ARGENTINA Law and Practice Contributed by: Daniel Rinci, Tomas Cabanelas, Fernando García and Marisa Majul, Rinci & Asociados
with certain exceptions for temporary assignments and diplomatic personnel. Once an individual qualifies as a tax resident, that sta - tus is maintained until residence is formally lost. Loss of residence occurs when the individual acquires per - manent residence in a foreign country or is continu - ously absent from Argentina for more than 12 months, subject to specific procedural requirements including notification to tax authorities. 2.3 Taxation of Resident Individuals Argentine tax residents are subject to income tax on their worldwide income at progressive rates. The Income Tax Law schedules income into four catego - ries: • income from capital (rentals, interests); • income from going concerns (business income); • income from work in a dependency relationship (employment); and • income from independent personal services (self- employment and professional fees). Progressive income tax rates for individuals currently range from 5% to 35%, applied on net taxable income after allowable deductions and personal allowances. Resident individuals must also include foreign-source income in their annual income tax return and may claim a foreign tax credit for taxes paid abroad on that income, subject to per-country and overall limitations. Special schedular rates apply to certain categories of income. Financial income – including interest on bank deposits, dividends from Argentine companies, and capital gains on financial instruments – is taxed at a flat rate of 5% or 15% depending on the currency denomination. 2.4 Taxation of Non-Resident Individuals Non-resident individuals are subject to Argentine income tax exclusively on Argentine-source income. The mechanism for taxing non-residents is generally through withholding at source, administered by the Argentine payer who acts as the withholding agent. The Income Tax Law establishes presumptive net income percentages for various categories of pay -
ment made to non-residents, to which the maximum individual rate of 35% is then applied. The effective withholding rates thus vary by income type. For exam - ple: • Royalties and technical fees – typically subject to withholding tax on a presumed net income base, yielding effective rates of approximately 12.25% to 21% depending on the type of service. • Interest payments – subject to withholding tax at effective rates ranging from 15.05% to 35%, depending on the nature of the lender and the loan. • Dividends – distributed dividends are subject to a 7% withholding tax. • Services rendered abroad but economically used in Argentina – subject to withholding tax under the technical services rules. Treaty protection may reduce or eliminate withhold - ing tax on specific income categories where Argentina has concluded a relevant double tax agreement. 2.5 Tax Residence of Legal Entities Legal entities – including local corporations and branches of foreign entities – are considered Argen - tine tax residents if they are incorporated or organ - ised under Argentine law. Foreign entities incorpo - rated abroad are not considered Argentine residents, regardless of where their management and control are exercised, unless they have a branch or permanent establishment in Argentina, in which case, the branch/ PE is taxed on the Argentine-source income attribut - able to it. Argentine-resident companies are subject to corpo - rate income tax on worldwide income. The corporate tax rate is currently 35% for taxable income exceed - ing certain thresholds, with a reduced rate of 25% for lower income brackets. 2.6 Definition of Permanent Establishment Domestic Definition The domestic definition of PE is set out in the Income Tax Law and the implementing regulations. A PE is generally defined as a fixed place of business through which a non-resident entity carries out all or part of its activities in Argentina. The definition encompasses branches, agencies, offices, factories, workshops and
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