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Taxpayers should monitor the progress of the steps required for the Treaty to enter into force and review the provisions to determine whether they qualify for any of the Treaty benefits once it enters into force.

On January 4, 2019, the Argentine Executive Power enacted the bill that approved the new Tax Treaty for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital between Argentina and the United Arab Emirates (the Treaty), which is based on the OECD Model Convention.

Article 30 of the Treaty states that it will enter into force on the date of the last notification made between the parties. Thus far, Argentina and the United Arab Emirates have not notified each other of the completion of their procedures for the Treaty to enter into force.

The Treaty provisions will take effect:

• For amounts paid on or after the first day of January for taxes withheld at source, in the calendar year following the year in which the Treaty enters into force
• For tax years beginning on or after the first day of January for other taxes on income or capital, in the calendar year following the year in which the Treaty enters into force

The Treaty reduces general domestic withholding rates on payments of interest from 35% to 12%, royalties from 21% / 28% / 31.5% to 10%, dividends from 13% (when applicable) to 10%, and capital gains upon disposal of shares and other participation interests from 15% to 10% on the net gain, if the participation interest is at least 25%.

To benefit from the provisions of the Treaty, in addition to the usual requirements (such as tax residence certificate, beneficial ownership clause, etc.), Article 25 introduces limitation of benefits (LOB) provisions, following the trends of the latest tax treaties signed by Argentina. The main purpose of these rules is to prevent residents in countries outside of Argentina and the United Arab Emirates from obtaining advantages from the Treaty. In this regard, in order to benefit from the provisions of the Treaty, certain conditions must be met (according to the detailed rules included in paragraph 1 of Article 25).

A person that is not entitled to the benefits of the Treaty under the provisions of paragraph 1 may, however, demonstrate to the competent authority of the State in which the income arises that such person should be granted the benefits of the Treaty. For this purpose, one of the factors the competent authorities will take into account is whether the establishment, acquisition or maintenance of such person and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the Treaty.

Companies doing business in Argentina and the United Arab Emirates should take note of the changes that the Treaty introduces once it enters into force, and monitor the fulfilment of the necessary steps in both countries in order to apply the Treaty provisions.

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