Tag Archives: Argentina National taxation

Argentina – Tax system

In Argentina, tax revenue is collected by the Argentine government, the provinces and municipal authorities. The tax system is structured on the basis of dues levied on income, wealth and consumption.

National taxation

At a national level, the Federal Administration of Public Income (Administración Federal de Ingresos Públicos – AFIP), the independent entity which answers to the Ministry of Economy and Public Finance, is responsible for the taxation of income, wealth and consumption. The main taxes levied at national level include: Income Tax, Value Added Tax, Presumed Minimum Income Tax, Internal Taxation, Personal Estate Tax, and Taxes on Debits and Credits in Bank Accounts and Other Operations.

Income tax: All income, including capital gains, is subject to this tax. Companies resident in Argentina pay taxes on their global income, although they may submit as payment on account of these taxes those amounts effectively paid as similar taxes on their activities abroad up to the limits established of the increase in tax obligations arising from the incorporation of the earnings gained abroad. Argentines and nationalized foreigners, foreigners with permanent residence in the Argentine Republic or those who have legally resided in the country for twelve months are considered residents, as are the following; the undivided estate of taxpayers who fulfill the condition of Argentine residents on the date of decease; incorporated business companies and other business forms (one-person companies, civil associations, foundations, etc.) established in the country. Branches established in the Argentine Republic of companies established abroad are considered resident entities and thus subject to taxation. The tax applicable to resident companies and branches set up in this country belonging to non-resident companies is 35% of total earnings. Non-resident companies that do not own branches or any other permanent establishments in the Argentine Republic are only subject to taxes on income earned in Argentina. The tax is withheld by a payment agent in Argentina according to a taxation scale dependent on the kind of income. These taxes arise from the application of a 35% levy on presumed earnings as established in the Law on Income Tax.

Double Taxation Treaties: The Argentine Republic has signed Broad Agreements with different countries in order to avoid double taxation. The agreements seek to avoid companies or individuals being taxed twice with regard to income, capital and/or wealth taxation.

Value added tax (vat): VAT is a tax applied on the price of the sales of goods and services at each stage of the commercialization process, taking as payment on account the amounts erogated by the payment of this tax during earlier stages in the process. General VAT is 21% while the differential VAT rate is 10.5%, half the general rate. The latter is applied to different goods and services: the sale of capital goods, transport (except for international travel, the sale of newspapers, magazines, brochures and periodicals, prepaid health coverage and interests on foreign and domestic bank loans. Imports are also subject to this tax at the same rates as domestic goods or services. Exports are not taxable and exporters may thus apply for VAT refunds on their purchases. The provision of certain services such as electricity, natural gas and water to properties not for residential use is subject to greater taxes. Payments must be made monthly, unlike fiscal credits arising from purchases and fiscal debt arising from sales operations.

Tax on Presumed minimum Income: This tax is applicable to all assets (located both in the Argentine Republic and abroad) of Argentine companies at an annual rate of 1%. It is also applied to goods located in Argentina which are the property of permanently-established foreign individuals or entities. The amount to be paid as Income Tax is considered as payment on account for this particular tax. If the Income Tax to be paid is greater than the Tax on Presumed Minimum Income, only the former is to be paid. If, however, the Tax on Presumed Minimum Income is greater than the Income Tax established, the excess may be used for a maximum period of 10 (ten) years to compensate for the potential overcharge of Income Tax defined concerning the allowance mentioned in the first instance. The calculation of tax credits for parallel taxes paid abroad for goods located outside Argentine territory may be admitted. Similarly, advances received on account of the taxes to be levied in each tax period should be recorded.

Tax on Personal estate: This is a wealth tax as it is applied to personal goods owned up to December 31 each year, and is applicable to both individuals and undivided estates. Individuals residing in the country are obliged to pay this tax on an annual basis, consisting of a sum equivalent to 0.5% of their personal estate with a value of between AR$ 305,000 and AR$ 750,000. Amounts over this figure and up to AR$ 2,000,000, are taxed at 0.75%; from AR$ 2,000,000 to AR$ 5,000,000, at 1%, and values over these figures are taxed at 1.25%. It should be noted that subjects established in Argentina are liable for taxes on goods located both in the Argentine Republic and abroad. Individuals domiciled abroad are only subject to taxes on goods located in the Argentine Republic. The regime applied is that of liable proxy subject to a tax of 1.25%. Nonetheless, as from the 2002 tax year there is a presumption in force which does not admit evidence to the contrary, according to which, individuals domiciled abroad or undivided estates established there may indirectly own stock and/or shares in the capital of Argentine companies whose owners are companies or any other kind of legally valid entity, companies, stable establishments, appropriation of wealth or exploitations, domiciled or established abroad. Likewise, as from then, Argentine companies are obliged to calculate and pay the taxes on the stock and/or shares in the capital of Argentine companies as liable proxy, calculating the rate on the basis of a 0.50% charge on the value assigned to the stock/shares (net assets of the Argentine company as of December 31 of each year, excepting certain circumstances).

Internal taxes: These are applied to the consumption of certain products at different rates and according to different payment and declaration regimes. In general, these taxes are applied to manufacturers or importers at the moment of selling their product.

Tax on Debits and Credits in Bank Current accounts: This tax is applied to credits and debits incurred in the bank accounts of the company account holder at a rate of 0.6% for debits and 0.6% for credits. All movements or transfers of money will be taxed at 1.2% when carried out using payment systems which replace the use of banking current accounts. It should be noted that there are certain differential rates and exemptions which may be applied to specific operations. Tariffs on the Import of goods: Import duties are levied at between 0 to 35%, except in specific cases where minimum thresholds are applied or the goods are from a category which receives special tax treatment. Generally, goods from ALADI members are subject to preferences on a percentage basis. As far as MERCOSUR is concerned, import duties for inter-zone trade have virtually been eliminated. At the same time, a common external tariff has been established for goods sourced and originating outside the zone.

Other taxes that importers must pay are: Statistics Duty (0.5% on cost, insurance and freight – CIF up to USD 1,750) and in some cases, Destination Confirmation Tax (2% of CIF). Imports are also subject to VAT (21% or 10.5% in certain cases) and Income Tax (usually 3% in most cases.

Provincial taxation

Income tax: All Argentine jurisdictions (provinces and the City of Buenos Aires) apply this tax to the gross income of any company carrying out a commercial, industrial, agricultural, financial or professional activity. The tax is levied on each commercial transaction and no fiscal credits are awarded for taxes paid during preceding stages. The taxes levied differ according to the kind of activity and the Law in force in each jurisdiction varies from 1.5% to 4%. (Primary and industrial activities in general are exempt). The taxes are paid over a calendar year with payments made on a monthly basis or every two months, depending on the jurisdiction.

Stamp duties: These are provincial taxes levied in each province generally applicable to the transactions, partnership agreements and operations of any value in the form of public or private instruments. In general, the tax rate charged is 1% although it may vary according to the deeds and legislation in force in the jurisdiction where the afore-mentioned deeds apply. In the City of Buenos Aires, this tax is only applied to the transfer of ownership for property and lease contracts or the sublet of properties in which commercial activities are carried out. The rate applicable to the transfer of property is 2.5% and to the lease or sublet of the same is 0.5%.

Property tax: Properties in every jurisdiction are liable for annual taxes which are calculated by applying the rates fixed by the Law on the taxation of the fiscal valuation of land free of improvements, and of improvements. Property Tax is a realty tax applied to the value of the land and buildings without taking into account the personal situation of the taxpayer. The amount is set by the application body and is calculated according to the tax laws of each fiscal period which establish the valuation and rate scales to be applied on taxable income according to the system foreseen for each kind of property.

Municipal taxes

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