April 12, 2018 Argentina issues additional regulations on the taxation of non-resident investors Taxpayers doing business in Argentina should review these new regulations and determine the effect of the regulations on their business. On April 9, 2018, Argentina published, in the Official Gazette, Decree No. 279/2018 (the Decree), which includes clarifications and additional regulations on the changes to the taxation of nonresident investors, and was enacted as part of the tax reform (Law 27,430) (see Tax Alerts 2017-2229 and 2017-2120). The Decree is effective April 10, 2018. The Argentine Federal Tax Authorities (AFIP) are expected to issue additional regulations to implement the necessary procedures and mechanisms for the collection and payment of the corresponding taxes by non-resident investors. Decree No. 279/2018 The Decree establishes presumed percentages of Argentine income for income derived from LEBACs (Argentine Central Bank Notes). Under the Decree, the presumed percentage for Argentine-source income is 100% (i.e., 100% of the income is Argentine source) and a 5% tax rate applies to that income. For foreign investors that qualify as banking entities under the supervision of a Central Bank or similar authority, and are not located in "non-cooperating" or low- or no-tax jurisdictions, only 43% of the income will be presumed to be Argentine-source income and subject to the 5% tax rate. Considering the 5% tax rate applicable to investments in Argentine Pesos (ARS), the effective tax rates will be 5% in most cases, and 2.15% for banking entities (i.e., 5% x 43%). Additionally, the Decree establishes the following provisions: — For investors that reside in, or funds that arise from, "non-cooperating" jurisdictions, the applicable capital gains tax rate will be 35%. — In certain circumstances, for investments in "common investment funds," the applicable tax treatment will be the same as the treatment applicable to the principal underlying asset held by such funds. — For purposes of determining the taxable gain derived from LEBACs when the taxpayer must establish the acquisition cost, a taxpayer may use the subscription value, and if applicable, the last purchase price or the quotation as of December 31, 2017, whichever is higher, until the National Securities Commission (in Spanish Comisión Nacional de Valores or CNV) issues other procedures. The Decree also sets forth that a jurisdiction will be considered as "non-cooperating" if it is not included in the latest version of the "cooperators" list published by the tax authorities. The following "cooperators" list (which corresponds to 2017) applies until the Executive Power issues a new list of "non-cooperating" jurisdictions (in accordance with tax reform Law 27,430):
Companies doing business and different stakeholders investing in Argentina should consider the consequences of these additional regulations and evaluate the effect on their current or future Argentine investments and operations. ———————————————
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