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Corporate Tax

Argentina

Following the cancellation of the former double tax treaty between Spain and Argentina in 2012, a new treaty between the two countries has recently been signed. The new treaty reflects in general terms the structure of its predecessor, while introducing a few relevant changes. Although these changes are significant, a mere renegotiation of the then-extant treaty would arguably have sufficed.

A conflict between the Income Tax Law and the Companies Act may arise if, during the two-year period following a restructuring, the surviving company (or companies) must make a capital reduction following the mandate imposed by the Companies Act, thus potentially jeopardising the requirement under the Income Tax Law for the continuity of proprietary interest. This conflict was analysed in a recent appellate court decision.

Following its unilateral termination of tax treaties with Chile, Spain and Switzerland, Argentina is in the process of negotiating new double tax agreements. It is hoped that this will ensure that the continuity of treaty benefits can be preserved. A number of rulings are also pending before the Supreme Court dealing with certain treaty law open issues for which a definition or clarification is expected.

In 2011 the Argentine government created a commission to evaluate and review the double tax treaties that were in force or those to be signed in future. After a year of inaction, the goverment recently decided unilaterally to terminate the treaty with Switzerland. Since then, two other treaties have also been denounced (those with Chile and Spain) as a result of the commission's analysis and determination.

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.

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