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The Decree would regulate the provisions of the tax reform related to nonresident capital gains taxation of indirect transfers, tax havens and transfer pricing rules. Taxpayers doing business in Argentina should review the Decree.

The Argentine Public Revenues Secretary has published on its website a draft decree (the Decree), which contains proposed regulations to implement the tax reform enacted by Law 27,430 (the Law). The Law has been in force during 2018. Over the last year, some regulations to implement the tax reform have been issued, but a more comprehensive regulatory decree still needs to be issued. This Decree (with any amendments, if applicable) will enter into force once the Executive Power has it published in the Official Gazette.

Nonresident capital gains taxation of indirect transfers of assets located in Argentina

The Law introduced the taxation of indirect transfers of assets located in the country and indicated that transfers within the same economic group will not be taxable.

To benefit from the "economic group" exemption, the Decree would require nonresidents to meet directly or indirectly a participation threshold of at least 80% for two years before an indirect transfer. For a subsequent sale to a third party, the tax cost basis would be equivalent to the cost basis of the original acquirer of said shares.

Tax haven policy

The Decree would clarify that, for purposes of determining whether a jurisdiction is a low- or no-tax jurisdiction, the total tax rate will be considered, regardless of the government level that imposed the taxes. In addition, preferential tax regimes would be those that deviate from the general corporate tax system and result in a lower effective tax rate. Prior versions of the regulatory decree contained a list of jurisdictions considered as non-cooperating for tax transparency purposes, but the list has been removed from the current draft.

Transfer pricing (TP)

The Decree would include regulations on (1) the functional analysis required for foreign intermediaries that participate in the import and export of goods into and from Argentina respectively; (2) guidelines and parameters for the application of TP methods; and (3) documentation requirements, including the local file, master file and country-by-country report.

Regarding the analysis of foreign intermediaries, the Decree would establish the following aspects for importers and exporters to consider: (1) existence of a real presence in the country of incorporation, in compliance with legal and tax requirements; and (2) an evaluation of the functions performed, assets utilized and risks assumed. Additionally, remuneration that is treated as commissions must be related to actual involvement in the transaction.

Permanent establishment

The Decree includes clarifications on profit attribution, fixed place of business, and dependent agents.

Derivatives

The Decree would clarify the requirements to be satisfied for instruments and contracts to qualify as hedging transactions.

Interest deductibility limitations

The Decree would clarify that 30% of the earnings before interest, taxes, depreciation and amortization limit may not apply to interest subject to withholding tax, even when the provisions of a Tax Treaty (e.g., reduced rates or exemptions) apply.

Controlled foreign corporation rules

The Decree would include substantive guidelines on "personal and material means" requirements.

Companies doing business in Argentina should review the proposed draft decree and the implications to their operations, as well as monitor the final publication of this regulation and its entry into force.

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