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República ArgentinaTaxation of Services under:
Domestic Tax Law & Tax Treaties
Income Tax LawArt. 1
Nexus Approach
• Residents – taxable on their worldwide income
• Non-residents – only taxable on the income derived from
Argentina
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Definition of Income sourced in Argentina
Art. 5
General rule:(i) derived from goods located or economically used in the territory of the Republic or (ii)from the performance in the country of activities or (iii) derived from that take placewithin the territory; regardless of the nationality, domicile or residence of the partiesinvolved and regardless of the location where contracts have been concluded.
Specific rules (regarding services):1. Art. 112. Art. 123. Art. 93 «a.1», «a.2», «d» & «d»
Art.11: Insurance or Reinsurance
Services sourced in Argentina... as long as it is:
A) covering risks within the territory of the Republic, or that:
B) Related to persons residing in Argentina at the time of the conclusion of the contract
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Art. 12.(II)
Technical, financial or other
consultancy rendered abroadFees paid in remuneration for such assistance, for the purposes of the
Income Tax Law, is considered to be sourced in Argentina...
Services provided by non residents through a
permanent establishment Article .(69,b)
Income attributable to a permanent establishment of a foreign person,
is taxed in a net basis at 35% as if it were a local entity.
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Art. 93:
Withholding Tax Regime applicable to Foreign Beneficiaries:
Sums paid to non residents are taxed in a presumed net income basis:
a. contracts for the transfer of Technology :
1) 60% of the payments for technical assistance, engineering or consulting is deemed to be net income sourced in Argentina, that should be taxed at a 35% rate, when such payments are related to a registered IP unobtainable in the country: (effective withholding tax rate: 21%)
2) 80% of any other payment related to the transfer of Technology is deemed to be net income sourced in Argentina: (effective withholding tax rate: 28%)
Art. 93:
Withholding Tax Regime applicable to Foreign Beneficiaries:
Sums paid to non residents are taxed in a presumed net income basis:
d) Intuitu personae activities: 70% of the sums paid to individuals acting temporarily in the country such as
intellectuals, technicians, professionals, artists, athletes and other personal activities is deemed to be net
income sourced in Argentina, as long as such individuals do not stay in the country longer than 6 months:
(effective withholding tax rate: 24,5%)
h) Other payments: 90% of any other payment to a foreign beneficiary (including payments for the provision
of services) is deemed to be net income sourced in Argentina:
(effective withholding tax rate: 31,5%)
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I. Peculiarities“Technical consultancy”
Since the domestic law lacks a definition, it must be studied on a case by case basis.
T.F.N. -COURT “A”- Hearing: “Austral” [06.02.07] The electronic booking service is performed abroad, and given the absence of a PE in the country of the company providing such service, it is not taxable. Since there is no scientific, empirical or any transmission of knowledge thereof, it cannot be considered “technical consultancy” in the terms of Article 12.2 of the law.
C.A.F. -COURT “V”- Hearing: “Austral” [02.06.09] Since the flight seats can be booked in the system via internet, which is accessible from Argentina, the company owning such system is considered to provide technical consultancy which can be used within the country. Therefore, it is economically used in the territory.
II. Peculiarities“Technical assistance”
Since the domestic law lacks a definition, it must be studied on a case by case basis.
The concept of “technical assistance” arises primarily from administrative and judicial rulings. Lack of consistency makes it impossible to obtain guidelines that can be applied in a generic form.
ADMIN CASE LAW [DAT 69/96] To be taxed, it is necessary that the service is provided through physical presence within the territory.
JUDICIAL CASE LAW [Philips Argentina, TFN] It will be taxed in the country in the case of payments for know how: when the assistance & instructions imply the transfer of knowledge or experience on certain issues to be used in Argentina.
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III. Peculiarities“economically used in the territory”
The concept arises primarily from judicial rulings. Lack of consistency impossible to give a general guideline.
T.F.N. -COURT “D”- Hearing: “Aerolíneas” [12.05.04] Since the software is used by an Argentinean airline, that software is, in its substance, economically used within the territory and, therefore, taxable therein.
C.A.F. -COURT “I”- Hearing: “Aerolíneas” [05.02.08] Databases processed by foreign companies in order to manage bookings are considered to be economically used in the country where it has effects, it means in the State where the company selling flights is located (art. 5).
Therefore, it must be studied on a case by case basis.
Value Added Tax“Taxable services” Art. 1 “b”
The works, leases and services included in Article 3, if performed in the territory.
International telecommunication services are taxed if the provider is located therein.
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Value Added TaxART ICLE 3 e) 21:
Any service not subject to gratuity and with no agency dependency is taxable
Art 3 e) “in fine” + Art.1 “b” VAT is applicable to connected services and to transfers or assignments of the right to use or enjoy intellectual or industrial property (copyright of writers and musicians is excluded)…
[Known as: INTANGIBLES]
I. Peculiarities“Intangibles”
SUPREME COURT, Hearing: “San Buenaventura S.R.L.” [23.05.06]A transfer of rights cannot be equal to a sale, a provision of services, an import or any other assumption reached by VAT.
This ruling establishes in a clear and precise manner that transfer of rights remain outside the scope of the tax.
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Exportation of Services[Criterion for taxability: “destination country”]
It is not taxed under the VAT (Art. 1 “b” and 77.1 D.R)
Art. 43
Exporters may apply for accreditation, return or transfer of VAT
they had been billed for goods, services and locations that are actually destined for export.
R.G. 2000/06 (AFIP)Taxable at zero rate
II. Peculiarities
ADMIN CASE LAW
Circular n° 1288 (DGI): A exportation of services takes place as long as their effectiveexploitation is carried out abroad. It does not depend –therefore- on thegeographical location of the “borrower” but on the effective location where theservice is applied or used.
Contrariu sensu, foreign companies performing activities within the territory are subject to the tax, given that these services are exploited or actually used in the country, regardless their domicile: Such activities are considered as Import of services
However, Circular n° 1288 has been subject to interpretation by way of jurisprudence
Export: “economically used abroad”
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II. Peculiarities
DAT 28/03 (AFIP): When a activity is not limited to the existence of an ordinary commercial link but also includes post-sales services, the service must be considered used in Argentina. Therefore taxable.
Export: “economically used abroad”
II. Peculiarities
Judicial Case Law
T.F.N. -COURT “A”- Hearing: “Tecnopel S.A.” [06.12.99] Court considered of vital importance the term “representative”. If it were a representative in the country to act on behalf of the foreign company then it would be exercising the activity economically within the country, there wouldn´t be a exportation of services. Contrariu sensu, not taxable.
T.F.N. -COURT “A”- Hearing: “Uniquim S.A.” [15.03.02] The mere existence of a retail management, brokerage or representative of foreign firms in order to locate in the country potential buyers…Circular n° 1288 is not applicable.
Therefore, it must be studied on a case by case basis.
“economically used abroad”
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Importation of Services[Criterion for taxability: “destination country”]
Suppliers of services –abroad- which effective utilization or
exploitation is carried out in the country.
VAT must be charged (Art. 1 “d”)
Substitute responsible
Taxability under International Treaties
Article 7
Only taxable on the State of Residency, unless business is conducted through a Permanent
Establishment.
Profits should attributed to the permanent establishment as if it were a distinct and
independent enterprise engaged in the same activity dealing independently with the
enterprise.
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Taxability under International Treaties
Article 12
Under many DTCs concluded by Argentina, the term “royalties” includes payments for the
provision of technical assistance.
“Royalties” are taxable on the State of residence.
The state of source may also tax royalties but such taxation is limited when they are paid to
the beneficial owner.
Taxability under International Treaties
Article 14
The term "professional services" includes especially, scientific, literary, artistic, independent
educational or teaching activities as well as the independent activities of physicians, lawyers,
engineers, architects, dentists and accountants.
“Professional Services” may be taxed in the State where the income derived if the income
generating activities are conducted through a fixed base or, in order to render them, the
individual stays more than 183 days.
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Taxability under International Treaties
Article 17
Income derived by artists and sportsmen may be taxed in the State of performance.
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