  • The software is not developed upon demand.

If the above-mentioned requirements are not satisfied, software royalty payments made to a foreign beneficiary would be subject to the maximum (31.5%) withholding tax rate.

Capital Gains

Gains from the sale or exchange of personal or real property located in Argentina are subject to an effective withholding tax of 17.5% (35% on a presumed net income of 50%).

Effective from 1 January 2018, new rules are applicable for the taxation of capital gains on the disposal of shares or securities by non-residents. Foreign entities and individuals are subject to income tax on income from the sale of shares, bonds or securities, whether listed or not unless a specific exemption applies (e.g., public bonds, publicly offered negotiable obligations and financial trust securities) at the following rates:

  • A 5% rate on income from the disposal of government securities, corporate notes, debt securities, shares in mutual funds, and digital currencies if denominated in Argentine pesos without an adjustment clause;
  • A 15% rate on income from the disposal of the above if denominated in Argentine pesos with an adjustment clause or denominated in a foreign currency; and
  • A 15% rate on income from the disposal of shares, representative securities, and certificates of deposits of shares and other securities.

The rates are applied on the actual net gain from the disposal or on a percentage of net income presumed by the Income Tax Law (ITL), which in this case stands at 90% of the gross price paid, resulting in effective tax rates of 4.5% or 13.5% on gross payments. Where the beneficiary of the gains is resident in a non-cooperative jurisdiction or the funds invested arise from a non-cooperative jurisdiction (see Sec. 13.5.), the withholding tax rate is 35%.

The rules provide exemptions in respect of capital gains from the sale of publicly traded shares and securities authorized by the National Securities Commission and sale of public bonds, negotiable obligations, and share certificates issued abroad that represent shares issued by Argentine companies (i.e., ADRs). The exemptions are available only if the non-resident beneficiary does not reside in a non-cooperating jurisdiction, or the funds do not arise from a non-cooperating jurisdiction.

Indirect Transfer of Assets

Effective 1 January 2018, new rules were introduced for the taxation of capital gains arising from the indirect transfer of Argentine assets.  Under the rules, the alienation of shares, securities, or other rights in an Argentine entity by non-residents may be subject to tax if:

  • They derive at least 30% of their value directly or indirectly from Argentine assets at any time in the 12 months preceding the alienation; and
  • The shares, securities, or other rights represented at least a 10% participation in the transferred entity at any time in the 12 months preceding the alienation.

Effective from 28 December 2018, indirect transfers of Argentine assets within a group are exempt from tax, provided that the non-resident transferor has direct or indirect participation of at least 80% in the acquirer, or vice versa, for at least two years prior to the indirect transfer. In case of a subsequent transfer to a third party, the cost of acquisition is the cost computed by the original acquirer in the group. The exemption is not applicable if the transfer has the main purpose of achieving a tax advantage.

In case of transactions/ transfers between non-resident parties which are subject to tax in Argentina, there was no mechanism provided for the remittance of the collection of the tax on indirect transfers. Given this, the government published General Resolution 4227 of 11 April 2018, which provides that the following are responsible for withholding/remitting tax on gains from the disposal of securities:

  • The buyer of the securities, if resident in Argentina, except in the following cases:
    • for Argentine Central Bank Notes (LEBAC) and other securities issued through a public offering with authorization from the National Securities and Exchange Commission (unless an exemption applies), the entity exercising the custody function of the securities is responsible; and
    • for shares in mutual investment funds, the depository company or the integral placement and distribution agent, if any, is responsible; and
  • If the buyer is not resident in Argentina, the foreign beneficiary's (seller's) legal representative domiciled in Argentina is responsible.

In both cases, foreign beneficiaries may elect to determine the gain based on net amounts (instead of the deemed taxable income of 90% or 50% of the gross proceeds), in which case the net taxable gain is computed based on the actual cost incurred and allowable deductions and the gain so determined is assessed to tax at the applicable rates of 35% or 15%.

Miscellaneous

Withholding tax rates on other payments to foreign beneficiaries vary depending on the characterization of the payment. Payments to technicians, professionals, and others for personal services rendered in Argentina on a temporary basis (up to six months) are subject to a 24.5% effective withholding tax rate. The applicable effective rate on lease payments on personal property located in Argentina is 14%, while the one applicable to lease payments on real property is 21%. Income from the disposition of assets (including rights and other intangibles) situated, located, or economically used in Argentina is subject to a 17.5% effective withholding rate. Finally, as a residual category, other income not specifically contemplated is subject to an effective rate of 31.5%.

Notwithstanding the above, and subject to prior approval, foreign persons receiving income from the lease of real property or from the sale or exchange of personal or real property located in Argentina may elect to assess net income from Argentine sources by computing actual expenses incurred in Argentina as well as other allowable deductions. In that case, the net income so determined is assessed at the statutory 35% withholding tax.

Several source rules also deal with income obtained by non-residents from activities performed partly within and partly outside Argentina or activities involving an uncertain source. In these cases, a given percentage of gross income is deemed to be Argentine-source net income without any rebuttal possibility.

As a result of the presumed net Argentine income provided for each type, the effective withholding rates vary. In the case of outbound international transportation and charter of vessels, the effective withholding rate is 3.5%. The container business is subject to a 7% effective withholding rate while the rate applicable to international news agencies and reinsurance businesses is 3.5%. The use within Argentina of foreign-made cinematographic films, tapes and videotapes, foreign TV and radio broadcastings, telex, facsimile and similar services rendered from abroad, all other foreign means of projection, reproduction, transmission or broadcasting of images or sound is taxed at an effective withholding rate of 17.5%.

Mining Companies

Effective 1 January 2015, the government introduced new withholding tax requirements for mining companies. Under these new rules, mining companies registered in the fiscal registry are required to act as a withholding agent and withhold income tax on transactions at the following rates:

  • 0.25% to 6% as set by General Resolution 830/2000 when the supplier is registered for income tax and is registered in the fiscal registry;
  • 20% for the transfer of movable properties, the rental of immovable or movable properties, and services supplied when the supplier is registered for income tax but is not registered in the fiscal registry;
  • 30% for other transactions when the supplier is registered for income tax but is not registered in the fiscal registry; and
  • 35% when the supplier is not registered for income tax.

With respect to the purchase of mining exploration rights, the acquirer of the rights is required to act as a withholding agent and withhold income tax on transactions at the following rates:

  • 0.25% to 6% as set by General Resolution 830/2000 when the seller of the rights is registered for income tax and is registered in the fiscal registry;
  • 20% when the seller of the rights is registered for income tax but is not registered in the fiscal registry; and
  • 35% when the seller of the rights is not registered for income tax.

The following table shows the most up-to-date standard domestic withholding tax rates.

Capital Gains 13.5 %
Dividends 7.0 %
Interest 35.0 %
Royalty Copyright 12.2 %
Royalty Patent 28.0 %
Royalty Trademark 28.0 %
Sales 0.0 %
Service Management 0.0 %
Service Technical 21.0 %

*Rates are current as of 02 October 2022