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Corporate Tax

Argentina

Overview
Including: Basic Income Tax Rules Applicable to Local Corporate Entities; Basic Rules Applicable to Non-residents; Limits on Deductions for Payments Made to Non-residents; Transfer-Pricing Rules; Anti-deferral Rules; Corporate Reorganizations; General Anti-avoidance Rule; Relief from Double Taxation; Other Taxes.

Article 73 of the Income Tax Law states that transfers of cash or assets to third parties that are not performed in the company's interest are subject to an interest presumption at a fixed rate determined by statute. However, without a precise definition of the relevant terms, the scope of the requirements under which Article 73 applies is subject to debate. Two Supreme Court decisions have shed light on the issue.

The Federal Tax Court recently analysed the scope and application of the most-favoured nation clause contained in the Latin American Integration Association treaty. The Tax Court adopted a very clear position on how the scope of the clause must be construed, in the context of the treaty in particular, and in any other treaty with similar features.

Congress has recently passed amendments to the preferential tax regime for the software industry, adding new tax advantages and an extended benefit period. These changes are aimed at promoting the establishment of new software manufacturers in Argentina and encouraging the export of services and the resulting intangible property, as considered strategic for the development of the Argentine economy.

Several discussions have arisen over the past few years regarding the registration of transfer of technology agreements with the Argentine Trade and Patent Office (INPI). In one such case, the Supreme Court recently concluded that payments made under such agreements are deductible and therefore benefit from the reduced withholding tax rates, provided that registration takes place before payments are made.

In a recent case concerning a joint Argentine venture between Ford Motor Company and Volkswagen AG, the tax authorities challenged a $10 million loan allegedly granted by Deutsche Bank AG, New York. The resulting Supreme Court decision demonstrated what should not be done when entering into a pretended genuine financial transaction. The tax consequences were devastating to the payor.

Under transfer pricing law, the best method of assessing source income from exports is now considered to be the market price prevailing at the date on which the goods are shipped, regardless of the price effectively agreed on at the time the contract is executed. The federal tax court recently applied this method to export transactions performed before its introduction and without verifying the statutory conditions required for it to apply.

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